Mercosur full member countries with the exception of Brazil will have the best growth performance in the region this year, according to the annual report from the UN Economic Commission for Latin America and the Caribbean, Cepal which was announced this week in Santiago de Chile.
Following a 1.9% decline in 2009, Latin America and the Caribbean will grow 6% in 2010 thanks to the economic recovery posted by most countries in the region, points out the Cepal report. The growth forecast for 2011 is 4.2%.
Mercosur three full members will be posting the strongest 2010 growth: Paraguay, 9.7%; Uruguay, 9%; (Peru, 8.6%) and Argentina, 8.4%, while Brazil, Latam’s largest economy is expected to expand 7.7%.
In the Preliminary 2010 Overview from Cepal presented by Alicia Bárcena, Executive Secretary of this Regional Commission of the United Nations, countercyclical measures adopted by several countries in the wake of the international financial crisis have been shown to have a positive impact on economic growth, which points to a 4.8% rise in per capita GDP for this year.
The consolidation of the upturn also had a positive effect on regional employment, with the unemployment rate falling from 8.2% in 2009 to around 7.6%, while the quality of jobs created also improved.
Meanwhile, inflation edged up slightly from 4.7% in 2009 to an estimated 6.2% in 2010, mainly due to international prices for some commodities.
Although the growth of the region's countries has been uneven, most recorded positive figures for 2010. South America will grow by 6.6%, while GDP is expected to rise by 4.9% in Mexico and Central America and by 0.5% in English-speaking and Dutch-speaking Caribbean countries.
The region’s second largest economy (but closely linked to the US) Mexico is expected to expand 5.3%, the same percentage as Chile. In contrast, Haiti and the Bolivarian Republic of Venezuela are expected to see GDP fall by 7% and 1.6%.
However 2011 is a different picture: the two strongest showings will be from Chile and Peru, 6%, with economies highly dependent on copper exports and trade agreements with several Asian countries including China.
Mercosur will be above the region’s average (4.2%) with Uruguay expanding 5%, Argentina, 4.8%, Brazil, 4-6% and Paraguay, 4%.
The Cepal report ends pointing out some of the challenges for the region: inflation because of the overall increase in international food prices (mainly cereals, beef and sugar) and fuel; equally significant the appreciation of local currencies with the Brazilian Real showing the largest revaluation (13%) in the first nine months of 2010.
Regarding the more conservative estimates for 2011 they reflect the overall slowdown of global economic growth and its impact on trade flows “which has begun to show in the third quarter of 2010”.
Finally in spite of the healthy performance of the region’s economies which reflect the increase in direct foreign investment and the increase in central bank international reserves, Cepal points out that the region must rebuild its ‘counter-cyclical capacity’ and create conditions for “a productive development that is not based on the export of commodities”.