‘Business climate’ up in Latam; lack of competitiveness and skilled labour remain challenges
Brazil, Bolivia and Chile had the best ‘business climate’ in Latin America during October according to the Economic Climate Index, ICE from the Brazilian think-tank Getulio Vargas Foundation, FGV.
The ranking for the month is as follows Brazil, 6.1; Bolivia, 6; Chile, 5.9; Peru, 5.8; Paraguay, 5.5 and Uruguay, 5.3. However if the last four quarters are taken into account, Peru ranks first, followed by Uruguay, Brazil, Ecuador and Chile.
Overall for the region the ICE climbed from 4.8 to 5.2 in October, which means the level is back to its April position and well above the 4.4 from October 2011, when it dropped to its worst level since the economic crisis of 2008.
The region’s ICE is calculated every quarter by the FGV and the German Institute for Economic Research from the University of Munich and for October’s index took into account the assessment of 140 specialists from 18 countries in Latin America.
The index showed an improvement of the region’s ICE for businesses despite a worsening of the business climate in the world because of the expanding crisis. The global ICE dropped from 5.2 in April to 4.7 in July and 4.6 in October.
However the index on the current situation, ISA which assesses the current economic situation in Latin America climbed from 4.9 in June to 5.1 in October, and “remains at a relatively low level”
The Expectations Index, IE, that estimates six months ahead for Latin America went from 4.6 in July to 5.3 in October, “its highest level since January 2011”.
The improved expectations index, “marks an expansion phase of the economic cycle in coming months” even when the assessment of the current situation in October “is showing that the environment is quite cloudy”, points out the release.
Nevertheless FGV admits that “a vigorous expansion cycle in Latin America will not take place until the main barriers for the recovery of the global economy have been dissipated”.
“In the countries considered the index improved between July and October, but the climate remains unfavourable, as in Argentina, or stable for Mexico, Ecuador and Venezuela”, says the report. No country has reached the economic cycle expansion phase, since all are in the phase of recovery or in a declination phase”.
According to FGV, the main economic problems in the Latinamerican countries indicated by experts consulted continue to be the lack of competitiveness and skilled labour.
The system to make the evaluations employed by FGV is based on quantitative and qualitative questions to the 140 experts from 18 countries on the three indexes, ICE; ISA and IE. Positive replies get a 9; indifferent replies get a 5 and negative replies 1. On the points from the answers an average is worked out.