MercoPress. South Atlantic News Agency

Modest 1,5% growth forecasted for Latinamerica

Latinamerica's economy is expected to experience a modest 1,5% recovery during the current year, after suffering a negative growth of 0,6% in 2002 according to the latest release from the United Nations Economic Committee for Latinamerica, CEPAL.

The report indicates that 2003 will be superior to 2002 in growth, employment, financial situation and foreign accounts, although far off from its potential.

Argentina is the country expected to have the greatest economic expansion, 5,5% although per capita income will still be 17% below 1997. At the other end, Venezuela's economy will be contracting a further 13%. Helped by the thrust of its exports Chile should grow 3,5% and Brazil is expected to manage for the third consecutive year 1,5%, also spurred by overseas sales.

The absence of an international "driving force" will have its impact in Latinamerica: United States is growing below expectations; European economies can't seem to pick up and Japan is still undergoing a prolonged recession. Mexico, the region's leading economy and the US main trade partner will barely manage a 1,5% growth. On the Pacific, Colombia in spite of the internal warfare is expected to expand 2,5% and Peru, the hottest economy in 2002 with 5,3%, will slow to 3,5%.

Overall exports value in Latinamerica is scheduled to grow 4,4% in 2003, (3,5% excluding oil) after the stagnation of 2002. Imports will grow 0,8%, recovering from the 6,7% collapse of 2002, anticipating a 37 billion US dollars surplus for the second year running and the current account deficit will stabilize at -0,2% of GDP (minus 3,7 billion US dollars), making it the best year since 1990. Investment capital inflow is expected to reach 40 billion US dollars in 2003 as the "international financial situation begins to improve". However there will be a negative net transfer of resources equivalent to 15 billion US dollars because of heavy interest and profits reimbursements.

December 2002-December 2003 inflation is forecasted at 8,6%, a considerable retreat from the 12,1% of 2002. As to employment in several countries the number of jobs increased but in Mexico and Brazil it has remained sluggish. An estimated 13,6 million people remain jobless in Latinamercia.

As to outstanding events in 2003, Cepal points out to the Chile-US free trade agreement and progress in a similar agreement between Central America and the US. Another encouraging signal is Argentina and Brazil's joint efforts to strengthen Mercosur; a possible free trade understanding between Mercosur and the Andean Community, all of which point towards a greater regional integration. Among some of the positive aspects of regional economic policy in 2003, Cepal underlines that most countries have addressed structural fiscal reforms which should lead to less fiscal short term adjustments and more long term stability.

Forced to a restrictive monetary policy during 2002 because of the financial crisis, in the first half of the current year a majority of countries have now resorted to expansive monetary policies. Finally exchange rate volatility has significantly decreased mainly in Mercosur members and even when many currencies have appreciated, overall exchange rates in the area are far more competitive than in 2001.