MercoPress. South Atlantic News Agency

Latinamerica diminishing share of world GDP

Debt, inflation and Asia's strong economic growth forced Latinamerica's share of the world's GDP to drop 1.8 points in the last quarter of a century, according to international consultants based on IMF/World Bank reports.

Latinamerica's contribution which represented 7.2% of GDP in 1980 dropped to 5.4% equivalent to 2.5 trillion US dollars.

United States with 4.6% of world population (compared to Latam's 8%) has a 28% share of world GDP.

Big changes also happened inside Latinamerica in the last 25 years. Argentina which concentrated 27% of the region's GDP in 1980, dropped to third place behind Brazil and Mexico and in 2005 represents a modest 7.8%.

Chile on the other hand managed to climb 0.7 points from 3.6% of Latam's GDP in 1980 to 4.3% in 2005. Chile's success in spite of its relatively small economy is based on sound economics, fiscal discipline, low inflation and pioneering trade relations with Asia which spurred strong, sustained expansion.

Brazil leads in the region with a GDP share ranking between 35/37%, and Mexico boomed ahead particularly with oil and the 1994 North American Free Trade Agreement encompassing United States and Mexico.

However Latinamerica's high foreign debt, 763 billion US dollars in 2004 is one of the factors that help to explain the region's lesser participation worldwide.

"The heavy debt burden plus high interest rates diminished the region's countries capacity to invest, particularly in infrastructure", said Ricardo Amorim from the Latinamerican branch of international consultants West LB.

Asia's growing participation from 22.5 to 27.6% also influenced the poor performance of Latinamerica.

"Hyperinflation, balance of payments crisis originated in the implementation of certain economic policies also contributed heavily to the poor showing", argues Alberto Ramos from Goldman Sacks.