MercoPress. South Atlantic News Agency

“The party is over”, lean growth years ahead

After three years of sustained growth the economies of Latinamerica (including Argentina and Venezuela) will be expanding at a more moderate rate according to estimates from the World Bank and Wall Street analysts.

Data seems to confirm that the region's strong growth was closely linked to overseas factors such as the soaring prices of commodities and the vigorous world expansion, which helped boost the region's exports.

A new report from the World Bank indicates that commodities prices will cease to grow at the rate of recent years which will have an impact on several Latinamerica countries. At the same time populist policies could be frightening foreign investors.

Some facts from the WB "Global Development Finance 2006" report:

*Latam economies will expand 4.6& in 2006; 4% in 2007 and 3.7% in 2008 "reflecting a significant deceleration in Argentina and Venezuela, the two countries with the fastest growth in the last two years. *Countries which depend on farm exports, such as Argentina, Brazil and Uruguay, will suffer from lower agriculture prices in the coming two years. And metal exporting countries. Chile and Peru, will also be affected by a more modest advance in metals' prices. *Venezuela, Ecuador, Mexico and oil producing countries which have benefited from soaring oil prices won't be experiencing a similar situation in coming years. World investment in exploration and new refineries, as well as greater conservation measures, will rein in hydrocarbons prices. * As in 2006, Latinamerica will be the world's developing region with the lowest expansion rate in 2007. Subsaharian Africa is forecasted to grow 5.4%; Middle East and North Africa 5.1%; South Asia 6.2%; East Asia 8.1% and East Europe 5.1%.

"The situation in developping countries overall is much better than five years ago", said Uri Dadush, chief economist in the WB. "What we are seeing in Latam is an improvement but lesser than in the rest of the world's developing regions", he added.

The United Nations Economic Committee for Latinamerica and the Caribbean is also forecasting a 0.5% drop in growth next year, levelling at 4.1%.

Goldman Sachs forecasts Argentine growth to decrease to 7.5% in 2006 and 3.9% in 2007; Venezuela will drop to 6.2% and 4.1%; Mexico 4.2% and 3.6% and Chile 5.5% and 5%.

"Latinamerica is not managing to convince domestic and foreign investors to trust their funds in the region, while other emerging markets are having more success in attracting investors", said Paul Leme Goldman Sachs Emerging Markets Director.

"Taxes are too high; government expenditure inefficient, the 2001 confiscation of bank deposits in Argentina is still fresh and Evo Morales in Bolivia and Hugo Chavez in Venezuela keep memories alive", he added.

The party is coming to an end, international conditions are not so favourable and it's time to begin thinking as in Chile and come other Central American countries that lean cow years are ahead. Unfortunately Argentina and Venezuela did not take advantage of the situation to diversify exports and become globally competitive.