MercoPress. South Atlantic News Agency

World Bank lowers Latinamerica growth prospects to 4.8%

The World Bank lowered Latin America's growth estimate for 2008 to 4.8% from 5.1% as a consequence of the economic slowdown in United States, said vice president for the region Pamela Cox.

Speaking at the Reuters Latin America Investment Summit Ms Cox said that while the impact on the region from the US credit and the housing market crises was not completely clear, Latin America was generally better placed than before to deal with the turmoil. But Mexico and Central America would be most affected in the region because of their proximity and dependency to US markets and the importance of remittances from the US. "Mexico, the Caribbean and Central America are much more closely tied to the U.S. market" she said. "We could see the impact in two ways -- on the demand for Mexican exports to the US, if US consumer demand slows, and, secondly, with remittances," which dropped 5.7% in January. The World Bank official said that in the last five years countries in the region had become more resilient to crises by strengthening their economic policies and regulation of financial systems, plus the fact that most were now running fiscal surpluses. Cox said more investment in education and infrastructure development would help bolster Latin America's competitiveness and lagging growth, when compared to other regions such as Asia and Eastern Europe. In particular, the region needs to strengthen business regulation and quality of legal and judicial frameworks. Ms Cox said several countries are waking up to this, especially countries such as Peru, Colombia and those in Central America". Cox also pointed out that getting goods to market in Latinamerica is expensive, with transportation and logistics costs in the region making up on average 25% of the cost of delivered goods, "compared with 9% in industrial countries". Another soft spot of Latinamerica is the quality of education which makes it difficult for countries to change from low labor cost industries to those that require higher education levels, a transition which has been most successful in several Asian countries. However Ms Cox said that the World Bank is planning to boost its lending to Latin America to 5.8 billion US dollars this year from 4.8 billion, with most of the increase going to development projects in Brazil's states. But in spite of the World Bank lower forecast, one of the Spanish leading banks in Latinamerica, Banco Bilbao Vizcaya Argentaria, BBVA, expects the region to expand above 5% in 2008, particularly South America boosted by domestic demand. BBVA report Latinwatch says Latinamerica is going through "a period of economic expansion unknown since the seventies" and forecasts that after having expanded 6.5% in 2007 the region will grow 5.4% this year and 4.6% in 2009. Latinwatch forecasts Peru to expand 7%, after having grown 9% in 2007; Argentina, 7.5% (8.7%) and Venezuela 5.7% (8.4%) "Less trade dependency from the US and greater export diversification have protected South American countries from the US financial crisis", says Latinwatch.