MercoPress. South Atlantic News Agency

Mercosur economic performance expected to lag behind Andean countries in 2012

Peru under President Humala and boosted by mining and energy will outperform other members of South America

Argentina and Brazil will experience an economic slowdown this year compared to 2011, while Paraguay, punished by drought and an outbreak of foot and mouth disease, will have the worst performance in Latin America, and Peru the best, according to the Argentine consultants Ecolatina

Brazil had an average growth of 6% from 2001 to 2011 with inflation in the range of 6.6% and Argentina expanded at 8% in the decade but inflation soared to an average 16.7% beginning in 2007, said the consultant which was founded by former Economy minister Roberto Lavagna. However the other members of Mercosur, Venezuela and Uruguay are expected to expand 4% in 2012.

Brazil and Argentina are the two largest economies of South America.

“It can be said that the slowdown of the world economy will be relatively limited in Chile as in the countries belonging to the Community of Andean Nations (Peru, Ecuador, Colombia and Bolivia) (CAN)” said Ecolatina.

More specifically on Chile the report says that in 2012 the economy showed signs of decelerating after growing 6% last year. “In effect, the latest Chilean central bank poll on economic expectations indicates a growth forecast of 5% this year”.

For Ecolatina the annual balance “will be favourable for the members of CAN since it is estimated the economy will expand at least 4%, and in that group Peru outstands, because according to the country’s central bank expectations poll, GDP is expected to advance 6% this year”.

“The excellent performance of the Peruvian economy is not a temporary phenomenon since during the last decade the country expanded at Chinese rates with low inflation, as happened in Argentina from mid 2002 to 2006”, adds the report.

President Ollanta Humala has continued with the policies started by Alberto Fujimori, Alejandro Toledo and Alan García to open the Peruvian economy and welcome foreign investments.

It also pointed out that the exit of Venezuela from CAN and its inclusion in Mercosur imply “an important readjustment in the region with consequences for trade relations in the future”.

Ecolatina looking ahead proposed “assessing the viability of the diminished CAN” and speculated that if “the recent creation of the Alliance of the Pacific”, which promotes deep integration of Chile, Mexico, Colombia and Peru advances, and Ecuador and Bolivia opt for Mercosur, “the region could be split into two blocks”.

However the overall result for South America in the first decade of this century has been clearly positive: the region’s GDP overall expanded at an average rate of 6.6%, underlined Ecolatina.

“Even when performance has been lower than that of the emerging countries group (8.8% annual), it was higher than the world average of 6.6%. And furthermore and very encouraging with the exception of a couple of specific cases, inflation has ceased to be a problem for South American countries”, concludes the report.