Brazil is still by far the largest economy in Latin America despite its recession and the impact of the devaluation of the Real, according to the latest report from the International Monetary Fund (IMF), which said Venezuela dropped to the position of the region’s seventh-largest economy with a GDP that’s now half the size of Colombia’s.
Likewise the best performing economies have been those of the Pacific Alliance, Chile, Peru, Colombia and Mexico.
The IMF released its new report at last week’s annual meeting in Lima, Peru and estimated Brazil’s GDP will reach US$1.8 trillion this year, far away from the US$2.6 trillion it managed in 2011 thanks to long years of nominal and real growth and a strong currency — a combination of factors not visible now.
Measuring GDP in dollars, Mexico ranked second with US$1.6 trillion, followed by Argentina in third place with US$580 billion, as it has been the case for the last 25 years, leaving aside the 2001-2002 economic and financial crisis, according to an analysis of the IMF’s report.
The IMF forecasted a modest 0.4% rise in output for this year in Argentina, followed by a 0.7% drop in 2016. In its previous estimates, the IMF had said that the country would see GDP growth of one percent in 2016.
But the biggest change is set to happen on the Pacific Alliance —Chile, Colombia, Peru and Mexico — which will face a better outlook, with Venezuela on the exact opposite.
“Although it’s difficult to see now because of the price of raw materials, Chile, Mexico, Colombia and Peru will benefit from the reforms of recent years, along with sable macroeconomic policies,” IMF Managing Director Christine Lagarde told reporters during a conference in Lima.
All IMF representatives have repeatedly insisted on the fact that they are happy with the economic policies that have been implemented in Latin America, which in the case of several countries such as Colombia and Mexico are being overseen by the Fund in the form of technical assistance.
That scenario is backed by statistics. Colombia has performed well, the IMF said. Despite the sharp fall in oil prices, the Colombian economy are still the region’s fourth-largest, with Chile in fifth position.
“Compared to 15 years ago, the region has changed for the better. It is now standing on much more solid ground,” Lagarde said, listing Chile, Mexico, Colombia and Peru as their favorites. “It is not the same old Latin America or the same old IMF.”
The Fund expects the economy of Latin America and the Caribbean to shrink 0.3% this year instead of growing 0.5%, largely due to a steep recession in Brazil and slumping commodity prices. But the region is set to recover in 2016 with a 0.8% growth.
With GDP levels of US$179.9 billion Peru has for the first time over-taken the Venezuelan economy. Venezuela’s GDP has dropped to US$131.9 billion, almost a third of what it was in 2012 and barely half of Colombia. Over the last 15 years, the country has gone from being the region’s fourth-largest economy to its seventh, largely due to its dependence on oil exports and the failure to create other means of revenue.
At the summit in Lima, the IMF said Venezuela will be locked into a “deep recession” lasting a minimum of two years, predicting that the economy will shrink by 10% this year. That conclusion means Venezuela is the worst-performing economy in the world. Inflation, already the fastest in the world, will average 159% in 2015 and increase to 204% next year, the IMF added.
The IMF and the World Bank also included purchasing power parity (PPP) in their analysis, which is an estimate that attempts to balance each country’s price level so as to be able to gain a better picture of economic activity, including the value of goods and services that don’t form part of international trade.
Using that analysis, Venezuela is still the region’s fifth-largest economy after Colombia. But as Venezuela’s crisis is far from over, Chile and Peru will soon overtake the country on this calculation in three years, the IMF said.
A country’s wealth can also be measured by their per capita income. That would put the smaller countries of Latin America such as the Bahamas and Trinidad and Tobago at the top of the table. Chile, Argentina and Uruguay are among the best placed large nations. Haiti improved in the ranking and Venezuela saw the sharpest fall in GDP.