Brazil, Venezuela and Argentina Slow Latin America's Growth

12/03/2014 - 10h37

Latin America is likely to register the lowest rate of economic growth of the past five years.

According to the United Nations Economic Commission for Latin America and the Caribbean (Eclac), Brazil's slowdown and the contraction of the economies of Argentina and Venezuela are pulling down regional performance.

Therefore, the region should get its worst result since 2009, the peak of the global financial crisis.

Brazil is the largest economy in the group of 33 countries monitored by Eclac. Argentina and Venezuela are the third and the fifth respectively. This year, all three are on the bottom of the list.

The reduction of investments that has been ongoing since 2011 is one of the factors that could explain the group's slowdown.

Spending on machinery and construction - called fixed formation in economic parlance - went down to an average of 3% in 2014.

The contraction occurred mainly in Argentina, Brazil, Chile and Venezuela.

Last week, Brazilian Institute of Statistic and Geography (IBGE) reported the investments fell 7.4% this year (including the third quarter) compared to the same period of 2013.

According to Daniel Titelman, director of the Economic Development Division at Eclac, it is a worrying factor that could compromise the performance of countries in the long term.

Titelman said that since 2010, when the region emerged from the global crisis, investments contributed to boost its growth.

In 2014, however, there will be no such help. On the other hand, Colombia, Bolivia, Ecuador and Panama have increased the investment rates in their countries.

"Economies that grew more or that had a slight deceleration were those with the best investment rates", says Titelman.

Another negative contribution came from the fall in raw material prices, which went into decline, especially since last year's second semester.

Metal and agricultural commodity prices retreated 2.3% and 6.9% on average this year.

Eclac shows that oil and gas fell 17%, affecting the performance of the region's major oil exporters: Venezuela, Colombia and Mexico.

In addition to the revenue reduction (in dollars), falling prices also have an impact on tax collections in these countries.

Mexico and Colombia were less affected due to American recovery, the country with which they maintain trade preference agreements.

Eclac forecast, traditionally supported by development economists, is the growth in the region will improve in 2015.

In Brazil, Eclac estimates 1.3% expansion, a higher rate than expected by Brazilian analysts consulted by the Central Bank, who forecasted growth of 0.77%.

Translated by JULIANA CALDERARI

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