Economy, Finance and Trade in Latin America

November 2022

Latin American economies witness economic slowdown, coupled with skyrocketing inflation and depreciation of local currencies. While economic development of regional economies varies, pressing monetary and economic issues burden most Latin American countries. In light of global economic slowdown, regional exports continue stagnating, while rising energy and other commodity prices pressure trade balances. Deteriorating government revenue and pressing social issues burden state budgets.

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Key Findings

The economic outlook in the region worsens amid global headwinds

Latin American economies recorded rather flat growth over 2016-2019, and while they witnessed strong recovery in 2021 after the pandemic-caused downturn, future growth prospects remain clouded. Persisting monetary and fiscal challenges, alongside a worsening global economic outlook in the face of Russia’s aggression, drag down Latin America’s economic growth forecasts.

Skyrocketing inflation and weakening local currencies cloud growth prospects

The region is struggling to deal with yet another inflation crisis, following years of already elevated inflation levels. With some Latin American countries recording multi-digit inflation rates and rapidly depreciating local currencies, the region struggles to deal with global stagflation and the robust rise in commodity prices. Inflation in the region is projected to remain elevated throughout the forecast period, dragging down consumption, limiting productivity and hampering economic growth.

Trade continues to stagnate as global demand slows down

While some Latin American countries, like Brazil or Mexico, benefit from rising global demand for (and the price of) oil and its products, overall exports from the region stagnate as demand globally slows down. Moreover, while exports recovered after the COVID-19 shock, disruptions to global supply chains persist, preventing trade expansion. Latin American economies aim to negotiate new trade deals with key global players, including the US and China; however, any changes might take a long time to come into effect, not promising any major export breakthrough for the region.

Global economic slowdown and monetary tightening will take a toll on the region’s fiscal health

The public finances of Latin American economies are set to be adversely affected by weakening tax revenue amid decelerating growth momentum, as well as increasing government spending aimed to shield consumers from rising living costs. Moreover, developing economies in the region are poised to witness local currency depreciation, financial instability and difficulties with balances of payments triggered by rapid monetary tightening across advanced global economies.

 

Scope
Key findings
Looming macroeconomic issues limit future growth outlook
Real estate and manufacturing remain key drivers of the region’s growth
Large differences in economic development exist within the region
Remittance inflows growth surges in 2021 thanks to recovered migration
Numerous tax havens in the region drive FDI inflows
Inflation in the region to remain the highest globally over 2021-2024
Impact of global stagflation scenario on the Argentinian economy
Impact of COVID-19 pessimistic scenario on the Brazilian economy
Impact of the US-China trade war scenario on the Mexican economy
Weakening currencies and soaring energy and commodity prices fuel trade deficits
Despite rising trade values, in volume terms exports slow down as global economies stagnate
While North America remains a key export destination, trade with Asian countries grows
While public debt in the region is rather low, some countries face debt-servicing risks
Weakening economic conditions to take a toll on public finances
Argentina : Economic structure and foreign investment overview
Argentina : Inflation, exchange rates and export profile
Bolivia : Economic structure and foreign investment overview
Bolivia : Inflation, exchange rates and export profile
Brazil: Economic structure and foreign investment overview
Brazil: Inflation, exchange rates and export profile
Chile: Economic structure and foreign investment overview
Chile: Inflation, exchange rates and export profile
Colombia: Economic structure and foreign investment overview
Colombia: Inflation, exchange rates and export profile
Costa Rica: Economic structure and foreign investment overview
Costa Rica: Inflation, exchange rates and export profile
Dominican Republic: Economic structure and foreign investment overview
Dominican Republic: Inflation, exchange rates and export profile
Ecuador: Economic structure and foreign investment overview
Ecuador: Inflation, exchange rates and export profile
El Salvador: Economic structure and foreign investment overview
El Salvador: Inflation, exchange rates and export profile
Guatemala: Economic structure and foreign investment overview
Guatemala: Inflation, exchange rates and export profile
Honduras: Economic structure and foreign investment overview
Honduras: Inflation, exchange rates and export profile
Mexico: Economic structure and foreign investment overview
Mexico: Inflation, exchange rates and export profile
Panama: Economic structure and foreign investment overview
Panama: Inflation, exchange rates and export profile
Paraguay: Economic structure and foreign investment overview
Paraguay: Inflation, exchange rates and export profile
Peru : Economic structure and foreign investment overview
Peru : Inflation, exchange rates and export profile
Uruguay : Economic structure and foreign investment overview
Uruguay : Inflation, exchange rates and export profile
Venezuela : Economic structure and foreign investment overview
Venezuela : Inflation, exchange rates and export profile
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