While countries like Venezuela and Brazil ache over falling commodity prices, Central America rejoices over the US recovery.
The most recent World Bank report indicates that throughout the LatAm region, recent economic developments have left 2 stories to tell.
South America generally wavered, their economic results largely depend on raw material prices. And drops were recorded for most of these, as not only oil fell dramatically, but alongside it prices for copper, nickel and coal. These indexes sealed a grim first quarter for South American economies, as prices still lack stability.
Besides that, South America has been exporting less. As China’s economy shrinks, demand for commodities will stay low. The situation is so dire, the World Bank has once again speculated a 0.6% contraction in regional GDP.
On the other hand, Mexico and Central America enjoyed a smoother start to the year. The United States’ recovery remains on course, and these countries, which are far less attached to commodities, are set to recover their main trading partner and investor. It’s this that leads the World Bank to speculate on a 2.5% regional growth for Central America, a decent, if not spectacular figure.
The World Bank report associated with these figures recommends a stronger savings policy, a reduction in expenditure and investment. In short, a certain degree of austerity. Leaders should look upon this report carefully though, because even though austerity might soften the blows of future crises, it will hardly help LatAm overcome its relative stagnation.
Investment and expenditure will offer another way out of the slump, as it might jumpstart the industry and stimulate regional demand. However, most countries simply cannot conceive this method. In Brazil, for example, the vaults are running dry as a result of sharp fiscal deficit, and in Venezuela, inflation decimated the Bolivar’s purchasing power.
Some countries can overcome these troubles through loans, but recent risk assessments speak ills of most South American countries, leading to exaggerated interest rates.
There is no easy exit then, through reports like the one released by the World Bank we will find insights into possible solutions, but only leaders can opt for one or another, and as scandals run amuck, consistent leadership also seems a distant reality.
LatinAmerican Post |