The most recent report from the Center for Latin American and Caribbean Studies (CELAC), on the region’s economic performance in 2012, is now online.

Latin America has been, along with Asia, the region on the planet with the highest levels of economic and social development in the last decade. In 2011, growth in the region’s Gross Domestic Product (GDP) was 4.3%.

In 2012, Panama is expected to experience the greatest expansion, with GDP growing 9.5%, followed by Haiti (6.0%) and Peru (5.9%). Bolivia, Chile, Costa Rica, Nicaragua and Venezuela are expected to grow 5% this year, while Mexico will see an increase of 4%. Brazil continues to hold its preponderant position in the region, however growth will be between 1.6% and 2%. However, for 2013, growth of around 4% is expected. Paraguay will be the only country that will see a contraction, of -2.0%, due to exceptional weather factors, which affected part of soy and beef production, two of the country’s main export products).

GDP growth for the region in 2012 is expected to stand at 3.2%, as opposed to the 3.7% previously forecast. By subregions, the Caribbean will grow by 1.6%, Central America by 4.4% and South America by 2.8%.

The slowdown in the pace of economic expansion is particularly due to economic weakness in Europe and the United States of America and the slowdown in China. These facts lead to Latin America being influenced, especially in terms of exports.
However, despite the turmoil in the global financial and economic environment, the region has maintained its access to international markets and its monetary reserves continue to increase, leading to an improvement in fiscal results in most countries.

Consequently, for 2013 a slightly lower growth trend is expected for the majority of Latin American countries, particularly for those whose exports are mainly destined for China. Mexico and the Central American countries will see growth similar to that of 2012. In the Caribbean, recovery will be paused with rates slightly higher than in 2012, thanks in particular to tourism.

Foreign Direct Investment (FDI), in Latin America and the Caribbean, currently represents 10% of global movements, having registered an investment flow of more than 154 billion dollars in 2011.

According to the report by the Economic Commission for Latin America and the Caribbean (ECLAC), from November 2012, FDI in the region increased by 8% in the first 6 months of 2012, totaling more than 94 billion dollars. The increase in FDI was due to political stability and economic dynamics, as well as the high price of raw materials. Mining activity and hydrocarbon exploration were two of the sectors that attracted the most investment, particularly in South America.

Chile, the Dominican Republic, Peru and Colombia were the countries where there was the greatest foreign direct investment. Brazil continues to be the main destination in the region, representing 46% of total FDI, but suffered a slight drop of 2%. Chile now occupies second place, thanks to an 80% increase, which allowed it to overtake Mexico.

Regarding “Translatinas” (Latin American investment companies abroad), they registered a growth of 129%.

In terms of business regulation for establishing small and medium-sized companies, Chile ranks first in Latin America and 37th worldwide, out of a total of 185 economies. Peru (43), Colombia (45), Mexico (48) and Panama (61) follow. Costa Rica has been one of the Latin American countries to make the most progress, ranking 110th (according to the World Bank).

Latin American GDP per capita is estimated at 12,328 dollars this year, having increased by 3.6% compared to 2011. Panama recorded the biggest increase in this index since 2008 (32.4%), followed by Uruguay (27 .7%), Peru (24.1%) and Dominican Republic (19.7%).
However, it is Chile that occupies, in 2012, the first position in the ranking of countries with the highest GDP per capita, worth 18,354 dollars, dethroning Uruguay to second place, with 15,840 dollars. In third place comes Mexico, with 15,300 dollars per inhabitant – in a universe of 115 million – in fourth place, Panama, with 15,266 dollars, and in fifth place, Venezuela with 13, 242 dollars.

According to the CEPAL report, inflation maintained a low trend in the first half of 2012, with an average variation of 5.5%, the lowest value since 2010. The increase in employment and the improvement of working conditions are other positive aspects to stand out in Latin America. The unemployment rate drops to 6.4%, exceeding values estimated at the beginning of the year. But the main driver of regional expansion has been private consumption: the marked improvement in purchasing power, due to the increase in real wages, greater ease in access to credit and, in some cases, remittances, have been the fundamental factors for avoid a further slowdown in the economy, according to CEPAL and ILO.

In short, Latin America has recorded effective economic performance since 2003, thanks to the adoption of public policies focused on long-term development. Despite being a region with some level of heterogeneity, in terms of economic and social development, it achieved an average annual GDP growth of around 5%, between 2003 and 2008, especially due to the intelligent combination of two factors: external demand and domestic consumption. Domestic consumption has increased by 15% in recent years. Between 2000 and 2007, the region’s public debt decreased to around 15% of GDP, demonstrating the solidity of Latin American economies. In the midst of the global crisis, between 2008 and 2012, the region’s economic situation was little affected, largely due to the available fiscal space, which allowed it to react with counter-cyclical policies, in order to stabilize the growing trajectory of investment, employment and growth. This economic development led to the exponential growth of the middle class throughout the region, especially in Argentina, Brazil and Mexico. In some cases, this middle class earns wages ten times higher than the minimum wage.