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Latin America: Regional Panorama 2011-2012

The abstract of the first report “Latin America: Regional Panorama 2011-2012”, prepared by the Institute for the Promotion and Development of Latin America, is now online.

LATIN AMERICA: REGIONAL OVERVIEW 2011-2012
INSTITUTE FOR THE PROMOTION AND DEVELOPMENT OF LATIN AMERICA
LISBON, 26 JANUARY 2012

Overview

After strong growth in Latin America in 2010 (5.2%), the region grew again in 2011 but at a lower rate (4.3%), mainly due to the weakening of the world economy and a contraction in domestic demand. Brazilian economy, the largest economy on the sub-continent.
However, in the first half of 2011, the international environment continued to be relatively favorable to Latin America’s growth: high demand for the main export products, improved trade balances and good conditions for access to international financial markets. In this context, several countries managed to improve their performance in relation to 2010, namely oil exporters, who still benefited from inflation in international prices, or some countries in Central America and the Caribbean, which saw their growth leveraged by increased exports to the United States. In these first six months, South American countries grew 4.6%, more than their Central American neighbors, which expanded their economies by 4.1%.
Generally speaking, there was also, on the one hand, a general increase in imports, driven by strong domestic demand, and on the other hand, an increase in exports, resulting more from an increase in prices than from an increase in sales volume. .
Mainly due to high international food and fuel prices, inflation increased in the first part of the year but returned to a value close to 7%, slightly higher than that recorded at the end of 2010.
In the second half of 2011, the slowdown in regional growth deepened. Contributing to this were lower rates of export growth, a fall in the prices of the main exported consumer goods and a decrease in domestic demand. Faced with growing uncertainty regarding the future of the world economy, doubts surrounding the debt crisis in several euro zone countries and the resulting volatility in international markets, the fourth quarter saw expectations lower further.
It is in this context that forecasts for 2012 are made: growth in the Latin American economy of around 3.7%, a slower pace than in recent years.

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Latin America has demonstrated resilience to the deterioration of the global economic climate but, due to its global trade links, it is not completely immune. Although even the largest economies in the euro zone represent a small percentage of Latin American exports (4.2%), the entire euro zone represents 14.8% (20% of Brazilian and Chilean exports and almost 15% of Argentinean and Peruvian exports, according to the World Bank) of the total.

Funding:

The Latin American banking sector does not depend as much on the inflow of foreign capital as the European one, since, despite the high participation in the banks’ share capital, the majority of loans are financed by the national deposits themselves. Therefore, Latin American banking should not be affected by financing difficulties in major world economies.