A particularly complex environment The region exhibits a - - PowerPoint PPT Presentation

A particularly complex environment

▪ The region exhibits a generalized and synchronized economic slowdown at the level

• f countries and sectors

▪ The slowdown in domestic demand is accompanied by low external aggregate demand and more fragile international financial markets ▪ Added to this context are the growing social demands and the pressures to reduce inequality and increase social inclusion ▪ Given this scenario, the region requires policies to stimulate growth and reduce inequality

International context

Three signs of stagnation and uncertainty

• 1. Growth of the world economy in 2019 is at

its lowest rate since the global financial crisis and no significant improvement is expected in 2020.

• 2. World trade is progressively weakening

amid rising trade tensions.

• 3. Financial vulnerabilities are apparent.

3.1 2.3 2.9 0.8 1.4 1.9 4.5 6.4 6.6 6.8 3.1 1.9 3.2 2.5 1.7 2.3 0.9 1.3 1.1 3.9 5.9 6.1 6.0 1.8 0.9 3.0

2.5 1.5 1.9 0.5 1.0 1.2 4.3 6.0 5.8 6.7 2.4 2.9 3.4

1 2 3 4 5 6 7 8

World Developed economies United States Japan United Kingdom Eurozone Emerging markets and developing economies Emerging Asia China India Emerging Europe Middle East and Central Asia Sub-Saharan Africa

2018 2019 2020

The lowest level of global growth in a decade

SELECTED REGIONS AND COUNTRIES: GROSS DOMESTIC PRODUCT GROWTH, 2018 TO 2020a (In percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on OECD data (Economic Outlook, September 2019), WEO (IMF, October 2019), European Commission (Autumn 2019 Forecasts of November 7, 2019 ), Capital Economics (October 2019), European Central Bank (Projections as of September 12, 2019), WESP, United Nations (preliminary report 2020).

a 2019 and 2020 correspond to projections b The figures for India correspond to the fiscal year, which begins in April and ends in March of the following year.

YEAR-ON-YEAR CHANGE IN THE VOLUME OF WORLD TRADE, THREE MONTH ROLLING AVERAGE, JANUARY 2011 TO SEPTEMBER 2019 (In percentages, based on a seasonally-adjusted index)

Global trade is increasingly weakening amid trade tensions

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of the Netherlands Bureau of Economic Policy Analysis (CPB), World Trade Monitor.

• 4
• 2

2 4 6 8 10 12 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Jan-18 May-18 Sep-18 Jan-19 May-19 Sep-19 2017 2018 3.4% 2019 (Jan-Sept)

• 0.4%
• World trade

volumes are contracting for the first time since the global economic and financial crisis.

• Commodities

prices are falling.

The financial world continues to grow while the real economy does not

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of IIF (2018-2019) and OECD (2019). Note: The long-term interest rate curve was obtained as a median of long-term interest rates for government bonds with a maturity of 10 years for G-7 countries.

AVERAGE LONG-TERM INTEREST RATES AND GLOBAL DEBT, FIRST QUARTER OF 2018 TO THIRD QUARTER 2019 (Trillions of dollars and percentages)

236 238 240 242 244 246 248 250 252 254 256 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 I II III IV I II III 2018 2019 Long-term nominal interest rates (%) Global debt (US$ trillions) (Right axis)

• Global debt levels reach

record highs with elevated financial vulnerability.

• Low interest rates boost

the search for higher risk returns.

• Debt increases at a rate

greater than that of world GDP.

• Debt increases for all

agents (households, governments and the financial and non-financial corporate sector).

80 90 100 110 120 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Energy Agricultural products Metals (non precious) and minerals

YEAR-ON-YEAR CHANGE IN COMMODITY PRICES, 2016 TO 2020a (In percentages, based on average annual prices)

After a 5% fall this year, further lows in commodity prices are expected in 2020

EVOLUTION OF COMMODITY PRICE INDEX, JANUARY 2018 TO OCTOBER 2019

a 2019 corresponds to estimates and 2020 to projections. b This category includes oil, natural gas and coal.

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on data from the Pink Sheet of the World Bank; International Monetary Fund (IMF); Economist Intelligence Unit, Bloomberg; Energy Information Administration (EIA), Capital Economics and Central Bank of Chile, Monetary Policy Report, September 2019, Santiago for the price of copper.

2016 2017 2018 2019a 2020a

Agricultural products 4.1 0.5 0.9

• 3.5
• 0.6

Foods, tropical beverages and

• ilseeds

5.7

• 0.6
• 2.3
• 4.4
• 0.9

Foods 9.3

• 0.1
• 3.4
• 1.0

0.3 Tropical beverages 0.6

• 1.7
• 10.1
• 7.7

2.5 Oils and oil seeds 2.4

• 1.0

1.5

• 8.3
• 3.4

Forestry and agricultural raw materials

• 2.3

4.9 13.4

• 0.3

0.5

Minerals y metals

• 0.7

23.3 4.2

• 1.3
• 1.7

Energy b

• 16.3 23.5 25.6 -10.5 -3.3

Crude oil

• 15.7 23.3

29.4 -11.5

• 4.5

All commodities

• 4.3

14.6 9.9

• 5.4
• 1.9

All commodities (excl. energy) 1.8

10.8 2.6

• 2.4
• 1.2

Five warning signs in the region

• 1. Sixth year of low growth for the region, a situation that will

continue in 2020: GDP per capita has contracted 4.0% between 2014 and 2019.

• 2. The slowdown is widespread: more countries and more sectors.
• 3. Lower trade volumes and less favorable terms of trade.
• 4. Aggregate domestic demand weakens: consumption and

investment slow or contract; low contribution of public spending to growth and internal credit declines.

• 5. Inequality is inefficient and threatens growth. It is at the heart
• f social unrest due to job deterioration, low levels of income,

insufficient provision of public goods and underdeveloped social protection systems, all of which undermine growth.

External Sector

• 10
• 5

5 10 15

Exporters of hydrocarbonsᵇ Exporters of minerals and metalsᶜ Mexico Latin America Central America, Dominican Rep. and Haiti Exporters of agro-industrial productsᵈ Brazil The Caribbeanᵉ

2017 2018 2019ᵃ

• 28,7

LATIN AMERICA AND CARIBBEAN (COUNTRIES AND GROUP OF SELECTED COUNTRIES): CHANGE IN TERMS OF TRADE, 2017 TO 2019 (In percentages)

Lower commodity prices translate into a deterioration of the terms

• f trade for the region, especially for exporters of hydrocarbons

and mining products

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures.

a The figures for 2019 correspond to projections. b Bolivia (Plurinational State of), Colombia, Ecuador, Trinidad and Tobago and Venezuela (Bolivarian Republic of). c Chile and Peru. d Argentina, Paraguay and Uruguay. e Excludes Trinidad and Tobago.

LATIN AMERICA AND THE CARIBBEAN: YEAR-ON-YEAR VARIATION OF EXPORT VOLUMES AND GDP GROWTH RATE OF TRADE PARTNERS, 2012 TO 2019 (In percentages)

The deceleration in external demand has resulted in slower growth in the region's export volume

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures.

4.5 1.7 2.5 2.6 2.1 4.3 2.6 0.6 2.0 2.2 2.4 2.6 2.8 3.0 0.0 1.0 2.0 3.0 4.0 5.0 2012 2013 2014 2015 2016 2017 2018 2019 Variation of exported volume GDP growth of trade partners (right axis)

LATIN AMERICA AND THE CARIBBEAN: YEAR-ON-YEAR VARIATION OF GOODS IMPORT VOLUMES, 2012 TO 2019 (In percentages)

Imports are also decreasing as a result of the deceleration in investment and consumption

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures.

24.3 11.8 3.5 3.0

• 0.2
• 3.7
• 4.9

5.2 6.5

• 0.9
• 10
• 5

5 10 15 20 25 30 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

• 0.9

0.2 0.8 0.4 0.4

• 1.1
• 1.0
• 1.0
• 1.0
• 1.0
• 2.5
• 2.6
• 2.8
• 3.1
• 3.3

1.3 1.5 1.5 1.7 1.8

• 3.2
• 1.9
• 1.5
• 2.0
• 2.0
• 5
• 4
• 3
• 2
• 1

1 2 3 2015 2016 2017 2018 2019 Goods balance Services balance Income balance Current transfers balance Current account balance LATIN AMERICA (19 COUNTRIES): CURRENT ACCOUNT OF THE BALANCE OF PAYMENTS ACCORDING TO COMPONENTS, 2015 TO 2019 (In percentages of GDP)

Current account balance remains steady, but the income balance has deteriorated

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures.

Increase in interest payments and reduction in FDI income: USD 8.5 billion Increased remittances USD 7.6 billion

• 5
• 4
• 3
• 2
• 1

1 2 3 4 5 I II III IV I II III IV I II III IV I II III IV I II III IV I II 2014 2015 2016 2017 2018 2019 Latin America Mexico and Central America South America

Growth slowed in the first half of the year in the region, and it did so in a generalized way across countries

LATIN AMERICA AND THE CARIBBEAN: GDP GROWTH RATE, 2014 TO 2019 (In percentages, based on constant dollars of 2010)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures.

LATIN AMERICA: CHANGE OF GDP GROWTH IN THE FIRST SEMESTER OF 2019 IN RELATION TO THE SAME PERIOD OF 2018 (In percentages, based on constant dollars of 2010)

Growth in 18 of 20 Latin American economies slowed in the first half of this year

• 12
• 10
• 8
• 6
• 4
• 2

2 Venezuela (Bol. Rep. of) Paraguay Nicaragua Chile Peru Uruguay Dominican Rep. Argentina Costa Rica Bolivia (Plur. State of) Mexico Cuba Ecuador Honduras Haiti El Salvador Panama Brazil Colombia Guatemala

There has been a significant contraction in all components of domestic aggregate demand

LATIN AMERICA: CONTRIBUTION OF PRIVATE AND PUBLIC CONSUMPTION, GROSS FIXED CAPITAL FORMATION AND GROSS EXPORTS TO GDP GROWTH, 2015 TO 2019 (In percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures.

• Gross exports are the only component of aggregate demand that has contributed

to growth.

• 2.0
• 1.5
• 1.0
• 0.5

0.0 0.5 1.0 1.5 2.0 I II III IV I II III IV I II III IV I II III IV I II 2015 2016 2017 2018 2019 Gross fixed capital formation Exports of goods and services (gross)

• 2.0
• 1.5
• 1.0
• 0.5

0.0 0.5 1.0 1.5 2.0 I II III IV I II III IV I II III IV I II III IV I II 2015 2016 2017 2018 2019 Private consumption General government consumption

Gross domestic investment in Latin America has decreased by 2.4 percentage points since 2014

LATIN AMERICA: FINANCING OF GROSS INTERNAL INVESTMENT, 2014-2019 (In percentages of GDP, based on current dollars)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures.

20.5 18.1 0.0 2.5 5.0 7.5 10.0 12.5 15.0 17.5 20.0 22.5 2014 2015 2016 2017 2018 2019 Foreign savings Gross national savings Gross domestic investment

National unemployment increased from 8.0% to 8.2%

LATIN AMERICA AND THE CARIBBEAN: NATIONAL AND URBAN UNEMPLOYMENT RATES AND NUMBER OF UNEMPLOYED (In percentages and millions of people)

• The number of unemployed rose by one million people, and reached a new high,

25.2 million.

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures.

a Estimates.

15 17 19 21 23 25 27 5.0 5.5 6.0 6.5 7.0 7.5 8.0 8.5 9.0 9.5 10.0 2014 2015 2016 2017 2018 2019ᵃ National unemployment rate (left axis) Urban unemployment rate (left axis) Number of unemployed (right axis)

LATIN AMERICA (11 COUNTRIES): INTER-ANNUAL VARIATION OF THE RATE OF HOURLY UNDEREMPLOYMENT, 2018 AND 2019a (In percentage points)

The average quality of employment deteriorated in most countries

LATIN AMERICA (10 COUNTRIES): INTER-ANNUAL VARIATION OF THE RATE OF INFORMAL EMPLOYMENT, 2018 AND 2019a (In percentage points)

• As in previous years, in 2019, self-employment expanded more than wage employment

(3.0% versus 1.5%).

• In addition, hourly underemployment and labor informality increased more generally.

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures.

a The 2019 data refer to the interannual variation for the period January to September.

• 2
• 1.5
• 1
• 0.5

0.5 1 1.5 2 2.5 2018 2019ᵃ

• 3.0
• 2.0
• 1.0

0.0 1.0 2.0 3.0 4.0 2018 2019ᵃ

Fiscal, monetary and financial policies

LATIN AMERICA AND THE CARIBBEAN: COMPOSITION OF CENTRAL GOVERNMENT REVENUES, 2017 TO 2019 (In percentages of GDP)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures. Note: Simple averages. Dominica is excluded. The figures for 2019 correspond to: projections derived from budgets or official estimates for the end of 2019.

Fiscal revenues stagnate: decelerating growth combined with a low tax take and tax evasion

15.4 15.5 15.5 14.0 13.9 13.9 16.8 17.0 17.0 21.0 21.6 21.8 2.7 2.7 2.6 2.8 2.6 2.5 2.6 2.7 2.7 4.8 5.4 5.4 18.0 18.1 18.1 16.8 16.5 16.5 19.3 19.8 19.7 25.8 27.0 27.2 5 10 15 20 25 30 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 Latin America (16 countries) Central America, Dominican Rep. and Mexico South America (8 countries) The Caribbean (12 countries) Tax revenues Other revenues

• Public revenues

remain stable despite slow growth due to tax activism in recent years.

• There is an

urgent need to advance in progressive taxation: wealth taxes.

LATIN AMERICA AND THE CARIBBEAN: COMPOSITION OF CENTRAL GOVERNMENT EXPENDITURES, 2017-2019 (In percentages of GDP)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures. Note: Simple averages. Dominica is excluded. The figures for 2019 correspond to: projections derived from budgets or official estimates for the end of 2019.

… and this in turn limits the capacity to expand public expenditure

15.3 15.3 15.2 12.9 12.9 13.0 17.7 17.7 17.4 21.6 21.8 21.9 3.5 3.2 3.1 3.8 3.5 3.3 3.3 2.9 2.9 3.6 3.5 3.7 2.3 2.5 2.6 2.2 2.5 2.8 2.4 2.5 2.5 3.3 2.8 2.7 21.2 21.0 20.9 18.9 18.9 19.0 23.4 23.1 22.8 28.5 28.2 28.3 5 10 15 20 25 30 2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019 Latin America (16 countries) Central America, Dominican Rep. and Mexico South America (8 countries) The Caribbean (12 countries) Primary current expenditure Capital expenditure Interest payments

• Important

reduction of capital expenditure and primary current expenditure (South America), with an increase in interest payments.

• The reduction in

current primary spending put pressure on social spending just when it is more necessary than ever.

Greater public indebtedness has not translated into greater public investment

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures. Note: Simple averages. The figures for 2019 correspond to: projections derived from budgets or official estimates for the end of 2019.

LATIN AMERICA (16 COUNTRIES): CENTRAL GOVERNMENT INTEREST PAYMENTS AND CAPITAL EXPENDITURE, 2000 TO 2019 (In percentages of GDP)

2.5 1.7 2.5 2.6 3.0 4.2 3.2 3.1 1 2 3 4 5 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Interest payments Capital expenditure

Since 2013, capital expenditure has been the variable

• f adjustment

used to accommodate rising interest payment.

The region continues to follow a process of consolidation to reduce deficits

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures. Note: Simple averages. Dominica is excluded. The figures for 2019 correspond to: projections derived from budgets or official estimates for the end of 2019.

LATIN AMERICA (16 COUNTRIES): CENTRAL GOVERNMENT FISCAL INDICATORS, 2015 TO 2019 (In percentages of GDP) THE CARIBBEAN (12 COUNTRIES): CENTRAL GOVERNMENT FISCAL INDICATORS, 2015 TO 2019 (In percentages of GDP)

• 3.1
• 3.2
• 3.1
• 2.9
• 2.8

18 18.0 18 18.1 18 18.1 21 21.2 21 21.0 20 20.9 18 18.9 18 18.5 18 18.3

• 1.0
• 1.0
• 0.8
• 0.4
• 0.2
• 6
• 4
• 2

2 4 6 8 10 12 10 12 14 16 18 20 22 24 2015 2016 2017 2018 2019 Global balance (right axis) Total revenues (left axis) Total expenditure (left axis) Primary expenditure (left axis) Primary balance (right axis)

• 2.6
• 2.2
• 2.8
• 1.2
• 1.1

25 25.8 27 27.0 27.2 28 28.5 28 28.2 28 28.3 25 25.2 25 25.3 25 25.6 0.6 1.2 0.6 1.6 1.6

• 6
• 4
• 2

2 4 6 8 10 12 10 12 14 16 18 20 22 24 26 28 30 2015 2016 2017 2018 2019 Global balance (right axis) Total revenues (left axis) Total expenditure (left axis) Primary expenditure (left axis) Primary balance (right axis)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures.

Despite fiscal consolidation, the level of public debt continues to rise while investment contracts

LATIN AMERICA (18 COUNTRIES): CENTRAL GOVERNMENT GROSS PUBLIC DEBT, 2000 TO JUNE 2019 (In percentages of GDP) LATIN AMERICA (18 COUNTRIES): CENTRAL GOVERNMENT GROSS PUBLIC DEBT, 2018 TO JUNE 2019 (In percentages of GDP) 41.2 55.3 30.4 29.8 43.2 10 20 30 40 50 60 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Jun-19 86.0 77.2 50.7 48.6 48.2 47.7 47.6 44.6 42.2 41.9 39.3 39.1 37.6 36.8 36.0 35.4 32.7 25.6 24.0 21.1 16.8 80.7 78.7 56.7 49.2 48.2 49.4 47.5 45.3 46.3 43.2 38.7 40.9 37.3 38.7 35.0 34.2 26.8 25.9 22.8 18.7

10 20 30 40 50 60 70 80 90

ARG BRA CRI COL HON URY SLV ASUR ECU AL-18 PAN CENT NIC RDO BOL MEX HTI CHL GTM PER PRY

2018 June 2019

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures.

While in the Caribbean, high primary surpluses have contributed to reducing the level of public debt

THE CARIBBEAN (13 COUNTRIES): CENTRAL GOVERNMENT GROSS PUBLIC DEBT, 2000 TO JUNE 2019 (In percentages of GDP) THE CARIBBEAN (13 COUNTRIES): CENTRAL GOVERNMENT GROSS PUBLIC DEBT, 2018 TO JUNE 2019 (In percentages of GDP)

124.0 102.9 93.9 72.6 71.7 71.4 68.2 64.4 63.6 62.2 61.3 59.8 47.0 41.1

122.6 97.091.5 69.069.070.667.662.361.158.756.157.5 43.339.1 20 40 60 80 100 120 140 BRB JAM BLZ SUR CAR-13 DMA VCT BHS ATG LCA GRD TTO GUY KNA 2018 June 2019 59.4 72.5 59.5 69.0 10 20 30 40 50 60 70 80 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Jun-19

1 2 3 4 5 6 7 8 9 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Latin America and the Caribbean excl Argentina, Haiti and Venezuela (Bol. Rep. of) South America excl Argentina and Venezuela (Bol. Rep. of) Central America and Mexico excl Haiti The Caribbean LATIN AMERICA AND THE CARIBBEAN: VARIATION RATE OF THE CONSUMER PRICE INDEX (CPI) IN 12 MONTHS, WEIGHTED AVERAGE, JANUARY 2015 TO OCTOBER 2019 (In percentages)

Inflation is at historically low levels and is continuing to fall…

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures.

2,4% 3,6%

LATIN AMERICA (SELECTED COUNTRIES): MONETARY POLICY RATE IN COUNTRIES THAT USE IT AS THE MAIN POLICY INSTRUMENT, JANUARY 2016 TO OCTOBER 2019 (In percentages)

… which has allowed for expansive monetary policy in the majority of the economies of the region

Policy rates at low levels Accelerating growth of the monetary base

LATIN AMERICA (SELECTED COUNTRIES): INTERANUAL GROWTH OF THE MONETARY BASE, I QUARTER OF 2016 TO III QUARTER 2019 (In percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures.

2 4 6 8 10 12 14 16

Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19

Brazil Chile Colombia Mexico Paraguay Peru Costa Rica Guatemala Dominican Rep.

• 15
• 10
• 5

5 10 15 20 25 30 35 I II III IV I II III IV I II III IV I II III 2016 2017 2018 2019 Bolivia Haiti Uruguay Dollarized countries The Caribbean

LATIN AMERICA AND THE CARIBBEAN: EVOLUTION OF GROSS INTERNATIONAL RESERVATIONS, 2012 TO 2019 (In billions of dollars and percentages of GDP)

Expansive monetary policy has been complemented with greater use of international reserves, to mitigate exchange volatility

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures.

834 829 857 812 831 859 867 861 12 13 14 15 16 17 18 19 20 800 810 820 830 840 850 860 870 880 2012 2013 2014 2015 2016 2017 2018 2019 International reserves (in million USD) In percentages of GDP (right axis)

Forecasts

In 2019 growth in Latin America and the Caribbean will slow to 0.1%

LATIN AMERICA AND THE CARIBBEAN: GDP GROWTH RATE, 2019 (Percentages, based on constant dollars of 2010)

• 25,5

The number of countries with growth of 1% or less in 2019 is the highest in many years

• 25,5
• 5.3 -3.0 -0.7
• 0.2
• 0.1

0.0 0.0 0.1 0.1 0.2 0.3 0.4 0.5 0.5 0.8 0.9 1.0 1.4 1.7 1.8 2.0 2.1 2.1 2.2 2.3 2.4 2.5 2.9 3.0 3.0 3.2 3.3 3.3 3.5 4.5 4.86.2 9.0

Venezuela (Bol. Rep. of) Nicaragua Argentina Haiti Ecuador SOUTH AMERICA Barbados Mexico LATIN AMERICA LATIN AMERICA AND THE CARIBBEAN Paraguay Uruguay Trinidad and Tabago Cuba CENTRAL AMERICA AND MEXICO Chile Bahamas Brazil THE CARIBBEAN Jamaica Costa Rica Saint Lucia Suriname Belize El Salvador Peru CENTRAL AMERICA Saint Vincent and the Grenadines Honduras Bolivia (Plur. State of) Saint Kitts and Nevis Colombia Guatemala Grenada Panama Guyana Dominican Rep. Antigua and Barbuda Dominica

7 9 9 9 8 5 14 2013 2014 2015 2016 2017 2018 2019

• 25.5%

Growth in 2020 is projected to continue at low levels for the region

LATIN AMERICA AND THE CARIBBEAN: PROJECTION OF THE GDP GROWTH RATE, 2020 (Percentages, based on constant dollars of 2010)

• 1.4
• 1.3
• 0.6

0.1 0.3 0.5 1.0 1.2 1.3 1.3 1.3 1.3 1.5 1.5 1.6 1.6 1.7 1.7 1.9 1.9 2.3 2.4 2.6 2.9 3.0 3.0 3.2 3.2 3.2 3.5 3.5 3.8 4.04.7 4.95.6 6.5

Venezuela (Bol. Rep. of) Nicaragua Argentina Bahamas Ecuador Haiti Cuba Chile SOUTH AMERICA LATIN AMERICA Barbados Mexico LATIN AMERICA AND THE CARIBBEAN Uruguay Trinidad y Tabago Jamaica CENTRAL AMERICA AND MEXICO Brazil Suriname Costa Rica Belize El Salvador Saint Vincent and the Grenadines CENTRAL AMERICA Honduras Paraguay Bolivia (Plur. State of) Saint Lucia Guatemala Peru Colombia Saint Kitts and Nevis Panama Grenada Dominican Rep. Dominica THE CARIBBEAN Antigua and Barbuda Guyana

• 14,0

85.6

The current low growth trend began in 2014

Import substitution 5.6% Debt crisis and Washington Consensus 2.5% Commodities boom 4.0% 2014-2020 0.5%

• 4.0
• 2.0

0.0 2.0 4.0 6.0 8.0 10.0

1951 1953 1955 1957 1959 1961 1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures.

LATIN AMERICA AND THE CARIBBEAN: ANNUAL GDP GROWTH RATES AND SIMPLE AVERAGES, 1951-2020 (In percentages)

Policy recommendations

Policy recommendations

▪ The region's low growth trend is related to structural constraints and falling external demand. ▪ This weak performance also translates into a high degree of idle capacity. ▪ In the short term, significant fiscal stimuli are required that must be accompanied by fiscal sustainability measures focused on increases in the tax burden, greater progressivity in the tax structure and structural reforms in social protection systems. ▪ A different investment allocation is required to support a change in the productive structure to get out of the primarization of the economy in which it is trapped and change the commercial insertion

• f the region.

▪ To deal with financial vulnerability and exchange rate volatility, it is necessary to privilege the real economy by strengthening the instruments of macroprudential policy.

The relevance of active fiscal policy

▪ Reactivating economic activity requires greater public spending on investment and social policies:

▪ Mexico: Actions to Support the Economy (US $ 24,250 million) and the National Private Sector Infrastructure Investment Agreement (US $ 42,951 million) ▪ Chile: Employment Protection and Economic Recovery Plan (US $ 5.5 billion) and Social Agenda (approx. US $ 1.6 billion) ▪ Colombia: proposed Growth Law (Ley de Crecimiento) with measures to protect lower-income / vulnerable populations

▪ Increasing the level of spending in the short term, entails pressures on public debt that must be faced according to the differing capacities of the countries.

A strategy is necessary to guarantee fiscal sustainability in the medium term

▪ Growth and productivity are necessary conditions to maintain a sustainable trajectory of the debt / GDP ratio. ▪ Inequality is inefficient and reducing it is imperative for achieving greater growth and productivity. ▪ Fiscal sustainability requires structural reforms in tax systems to dismantle the culture of privilege:

▪ Improve tax progressivity (richest 1%), strengthening wealth taxes, those who have more pay more. ▪ Reduce tax evasion, which represents 6.3% regional. ▪ Reassess tax expenditures that represent 3.7% of regional GDP. ▪ Implement new generation of taxes on the digital economy, environmental and related to public health.

Political Economy of Growth

▪ The role of the State is more important today than ever. ▪ Countries need to review their models of growth and their policy toolbox. ▪ Macroeconomic policy requires greater coordination between Central Banks, fiscal policy and financial authorities. ▪ A social pact requires a management of the macroeconomy that stabilizes the economy but prioritizes sustainable development policies.