Contents of the Economic Survey 2012 I. Macroeconomic trends in - - PowerPoint PPT Presentation

Contents of the Economic Survey 2012

• I. Macroeconomic trends in Latin America and the

Caribbean in 2012

• II. Reactions of the countries of the region to the

adversities of the global economy

• III. Savings and investment: stylized facts
• IV. The role of the regional financial architecture in

confronting the adversities of the global economy

• V. Conclusions and recommendations

International economic context and regional impact

 The deceleration of China most strongly affects exporters of

natural resources (South America), who have a greater capacity to react (fiscal space)

 The dynamism of the U.S. economy is benefitting to a greater

degree Mexico, Central America and the Caribbean, but these have less capacity to react (fiscal space) when faced with a possible “fiscal cliff”

 The recession in Europe has had a varying impact:

• In South America, lower exports were registered (Brazil, Chile and Uruguay) as

well as a drop in remittances (Ecuador, Colombia), although these countries do have a greater capacity to react to these adverse developments

• In Mexico and some Central American countries there was an increase in

exports, despite the contraction of the European economy

Most affected countries (South America) have a greater capacity to react, but there are risks to Central America and the Caribbean

LATIN AMERICA: CONTRIBUTION TO REGIONAL GDP GROWTH BY COUNTRY

The reduction in the forecast for regional production for 2012 is largely due to a lower level of activity in Brazil and Argentina

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

• 3%
• 2%
• 1%

0% 1% 2% 3% 4% 5% 6% 7%

2004 2005 2006 2007 2008 2009 2010 2011 2012 Brazil Argentina The Caribbean Mexico Central America Rest of South America Latin America & the Caribbean

• 6
• 4
• 2

2 4 6 8 10

• 6
• 4
• 2

2 4 6 8 10 I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II 2004 2005 2006 2007 2008 2009 2010 2011 2012 Public Consumption Private Consumption Investment Net Exports GDP

Consumption continues to be the main driver of GDP growth

LATIN AMERICA: RATE OF GDP VARIATION AND THE CONTRIBUTION TO GROWTH OF THE COMPONENTS OF AGGREGATE DEMAND (2005 constant dollars, in percentages, weighted averages)

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

LATIN AMERICA AND THE CARIBBEAN: GDP GROWTH RATE, 2012 (In percentages)

Economic activity continues to expand (3.2%), but at a lower rate than that of 2011

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

• 2.0

1.6 1.6 2.0 2.0 2.8 3.0 3.2 3.2 3.2 3.5 3.5 4.0 4.4 4.5 4.5 4.5 5.0 5.0 5.0 5.0 5.0 5.9 6.0 9.5

• 4.0
• 2.0

0.0 2.0 4.0 6.0 8.0 10.0 12.0 Paraguay The Caribbean Brazil Argentina El Salvador South America (10 countries) Cuba Honduras Latin America & the Caribbean Latin America Guatemala Uruguay Mexico Central America (9 countries) Colombia Equador Dominican Republic Bolivia (Plur. St. of) Chile Costa Rica Nicaragua Venezuela (Bol. Rep. of) Peru Haiti Panama

THE CARIBBEAN: RATE OF GDP GROWTH, 2012 (In percentages)

Growth in the Caribbean increases from 0.4% in 2011 to 1.6% in 2012

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

1.0 1.0 1.0 1.0

1.6

1.8 1.9 2.3 2.3 2.4 2.5 2.6 3.2 3.8 4.3 0.0 1.0 2.0 3.0 4.0 5.0 Barbados Jamaica

• St. Kitts y Nevis

Trinidad & Tobago The Caribbean

• St. Vicente y the Grenadines

Grenada Antigua & Barbuda

• St. Lucia

Belize Bahamas Dominica Latin America & the Caribbean Guyana Suriname

For 2013 a moderate recovery of growth in the region is foreseen, mainly due to an upturn in Brazil

LATIN AMERICA: CONTRIBUTION TO REGIONAL GDP GROWTH BY COUNTRY

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

• 3%
• 2%
• 1%

0% 1% 2% 3% 4% 5% 6% 7%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Brazil Argentina The Caribbean Mexico Central America Rest of South America Latin America & the Caribbean

LATIN AMERICA AND THE CARIBBEAN: GDP GROWTH RATE, 2013 (In percentages)

Moderate recovery in some countries and a slight deceleration in others in 2013

Source: Economic Commission for Latin America and the Caribbean (ECLAC)

2.0 2.2 3.0 3.0 3.0 3.5 3.5 4.0 4.0 4.0 4.0 4.0 4.5 4.5 4.5 4.5 4.8 5.0 5.0 5.5 7.0 7.5 0.0 2.0 4.0 6.0 8.0 El Salvador The Caribbean Cuba Honduras Venezuela (Bol. Rep. of) Argentina Guatemala Brazil Costa Rica Mexico Uruguay Latin America & the Caribbean Bolivia (Plur. St. of) Colombia Equador Dominican Republic Chile Nicaragua Paraguay Peru Panama Haiti

THE CARIBBEAN: GDP GROWTH RATE, 2013 (In percentages)

Modest and vulnerable increase in growth in the Caribbean: from 1.6% in 2012 to 2.2% in 2013

Source: Economic Commission for Latin America and the Caribbean (ECLAC)

1.3 1.5 1.8 2.0 2.2 2.2 2.2 2.5 2.5 2.6 2.6 2.7 4.0 4.0 4.5 0.0 1.0 2.0 3.0 4.0 5.0 Jamaica Barbados

• St. Kitts y Nevis
• St. Vicente y the Grenadines

The Caribbean Grenada Trinidad & Tobago Belize

• St. Lucia

Antigua & Barbuda Dominica Bahamas Suriname Latin America & the Caribbean Guyana

Regional performance in 2012:

Inflation, employment and wages External sector Policies: Fiscal and Monetary

LATIN AMERICA AND THE CARIBBEAN: CONSUMER PRICE INDEX, FOOD PRICE INDEX AND CORE INFLATION, 2009-2012 (12-month change, simple average)

Inflation maintained its downward trend of the first quarter of the year

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures. 0% 2% 4% 6% 8% 10% 12% 14% 16% January February March April May June July August September October November December January February March April May June July August September October November December January February March April May June July August September October November December January February March April May June July 2009 2010 2011 2012 CPI Core Food

Until mid-2012, at the regional level, there was a continuous increase of employment which positively affected consumption

LATIN AMERICA AND THE CARIBBEAN (10 COUNTRIES): EMPLOYMENT RATE AND URBAN UNEMPLOYMENT RATE, FOUR QUARTER MOVING AVERAGE, 2009 TO SECOND QUARTER 2012

(In percentages)

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

53.50 54.00 54.50 55.00 55.50 56.00 56.50 5.00 5.50 6.00 6.50 7.00 7.50 8.00 8.50 9.00 Employment rate (left scale) Unemployment rate (right scale)

Wage increases help strengthen households’ purchasing power

LATIN AMERICA (SELECTED COUNTRIES): CHANGE IN REAL WAGES IN THE FORMAL SECTOR BETWEEN THE FIRST HALF OF 2011 and THE FIRST HALF OF 2012

(In percentages)

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

0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 Brazil Chile Colombia Costa Rica Mexico Nicaragua Panama Uruguay Venezuela, (Bol. Rep. of)

With the exception of food, commodity prices are decreasing

COMMODITY PRICES, 2002-2012 (Index: 2005=100)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of figures from the World Bank, “Pink Sheet”, August 2012.

50 100 150 200 250 300 2002M01 2002M06 2002M11 2003M04 2003M09 2004M02 2004M07 2004M12 2005M05 2005M10 2006M03 2006M08 2007M01 2007M06 2007M11 2008M04 2008M09 2009M02 2009M07 2009M12 2010M05 2010M10 2011M03 2011M08 2012M01 2012M06 Energy Food Agricultural Raw Materials Metals & Minerals Beverages

The terms of trade are deteriorating in most countries

• f the region

LATIN AMERICA: ESTIMATED CHANGE IN THE TERMS OF TRADE, 2009-2012 a

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures. a/ Figures for 2012 correspond to projections.

• 15%
• 10%
• 5%

0% 5% 10% 15% 20%

Latin America and the Caribbean South America (except Brazil) Central America Mexico Brazil Caribbean (except T&T)

2009 2010 2011 2012

The exports of the region that will grow less than in 2011 are those destined for Europe

LATIN AMERICA: ANNUAL CHANGE IN THE VALUE OF EXPORTS BY DESTINATION, 2011-2012a

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

a Projection.

• 20%
• 10%

0% 10% 20% 30% 40% 50% I II III IV I II 2011 2012 United States European Union (27) Asia (incl. China) Latin America and the Caribbean

Remittances recover, except for those originating from Europe, which are decreasing in 2012

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

LATIN AMERICA AND THE CARIBBEAN (9 COUNTRIES): CHANGES IN INCOME FROM WORKERS’ REMITTANCES, 2010-2012

• 10%
• 8%
• 6%
• 4%
• 2%

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% Colombia Ecuador El Salvador Guatemala Honduras Jamaica Mexico Nicaragua Dominican Republic

2010 2011 2012 (Q1)

A moderate deterioration in the current account is expected, due to the worsening of the goods balance

LATIN AMERICA (19 COUNTRIES): STRUCTURE OF THE CURRENT ACCOUNT, 2006-2012 a (As a percentage of GDP)

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

a Figures for 2012 correspond to projections.

• 4%
• 3%
• 2%
• 1%

0% 1% 2% 3% 4% 5% 6% 2006 2007 2008 2009 2010 2011 2012 Goods balance Services balance Income balance Current transfers balance Current account balance

Despite the turmoil in the international financial environment, the region has generally maintained its access to international financial markets

INTERNATIONAL BOND ISSUESa (In millions of dollars, basis points)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of data from Latin Finance, Bonds Database, JP Morgan and Merrill Lynch.

a Emerging Markets Bonds Index

100 200 300 400 500 600 700 800 5,000 10,000 15,000 20,000 25,000 30,000 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Private-sector Banks Sovereign Quasi-sovereign EMBI+ Latin America (right scale)

No major changes in the overall fiscal balance are expected for 2012

LATIN AMERICA AND THE CARIBBEAN (19 COUNTRIES): CENTRAL GOVERNMENT FISCAL INDICATORS, 2000-2012a (Simple averages, as a percentage of GDP)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures. a/ Figures for 2012 correspond to projections.

• 2.9
• 1.8
• 1.8
• 1.8
• 6.0
• 4.0
• 2.0

0.0 2.0 4.0 6.0 8.0 10.0 12.0 13.0 14.0 15.0 16.0 17.0 18.0 19.0 20.0 21.0 22.0 2009 2010 2011 2012 a/ Overall balance (right scale) T

• tal revenues (left scale)

T

• tal expenditures (left scale)

Latin America: Varying fiscal spaces, but greater than those of OECD countries

LATIN AMERICA AND OECD: OVERALL FISCAL BALANCE AND PUBLIC DEBT, 2011 (As a percentage of GDP)

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

ARG BOL BRA CHL COL CRI ECU SLV GTM HND MEX NIC PAN PRY PER URY VEN

Latin America

HTI DOM

• 6.0
• 5.0
• 4.0
• 3.0
• 2.0
• 1.0

0.0 1.0 2.0 3.0 10 15 20 25 30 35 40 45 50 Overall fiscal balance 2011 Gross public debt 2011

LA

OECD

• 8.0
• 4.0

0.0

20 40 60 80 100

The Caribbean: Very limited or nonexistent fiscal spaces

THE CARIBBEAN AND OECD: OVERALL FISCAL BALANCE AND PUBLIC DEBT, 2011 (As a percentage of GDP)

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

ABU BHS BRB BLZ BRD GUY JAM KNA VCT LCA TTO

Caribbean

Latin America SUR OECD

• 7.0
• 6.0
• 5.0
• 4.0
• 3.0
• 2.0
• 1.0

0.0 1.0 2.0 3.0 20 40 60 80 100 120 140 Overall fiscal balance 2011 Gross public debt 2011

In 2012, monetary policy rates were generally stable, though some countries enacted rate reductions

Source: Central banks, updated on 24-08-12.

Increased Decreased Bahamas Argentina Brazil Belize Honduras Colombia Bolivia (Plurinational State of) Uruguay Paraguay Chile Dominican Republic Costa Rica Venezuela (Bol. Rep. of) Guatemala Guyana Haiti Jamaica Mexico Peru Trinidad and Tobago Countries that did not modify their monetary policy rate Countries that modified their monetary policy rate

In the first half of 2012, international reserves have increased in most countries

LATIN AMERICA: INTERNATIONAL RESERVES (Index numbers, averages before the crisis = 100)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures * The values represent international reserves in millions of USD for August 2012

45,152 13,064 377,221 38,421 35,276 4,898 4,219 6,766 165,393 4,832 59,836 12,546 25,932 0.00 50.00 100.00 150.00 200.00 250.00 300.00 350.00 Post Crisis Average (Q1 2010-Q2 2012) Aug-12

The variability of nominal exchange rates has increased

LATIN AMERICA AND THE CARIBBEAN: RATE OF CHANGE OF THE NOMINAL EXCHANGE RATE, DECEMBER 2011 TO AUGUST 2012

APPRECIATION DEPRECIATION

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

10.2% 7.0% 6.6% 4.2% 3.1% 2.9% 1.4% 0.4% 0.3% 0.0% 0.0% 0.0% 0.0% 0.0%

• 0.3%
• 0.3%
• 0.7%
• 2.5%
• 2.6%
• 4.4%
• 7.2%
• 7.5%
• 10%
• 8%
• 6%
• 4%
• 2%

0% 2% 4% 6% 8% 10% 12% Brazil Uruguay Argentina Haiti Jamaica Nicaragua Dominican Rep. Honduras Guatemala Dominica Equador El Salvador Panama Venezuela (Bol. Rep. of) Trinidad & Tobago Paraguay Bolivia (Plur. St. of) Costa Rica Peru Mexico Chile Colombia

A wide array of policies and measures (with differences between countries) has been applied between 2003/2008 and 2012

1. Fiscal policy focused on saving and debt reduction between 2003/2008, increased spending in 2009, and fiscal consolidation in 2010-2012 2. Contractionary monetary policy in 2008, exchange rate depreciation in many cases with increased liquidity provision in 2009, and beginning in 2010 increased macroprudential actions. 3. Social and labour policies: income protection in 2008 and employment protection in 2009 (transfers, subsidies, standards) 4. Sectoral and trade policies: reduction in tarrifs and promotion of agriculture in 2008, promotion of small and medium enterprises and housing in 2009, and incentives and protection for industrial production in 2010-2012.

Conclusions and recommendations

A slight deceleration in 2012 and a modest recovery in 2013

 World economic growth continues to slow in the second

semester of 2012 and the first semester of 2013

 The main transmission mechanism of the international

situation to Latin America and the Caribbean is the trade channel

 The region will maintain economic growth in 2012,

albeit lower than that recorded in 2011, of about 3.2%, with Argentina, Brazil and Paraguay having the lowest growth rates

 Growth is expected to recover somewhat in 2013,

especially due to stronger growth in Brazil

The (varied) country outlook will depend on the external situation and on the capacity to respond

 The South American countries that could potentially be the

most affected by a deceleration in China and a contraction in the European Union also count with a greater capacity to respond (fiscal space and the use of macroprudential measures)

 Mexico, Central America and the Caribbean are benefitting

more from the precarious recovery of the United States, but:

• Central America, and especially the Caribbean (due to less

fiscal space) would be more vulnerable to an extreme fiscal adjustment in the United States

 While an expansive monetary policy in the United States could

moderate the impact of fiscal adjustment, it would also contribute to an exchange rate appreciation in emerging market economies

Towards a structural change for equality

 The experience of Latin America and the Caribbean

during 2008-2012 highlights the importance of integrated macroeconomic policies (fiscal, monetary, exchange rate, macroprudential) that are closely coordinated with industrial policies as well as social and labour policies, and trade policies with an emphasis in increased open regionalism, in order to:

• Guarantee a relatively stable growth trajectory of
• utput, quality employment, and investment, and
• Contribute to a structural change for equality: closing

productive gaps based in technological innovation and environmental sustainability