We are leaving behind a year with downturn, even though it has been the engine of the world economy after China. Positive perspectives for 2014.

In general terms, and after the interesting growth after 2010 recession, the latin-american economy went on slow downing for three running years. The different reports made by the most prestigious organizations and credit rating agencies agree that the stop is due to the significant performance of the two biggest economies of the region: Brazil and Mexico, which was below expectations during the second half of the year. Both economies represent two third of GDP of Latin America.

However, the region has been the second engine in world economy after China.

Most countries registered a downturn in 2013, except for Argentina and Brazil, which had had a really low growth the previous year.

Some experts define the behavior of the region as a “healthy moderation”, however, they warn as regards the lack of structural reformation.

The growth was headed by Peru, Argentina, Chile and Colombia, among the seven main economies. The fact that these countries count with diversified markets for its exports, having China as one of the most important commercial partner, explains the resistance to weak performance of Europe and the U.S.A.

The perspectives for 2014 are positive for the region, considering that Europe is getting put recession, U.S.A is showing a more defined advance and China is getting stability in the growth. For China, growing rates of 7.8% in 2014 and 7.2% in 2015 are expected.

The two main economies of the region (Brazil and Mexico) will have a significant acceleration in 2014, growth forecasts are 3% for Brazil and 3.4% for Mexico.

According to the report “Economic Perspective for Latin America” made by Moody´s Analytic, it is expected that Latin America would have a higher growth rate in 2014 with South America leading the expansion once more. The growth forecasts for 2014 are of 3.5% after closing 2013 with 2.6%. In this way, we are leaving behind three years of downturn to start a new expansion cycle.

ARGENTINA: according to the report, 2013 registered a better performance than the one expected due to the growth in agriculture. The growth was 4,8% (vs. 1.9% in 2012). Difficulties for 2014 are expected since the government will be forced to make adjustments and the private inflation will be kept expectant as a consequence of the regulations. With an inflation of about 25%, the consumption and investments are suffering consequences. The government will also reduce some subsidies. The price of grains will remain high in historical terms. The economy will grow 2.5% in 2014.

BRAZIL: the economy advanced below its potential in 2013, growing only 2.5%. Most of the recovery (it grew only 1% in 2012) is due to the incentive of the economic policy and the investment in infrastructure for the World Cup. In 2014, the economy will be benefited by the process of investment and the international environment. Inflation will remain in the upper end of the range (4.5% to 6.5%) even though it will face certain pressure from the demand.

CHILE:  after a three-year expansion, growth started to moderate this year due to an excess in the demand which has widened the external lack of equilibrium. The strong penetration of imports limited the GDP and affected the industrial competitiveness. The growth of GDP for 2014 will moderate itself even more after closing this year in 4.3%. This moderation will be healthy because it will be the result of adjustments in expansive policies instead of being the negative consequence of an overheating of the internal demand. Inflation will pass the 3% to later go down as long as the excess in the demand tends to disappear.

COLOMBIA: the currency overvaluation and the weakness of the external environment had an effect in the economy this year. The GDP has grown 4% this year (vs. 4.2% in 2012). It is expected that economy will gain acceleration in 2014, encouraged by solid internal demand and more favourable external context. Expansive policies will go on supporting the internal demand getting the economy to a growth rate of 4.5% for 2014. Inflation is under control.

MEXICO: the economy has not escaped from the traditional downturn generated by the change of government every 6 years. It has also been affected by the weak economic fundamentals due to the lack of structural changes during the last decade. The advance of U.S.A and the implementation of some reforms will have a positive impact. It is expected that the economy will advance 3.5% in 2014 after a growth of about 1% this year. The inflation of about 4% will increase due to the impact of new taxes included in the tax reform just approved.

PERU: the economy lost strength in 2013 due to the difficulties in the external environment and a low of the price of metals. However, Peru had the best performance among the countries of Latin America thanks to the implementation of fiscal stimulus and solid macroeconomic fundamentals. This year the GDP grew 5% (vs 6.3% in 2012). The healthy slowdown relieved the concerns related to the oversupply and possible overheating. The economy will grow 5.5% in 2014 with inflation within the objective range of about 1% and 3%.

URUGUAY: the growth will lose acceleration from 4.5% this year to 3.8% in 2014. Private consumption will go growing due to the low unemployment but the internal demand will be more moderate because of the impact of currency restriction and the downturn of real salaries. The slowdown and the capital controls of Argentina will affect the investment in tourism incomes. Inflation will moderate itself to 7.6% in 2014.

VENEZUELA: the macroeconomic lack of equilibrium is affecting the economy even though the prices of petrol are even higher. GDP grew 1.1% this year (vs. 5.6% in 2012). The fiscal deficit, the collapse of the currency, inflation without control and the growing government intervention made the economy be near a recession again. Any significant decrease in the price of petrol would lead the economy to a recession in 2014. Inflation would reach 3 digits next year.

As regards the expectations of creation of employment for the first quarter next year, the American firm Manpower carried out a survey among more than 65.000 HR Directors in 42 countries. Colombia is the Latin American country which leads the expectation of employment creation with 19%, then Brazil and Peru with 16%, Mexico and Panama with 14%, Guatemala 11%, Costa Rica 10% and Argentina 5%. The net trend of employment is the result of subtracting from the percentage of employers who forecast to increase their recruitments, the percentage of ones who claim to diminish their recruitments. In Europe, countries such as Italy, Ireland, Spain and Belgium show negative figures.

To sum up, although the expectations are positive, Latin America should strengthen the fundamental sources of permanent growth (saving and investment, productivity and technological change) to increase the potential capacity to grow up in the mid-term. To achieve this, it is necessary to deepen structural reformation and to strengthen macroeconomic discipline. These two elements added to th production of stability, the active struggle against labour informality and public policies of high social content, will provide the population of the region with higher lifestyle level.