Nearshore Americas
Geopolitical tensions ECLAC

Global Uncertainty and Geopolitical Tensions Hurt LatAm Economies Dearly: ECLAC

Latin America and the Caribbean are bearing the brunt of ongoing geopolitical tensions and the global economic uncertainty, with the region’s economic output continuing to decrease.

The region’s economy is set to grow barely 0.50% this year, lower than the 0.9% registered in 2018, according to the annual economic survey by the Economic Commission for Latin America and the Caribbean (ECLAC).

The slowdown, says the UN agency, will affect 21 of the 33 countries in the region. On average, South America is expected to grow by 0.2%, Central America 2.9% and the Caribbean 2.1%.

Even as the internal growth slows down, foreign inflows are drying up, causing exports to fall along with public spending and private consumption.

Meanwhile, some countries are racking up large debts, as they are spending heavily amid declining income.

“Additionally, structural conditions accentuate external vulnerability and do not help to spur growth – as the export structure focused mainly on primary goods and falling trend in productivity,” the report added.

The growing foreign exchange volatility and greater depreciation will limit central banks to stimulate aggregate demand, the ECLAC said, urging the governments to leverage all sorts of financial resources, including the so-called “shadow banking system”, in which groups of financial intermediaries facilitate in creating credit across the global financial system.

Sign up for our Nearshore Americas newsletter:

The UN agency has also told the countries to focus on reducing tax evasion and illicit financial flows, in addition to promoting taxes related to the digital economy.

Narayan Ammachchi

News Editor for Nearshore Americas, Narayan Ammachchi is a career journalist with a decade of experience in politics and international business. He works out of his base in the Indian Silicon City of Bangalore.

Add comment