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LATAM Economic Growth To Be Held Back by Brazil, Argentina, Venezuela in 2016

Latin America and the Caribbean economies will grow just 0.2% this year due to the continued turmoil in the commodity market and declining investment, according to latest projections unveiled by the United Nations Economic Commission for Latin America and the Caribbean (ECLAC).
While Central America will grow around 4.3% in 2016, South America will see its GDP shrink -0.8%, mainly due to the projected contractions in Brazil (-2.0%) and Venezuela (-7.0%) as well as near-zero growth in Argentina (0.8%).
Once again, the UN agency has urged the region’s countries to invigorate economic growth through greater investment and higher productivity. “It is necessary to resume growth and reverse the contractionary investment cycle in a context of slow global recovery and a decline in trade,” said Alicia Bárcena, executive secretary of the commission.
There is some good news. ECLAC expects Panama to lead regional growth with an expansion of 6.2%, followed by the Dominican Republic (5.2%), Saint Kitts and Nevis (4.7%), and Bolivia (4.5%). The English-speaking Caribbean are a group is estimated to grow 1.6%.
Bárcena also added that some countries can keep fueling economic growth by offering incentives for innovation and investment in renewable energy resources. Some can clean up their account books by lowering fuel subsidies, adding tax incentives, and curbing tax evasion. This will still be hard for many, however, considering that the region will face diverse scenarios and risks in the year to come, which will undoubtedly hinder its economic performance.
On the external front, global growth is forecast to remain slow at 2.9% in 2016, while uncertainty persists regarding China — one of Latin America’s main trading partners — which will continue decelerating to 6.4%.
In addition, the prices of the commodities that the region exports will stay low, meaning that Latin America and the Caribbean will once again suffer a deterioration in its terms of trade in 2016, especially in countries that export hydrocarbons and minerals, the document states.
The ECLAC explains that the volatility and uncertainty observed in 2015 will continue into this year, which means that some emerging economies will still have difficulty obtaining resources in international markets. On top of that, there will be impacts from the steady appreciation of the dollar and the rise in United States interest rates.
It is expected that Nicaragua will grow 4.3%, Cuba 4.2%, Guatemala 4.0%, Peru 3.4%, Costa Rica and Honduras 3.3%, Colombia and Paraguay 3.0%, Mexico 2.6%, Haiti 2.5%, El Salvador 2.4%, Chile 2.1%, Uruguay 1.5%, Argentina 0.8% and Ecuador 0.3%.

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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.

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