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Peru Leads GDP Growth

Latin America's GDP will grow higher than the IMF predicts, ECLAC says. Meanwhile poverty has been falling since 1999.


Peru is on a roll. Brazilian steelmaker Gerdau announces a major investment as experts predict the country's economy will lead Latin American growth. Gerdau plans to invest $1.4 billion in its Peruvian subsidiary Siderperú - an investment that aims at making it into one of the largest steel mills in South America. Peru is a strategic country for Gerdau, being a market with great potential and great development possibilities,” Gerdau CEO André Gerdau Johannpeter said in a statement yesterday after meeting with Peruvian President Alan Garcia.

According to a new forecast from the United Nations Economic Commission for Latin America and the Caribbean (ECLAC), Peru
will have the fastest-growing economy in Latin America this year, while Mexico will have the slowest.

Meanwhile, new data from the World Bank shows that poverty in Latin America has been falling since 1999.


All in all, Latin America is expected to post GDP growth of 4.7 percent this year, ECLAC predicts in a new report released last week. That's higher than the International Monetary Fund (IMF) forecast in July.  The fund predicts 4.5 percent growth, itself a revision upwards from the 4.4 percent it had forecast in April.

"In spite of the deteriorating international economic scenario, this year Latin America and the Caribbean will complete six consecutive years of growth, with Gross Domestic Product (GDP) rising 4.7 percent," ECLAC says.

International volatility will have less of an impact on Latin America than in the past due to  greater fiscal solvency and an improved debt environment (reduced debt, longer periods and more advantageous conditions), according to the report.

Last year, governments in the region had a primary surplus of 2.3 percent of GDP and a global surplus of 0.3 percent of GDP. "This has allowed governments to allocate greater resources to public investment and social spending, while accumulating resources and designing anti-cyclical instruments to face potentially unfavorable economic scenarios in the future," ECLAC says.

Meanwhile, public debt continued decreasing, falling from 36 percent of GDP in 2006 to 33 percent of GDP last year.


Brazil, Latin America's largest economy, will likely expand by 4.8 percent this year, ECLAC says. That's slightly less than the IMF forecasts - 4.9 percent. Mexico, the second-largest economy, will grow by 2.5 percent, according to ECLAC. That is slightly better than the IMF had forecast in July - 2.4 percent.

Argentina's economy, the region's third-largest, should end up the year with GDP growth of 7.0 percent, ECLAC says. That's the same figure the IMF forecast in April. However, the new ECLAC prediction comes despite a four-month farmers strike that reduced exports and slowed down economic activity.  Venezuela's economy, Latin America's fourth-largest, is expected to increase by 6.0 percent this year. That's slightly better than the IMF had forecast in April - 5.8 percent.

Venezuela will likely replace Argentina as Latin America's third-largest economy this year, although the two countries will switch places next year, according to a Latin Business Chronicle analysis of IMF forecasts.


Colombia, Latin America's fifth-largest economy, will likely expand by 5.3 percent this year, ECLAC says. That's higher than the 4.6 percent the IMF had forecast in April.
Chile, the sixth-largest economy, will grow by 4.2 percent this year, according to ECLAC forecasts. That's somewhat lower than the IMF had predicted.

But it will be Peru that outshines all other economies in Latin America this year. The South American country's economy, the region's seventh-largest, is slated to grow by 8.3 percent, ECLAC estimates. That’s much higher than the 7.0 percent the IMF had predicted in April. It also is higher than Panama, which the IMF had predicted would have the fastest-growing economy. ECLAC says Panama's economy will expand by 8.0 percent this year, making it the second-fastest growing economy in Latin America.


Meanwhile, new World Bank research shows that poverty has declined in Latin America, both in real terms and in percentage terms. The number of people in Latin America and the Caribbean living on less than $2 a day declined from 114.2 million in 1999 to 98.7 million in 2005. As a percent of the total population, that means Latin America's poor fell from 22.5 percent to 17.9 percent.

The number of extreme poor - defined as living on less than $1 a day - also has declined - from 40.2 million in 1999 to 27.6 million in 2005 and from 7.9 percent in 1999 to 5.0 percent in 2005, according to the World Bank.

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