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Latin America: Mixed Outlook

Latin America's economy and trade will hold up this year, but will weaken next year.


Despite the Wall Street meltdown, Latin America's overall economic growth remains largely on track, according to new projections from the International Monetary Fund.  Brazil, the region's largest economy, should grow by 5.2 percent this year.

U.S.-based General Motors, the world's second-largest automaker, today released third quarter data showing record sales in its Latin America, Africa and Middle East (LAAM) division. “We are still showing solid growth, despite the global economic crisis that surrounds us,” Maureen Kempston Darkes, president of GM LAAM, said in a statement.

GM sold 341,900 vehicles in the LAAM region, up 11,400 units over the same period in 2007. All-time quarterly GM sales records were posted by Brazil, Chile, Ecuador and Peru, GM said. Brazil sales were up 16 percent, while sales in Chile grew by 19 percent and in Ecuador by 64 percent.


Meanwhile, U.S. trade with Latin America continues to grow in double digits, although August marked a slower pace than July, according to a Latin Business Chronicle analysis of US Census Bureau data released last week. Mexican exports to the U.S. market have especially slowed down, indicating the start of a negative cycle.

But U.S. trade with Latin America may also be hurt by a stronger dollar (making U.S. exports to the region more expensive) and reduced prices on key Latin American commodities, warns Isaac Cohen, president of U.S.-based consultancy Inverway and a former director of the Washington office of the United Nations Economic Commission for Latin America and the Caribbean (ECLAC).

"As long as the strength of the U.S. dollar continues, it will make U.S. exports more expensive and therefore less competitive, while the prices of commodities exported by Latin America will continue falling, while the recession in the United States reduces the demand for commodities," he says. "This is hardly an encouraging scenario for trade relations between the United States and Latin America. By contrast, dollar weakness will help U.S. exports and push commodity prices upwards."


In its latest World Economic Outlook released last week the IMF estimated that Latin America's GDP would expand by 4.6 percent this year. That's slightly better than the 4.4 percent the fund had predicted in its previous World Economic Outlook in April. However, for 2009 the fund revised down its forecast - from 3.6 percent to 3.2 percent, which is also a relative minor change.

Despite the slight revision next year, Latin America remains one of the leading growth areas in the world. The growth rate this year, for example, is significantly higher than...

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Keywords: Brazil, Mexico, Panama, Peru, Venezuela


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