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Global macroeconomic trends in Latin America

The high economic growth rates of the 2000s evaporated. After a GDP growth of 0.9% in 2014 the region is expected to register a negative growth rate in 2015, -0.9% (Consensus Forecasts, September 2015), before timidly accelerating to 0.8% in 2016. These projections are being revised downwards (at the start of the year, the region was expected to have a positive growth of 1.3% for 2015 and 2.7% for 2016; by July 0% and 1.5%).

The regional average hides considerable inter-country differences, Americas Latinas. Trade dynamics explain much of the heterogeneity seen in the region these days. Net energy importers in Central America and the English-speaking Caribbean, which benefit from lower crude prices, have better growth perspectives. Manufacture exporters integrated into value chains in the US are outperforming net commodity exporters in South America. By contrast, major commodity exporters that increased their exposure to China over the past decade suffered a large contraction in their terms of trade, reducing both the purchasing power of exports and investment in commodity sectors. The end of the so-called ‘commodities super-cycle’ is affecting, particularly, oil and mineral exporters in South America. Forecasts are negative for Argentina (0.7% and 0.9%, respectively), Brazil (-2.6% and -0.6%) and Venezuela (-7.4% and -3.8%).  In contrast, Chile (2.2% and 2.6%), Colombia (2.9% and 2.9%), Mexico (2.4% and 3.0%) and Peru (2.8% and 3.6%) will grow above the regions average.

Latin America is experiencing a slowdown resulting from the structural characteristics of commodity- and credit-based growth. Medium-term growth projections suggest that potential output is less robust than previously thought and requires structural change. Increasing evidence suggests that potential growth is lower than expected, closer to 3% or even below that. This stands in sharp contrast with the 5% average that characterized the mid- 2000s. Less dynamic capital accumulation, low efficiency and labor’s weaker contribution limited by the inability to increase formal labor participation and reduce unemployment, and population ageing are slowing productivity.

Domestically, the loss of investment momentum is a key factor behind the slowdown. While investment’s contribution to growth was pivotal in 2010 in the aftermath of the crises, it had a negative contribution to growth by 2014. External headwinds, notably lower commodity prices, the gradual retrenchment of monetary easing in the US and the ensuing tighter financial conditions, are impacting investment plans. This adds to some (probably) short-lived domestic factors, such as policy uncertainty and the passing of reform bills (notably on taxes in some countries such as Argentina, Chile, Colombia, Ecuador, El Salvador and Venezuela). Public investment was not strong enough to compensate for this actually, in some cases, it reinforced it.

The middle income trap stands as a potential challenging scenario for Latin America. The trap has affected the large majority of countries in the region, many of which have suffered recurrent and pronounced episodes of per capita income stagnation particularly after the 1980s. Several factors account for the special incidence of the middle income trap in Latin American countries. Institutional shortcomings related to the rule of law and rent-seeking behavior’s and productive structures less concentrated in knowledge-intensive activities are key constraints in the region.

The region needs to shift more resources from low- to higher-productivity sectors and activities within sectors. The growth of small- and medium-size enterprises is constrained by difficult access to and high cost of credit, particularly in the case of long-term credit. Improved infrastructure and logistics performance are needed to bolster structural change and strengthen regional integration, serve a larger consumer demand and attract greater foreign direct investment. Employable skills and innovation are also crucial. Latin American firms are 13 times more likely than Pacific Asian firms to face serious operational problems due to a shortage of human capital.

According to the macroeconomic in Latin America for our wood panel industry is recommended automatized inspection quality, fast production in order to get from low to higher productivity and competitiveness. A special challenge for small and medium-size companies is the digitalization of production.


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