Latin Business Chronicle

A survey by Brazil’s Fundação Getulio Vargas (FGV) business school and Germany’s Institute for Economic Research Institute (Ifo) shows that the economic outlook for Latin America in the coming six months is good.

The Economic Climate Index (ECI) for July 2009 shows that Latin America is entering the recovery phase of the business cycle, with Brazil recording the second highest economic climate index in the region. The ECI rose to 4.0 points in July from 3.6 points in April. A breakdown of the findings shows that while the Present Situation Index (PSI) is still low, the Expectations Index (EI) increased to 5.4 from 4.6 points between April and July.

A special survey was conducted to evaluate how the experts perceived the legal and administrative restrictions on foreign firms in their respective countries. Peru, Uruguay and Chile have been classified as countries without restrictions. Low restrictions have been attributed to Colombia, Brazil, Paraguay, Bolivia and Mexico. High restrictions were associated with Argentina, Venezuela and Ecuador.

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During this economic slowdown, there’s an opportunity for Indian companies offering products with built-in intellectual property and compelling price/performance ratios especially in energy, pharma and specialty chemicals to enter the LatAm market. The Eximbank expanding lines of credit will also help. In a recessionary environment that promotes  cost-cutting, it is not surprising that the Chinese imports are slowly replacing US imports in some sectors.
Law.com –

The global financial crisis will hurt Latin America and the Caribbean Basin even if rich nations start to recover in 2010, according to an Inter-American Development Bank study presented last month at a meeting in Medellin, Colombia, of the bank’s 48 member countries.

The annual average output growth, a macroeconomic indicator measuring the total value of goods and services produced in the region’s seven biggest economies — Argentina, Brazil, Chile, Colombia, Mexico, Peru and Venezuela — could slow to 1.9 percent over the next four years if developed nations begin their economic recovery in the second half of the year. However, growth could slow to an annual average of only 0.1 percent in the next five years if recovery in the United States and Europe takes longer than expected.

The economies of the seven nations, which represent 91 percent of Latin American output, grew 5.8 percent between 2003 and 2007.

Despite the grim outlook, the Washington, D.C.-based IDB has some reason for optimism.

“Latin America and the Caribbean are much more prepared to face the impacts of the financial crisis because of their lower levels of debt, debt dollarization, smaller budget deficits and high level of international reserves,” said Santiago Levy, a vice president at the IDB. “But they will still suffer the effects. Depending on how rapidly growth in the rest of the world picks up, the collateral damage of the crisis could be felt years to come.”

“A strong dollar and a lack of available trade finance have hurt the competitiveness of U.S products. Exporters are cutting costs and are doing all they can to sell products to the south,” Hart and Lestingi wrote. “They are battling competition from low-cost countries like China. Import tariff increases in Mexico (in response to the NAFTA dispute) and Ecuador have already made some Latin American markets unreachable for U.S. producers and South Florida exporters.”

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