Along with the world economic expansion in 2004, Latin America reported a strong recovery and will end this year with an unprecedented growth rate of 4.8 to 5.0 percent.  

The growth -- the strongest since the region suffered an economic crisis in 1999 -- was headed by improvements in the economies of Brazil and Mexico, which together account for 55 percent of the region's gross domestic product (GDP), and remarkable economic advances in Venezuela, the world's fifth largest crude oil exporter.

Major economies report strong rebound

According to the Chile-based UN Economic Commission for Latin America and the Caribbean (CEPAL), Brazil, the biggest economy in Latin America, will enjoy GDP growth of about 4.5 percent in 2004 after three years of stagnation.

The forecast comes in the wake of 5.3 percent GDP growth registered in the first three quarters due to good performance in all sectors.

The Brazilian Geography and Statistics Institute said that from January to September, Brazil achieved a commercial surplus of about US$30.2 billion with a 31.6 percent increase in exports and a 28.9 percent growth in imports compared with last year.

Mexico, Latin America's biggest exporter, registered a 14.6 percent growth in exports in the first 10 months and has been predicted by CEPAL to achieve an economic expansion of 4.0 percent this year.

In the first 10 months Mexico had a US$15.3 billion surplus in the international trade of petroleum products while foreign investments totaled US$13.6 billion in the first three quarters, up 50.6 percent over the same period in 2003.

Argentina, the region's third largest economy, was another country experiencing remarkable economic growth.

From January to October, the country's economy grew by 8.6 percent after last year's 8.7 percent. CEPAL forecasts growth of 7.5 percent for 2004.

The National Statistics and Census Institute said that in the first 10 months, Argentina reached a trade surplus of US$10.42 billion with exports growing by 15 percent and imports by 64 percent.

Growth in the sub-continent was also driven by Venezuela that reported an expansion of 20.4 percent in the first three quarters, largely thanks to its petroleum industry, and CEPAL forecasts the country will end the year with a 12-month growth figure of 12.0 percent.

Factors behind recovery

The economic recovery of Latin America is the result of economic reactivation in the industrialized world, headed by the United States, and the growth of Asia's developing economies, especially China, which has boosted global trade.

Brazil, Argentina and Chile head the Latin American countries with large-scale exports to China while Mexico benefits most from the economic expansion of the United States, which accounts for 85percent of its foreign trade volume.

Exports from the Latin American countries increased 18.8 percent in the first quarter of the year, according to the Latin American Integration Association (LAIA).

Meanwhile, higher prices of raw materials and primary products largely boosted the revenues of oil producers like Venezuela, Mexico, Ecuador and Colombia, metals exporters like Chile, Peru and Bolivia and agricultural products producers like Argentina, Brazil, Ecuador and Paraguay.

Latin America's economic recovery has, according to the World Bank, benefited from the area's stable political situation that has promoted investor confidence in the region. The area has seen investment capital grow this year by some US$38 billion.

Confidence has also been helped by Latin American economies becoming more integrated. Twelve Latin American countries announced on December 8 the establishment of the South American Community of Nations (CSN), the world's third largest regional bloc surpassed only by the European Union (EU) and the North American Free Trade Agreement (NAFTA).

Challenges remain high

Despite the recovery, most Latin American countries remain subject to the vicissitudes of the world economy, basic prices and its own institutional vulnerability.

And the region's indebtedness remains a problem. Germany's Dresden Bank said in a recent report that Latin America's foreign loans for 2004 total some US$776 billion, rising to US$793 billion in 2005.

Loans to Brazil, Mexico and Argentina this year will reach US$222 billion, US$161 billion and US$152 billion respectively, the report said.

Due to stagnation in infrastructure development, insufficient investments and inflationary pressures, some Latin American countries are expected to face economic slow-down in 2005.

The Brazilian Geography and Statistics Institute said the country may just reach 3.5 percent of growth next year.

Experts say Mexico will end this year with 5.4 percent inflation, far higher than the 3.0 percent target, and that economic growth next year may slow to between 3.7 and 3.8 percent.

According to CEPAL, the number of poor people in the region will fall by three million this year as a result of economic recovery. But poverty still remains high at 224 million -- some 43 percent of Latin America's entire population -- and unemployment is expected to surpass 10 percent this year.

In Latin America, a region noted for inequality in wealth distribution, 10 percent of the richest people account for 48 percent of total income while the poorest 10 percent account for just 1.6 percent of the income, says the World Bank.

This problem has curbed moves to reduce poverty and is a major factor in hobbling the region's future economic development.

(Xinhua News Agency December 28, 2004)