Coface: Latin America – Growth picking up for Pacific countries

Lateinamerika

(Foto: Pixabay)

Zurich – Latin America is a major producer of commodities and a good part of the strong performance observed in recent periods was thanks to China’s rapid growth. Countries in the region started to record high trade surpluses, but this bonanza period is over. After many years growing at around 10% a year, Chinese activity has lost its rhythm. As a consequence, commodity prices have begun to fall, impacting Latin America´s expansion rates. The region´s GDP is expected to grow by 1.3% in 2014 and by 2% in 2015 – much lower than in previous years.

The weaker forecast also reflects lower global activity and lack of investment. Infrastructure is a key issue in the region and countries as a whole did not take the opportunity to implement reforms during the years of strengthened terms of trade.

The best positioned country in Latin America, Chile, occupies only the 49th position in a worldwide ranking of 144 countries. All other countries of the region are ranked lower.

One region and two directions
On one side of Latin America, the countries of the Pacific (Mexico, Chile, Colombia and Peru) are defending free trade and free markets. On the other side, in the countries bordering the Atlantic, mistrust of globalization and state-run models play significant roles in the economy.

The first group created the Pacific Alliance, and has been trying to improve trade partnerships outside the continent, while the second group remains trapped within the Mercosul. So, how do the groups compare? Taking into account activity in 2013 and Coface´s forecasts for 2014 and 2015, GDP has been increasing at a higher pace in those countries bordering the Pacific.

Sector outlook between medium and high risk
The general outlook for Latin Amercia is between medium and high risk. This result is achieved based on a weighted average of the countries´ GDPs. It is worth noting that the five main economies (Brazil, Mexico, Argentina, Colombia and Chile) together represent 83% of the region’s GDP. Within the context of slower regional GDP growth, many sectors report a deterioration of their perceived risk. In this edition of Panorama we discuss the outlook for each segment in the region in more detail.

We also focus, in a special section, on two segments of the Mexican and Peruvian economies. These industry focuses are construction for Mexico and mining for Peru. The first faced turmoil in 2013 and is now beginning to recover. The second, a major sector of the Peruvian economy, has experienced a slowdown in activity in recent months.

Latin America unlikely to increase at its previous rhythm
In 2015, activity in Latin America is unlikely to increase at its previous rhythm, mainly due to lower international prices for commodities.

“The intensity of the effect of this in each economy also depends on the importance of exports as a proportion of each country´s GDP. For instance Brazil is considered as a closed economy, as exports accounted for only 11% of its GDP. The ratio is more significant in Argentina (13%), Colombia (17%), Peru (25%), and finally Chile (27%),”explains Patricia Krause, Economist for Coface’s Latin America region. (Coface/mc)

About Coface
The Coface Group, a worldwide leader in credit insurance, offers companies around the globe solutions to protect them against the risk of financial default of their clients, both on the domestic market and for export. In 2013, the Group recorded consolidated revenues of €1.440 billion. Its 4,400 staff in 67 countries provides a local service worldwide. Each quarter, Coface publishes its assessments of country risk for 160 countries, based on its unique knowledge of companies’ payment behaviour and on the expertise of its 350 risk underwriters closely located to clients and their debtors. In France, Coface manages export public guarantees on behalf of the French State.

Schreibe einen Kommentar

Deine E-Mail-Adresse wird nicht veröffentlicht. Erforderliche Felder sind mit * markiert.