Question

What do you feel are the strengths and weakness of the economies of Latin America?

Answer 1

The strengths are:

The area developed at an average rate of 2.2% from 1995 to 2003, with an inflation rate of 13.2%. Growth stood at 5.7% in 2004, while inflation stood at 6.5%. And in 2005, the economy grew by 4.4%, with prices rising by 6.3%.

Strong global demand for basic commodities has driven regional production, and in recent years prices have followed closely the same direction as economic activity. Between the end of 2002 and the third quarter of 2006, prices rose by 150% and 80% respectively for both fossil and non-fossil fuels. Nevertheless, the effect of these increases was unequal within the region: trade conditions improved by an average of 23% in South America[ as a whole] and about 9% in Mexico between 2002 and 2005. In Central America, however, they declined by 4% and in the Caribbean by 9%. Inflation has typically remained modest amid sustained growth in the price of basic commodities in recent years, and predictions call for it to continue to fall. In 2006, Latin America and the Caribbean will have an average annual inflation rate of about 5.25%, which is about 1% less than in 2004.

The organization also commends the "reinforcement" of indicators showing the financial strength of the region. "The increase in asset quality is expressed in a drop in default loans, The IMF estimates that, compared to 10.6 percent in 2002, only 4.4 percent of loans actually remain unpaid. "The increased volume of credit and margin stability led to the increase in bank profitability over the period 2005-6.

In recent years, the development that the region has undergone has helped raise employment levels and improve social indicators. Employment growth increased in 2005 and during the first half of 2006 in many countries, including Argentina, Brazil, Chile, Mexico, and Venezuela. The official unemployment rate has dropped substantially to an average rate of 10%. Poverty has also decreased at the same time

The weakness are:

The high growth that has occurred in recent years is concentrated in those countries that at the beginning of this decade faced a very serious crisis, like Argentina and Uruguay, that faced serious problems from 1999 to 2002. For its part, in 2002 and 2003, Venezuela experienced another similar economic crisis. The high rate of growth represents a rebound from previous production levels. There are no significant economic indicators indicating a sustainable growth wave

Unlike previous economic peaks, there are no seeds of its own demise in the current advance. "When the Latin American economy recovered, this expansion is favorably compared with earlier periods. Latin America's growth has historically been influenced by cycles of peaks and breakdowns. Thus, the debt-funded growth of the seventies gave way to the debt crisis of the eighties. The rebound in the early 1990s later ended with the 1994 Tequila crisis. The rebound that followed came to an end in 1998 due to the emerging markets crisis.