Latin America growth gloom persists

Outlook

After a regional contraction of 0.7% last year, according to the World Bank, a new fall is likely this year. This is due to the slump in South America -- dragged down by Brazil and Venezuela in particular -- with Mexico, Central America and the Caribbean seeing better prospects if the US economy does not falter.

Despite widespread calls for reform, space for major change is limited. With growth expected to remain subdued for several years, fiscal retrenchment could see a worsening of employment and poverty rates. Meanwhile, prospects for greater investment in education, diversification and infrastructure are dim.

Impacts

• Obstacles to competitiveness (other than exchange rates) will not be overcome in a weak investment climate.
• Recent advances in reducing poverty and inequality could be undermined or reversed.
• Political crises in Venezuela and Brazil mar prospects for rapidly resolving economic ills.
• The increased importance of exports to and lending from China in recent years is now a substantial risk factor.