Economies of Latin American Countries

¶ … Economies of Latin American countries

Comparative Politics

Latin America includes conceptually Central America, Mexico, the Caribbean and South American countries. In this culture is home to around 500 million people who speak mainly Spanish and Portuguese. The largest metropolis in Latin America is Mexico City with around 19 million.

Among the ten largest cities in the world belongs to the Brazilian metropolis of Sao Paulo and the Argentine capital Buenos Aires. In Latin America, according to studies by the World Bank, especially in Brazil, the country is in a dynamic economic growth of around five percent a year. Many countries in Latin America will benefit because of the good relations with China from the economic boom of the People's Republic.

China has now replaced the U.S. As the most important trade partner of Brazil. Until the turn of the millennium, the U.S. was the main trading partner of many countries in Latin America. Care in countries like Brazil, Argentina, Chile or Costa Rica, the close economic relations with China, the growth is greater than in other Latin American countries. Many Latin American countries organize themselves increasingly in business organizations. The new Banco del Sur, which was founded in 2009, is in the development process and has members from countries such as Venezuela, Brazil, Argentina, Paraguay and Bolivia. Among other things, the Bank of the South will give financial aid to weak economies in the Member States.

In emerging countries like Argentina and Brazil are now made large direct investments. Germany is in the list of direct investment in Brazil ranks 6th The U.S. And China are in Brazil and Argentina, both in export and import of goods in the most important trading partner of the two leading economies of South America. The inflation rate in Brazil was in the Jar 2009 at nearly five percent, with an unemployment rate of 9.3%.

Background

In Brazil, the main industry, the services sector with approximately 66% (2010). The agriculture and forestry in Brazil makes from only about 5.5%. Among the major economies in South America includes Chile. Chile has traditionally had good trade relations with Germany and the EU. The EU is the most important trade partner of Chile's exports. There is a free trade agreement with China, which has simplified the bilateral economic relationship. The export of Chile is the raw copper. Half of Chile's export volume accounts for the precious metal. Foods are also important export commodities, which account for only about 11% of export volume.

The leading economies in Latin America are Mexico. Mexico is among the emerging economies of Central America and was mainly due to the financial crisis in 2008/09 has been drawn economically hard hit. Mexico has traditionally had the closest economic relationship of Latin American countries to the United States. Mexico sees himself in self-understanding as an industrial nation. Very important is the trading of energy commodities. The petroleum industry is the largest export industry in Mexico. In Mexico City have some of the largest energy companies in Latin America as Comision Federal de Electricidad, or Petroleos Mexicanos. Due to the limited resources of petroleum and natural gas, the government has in recent years set up funding to new industries and slippers Mexico less dependent on oil to make. Mexico must be mainly due to the vulnerability of the economy are working, as the international competitiveness of the transport infrastructure or the rule of law.

Mexico has lowered in recent years as the import duties. An important issue not only in Mexico is education. In the formation scenarios of many Latin American countries, many young people are excluded from normal education. Most large cities in Latin America are struggling with social unrest and high crime rate.

Discussion

Even lesser-known countries like Colombia have developed well in tourism. In Colombia, luxury hotel chains like Hilton, Marriott and Hyde investments have been announced. Since 2003, visitor numbers have doubled in Colombia. Among the most popular travel destinations of the Germans are still the Dominican Republic, Cuba, Brazil or Mexico. More and more tour operators have expanded their offerings in Latin America travel segment. Above all, city trips for individual tourists are increasingly offered. In Germany there is the Latin America Initiative of German Industry and Commerce of the Federation of German Industries (BDI), who wants to improve its image in Latin America, especially in Germany.

Dynamics of economic growth

A cursory examination of the composition and quality of the dynamics of economic growth in emerging economies around the world in recent years offers several important conclusions. First, among the top three emerging market regions (Asia, Latin America and Central and Eastern Europe), the countries of Central and Eastern Europe have been the ones who have depended on foreign capital inflows, as evidenced by the huge levels current account deficit recorded by the region in recent years.

Second, among the top three emerging market regions, Latin America and Eastern European countries have accumulated a significant vulnerability in regard to the levels of overvaluation of their currencies. That's the conclusion to be drawn from the steady deterioration in net export performance in these areas in recent years. Third, in terms of long-term sustainability of the recent period of economic expansion recorded by the three emerging market regions, it is reasonable to conclude that Asia will probably prove to be the most durable, followed in turn by the Latin American and Central and Eastern Europe.

This conclusion is drawn from (a) the impressive strength of public sector financial position in Asia and Latin America in recent years, in stark contrast to emerging Europe, and (b) the distinction of Asia, among the three emerging market regions, watching as their private sector (corporate and household) experienced growth in their savings rate during this period.

Emerging countries affected by the crisis in 2009

The economic and financial crisis in 2008-2009 interrupted the momentum of growth in emerging markets. She came after a period of expansion long and strong while most countries of the three zones in Asia, America and Eastern Europe began to see signs of overheating dawn. In excluding China, growth in these areas was almost zero in 2009.

The recession imported from developed countries has achieved several channels: - Through the medium of foreign trade with the crisis, developed countries have seen domestic demand and import requirements decline drastically. The Table 1 shows that over half (and up to 73.4% in the case of China) exports from emerging countries to developed countries (countries Advanced Asian included).

In total, between the second quarter 2008 and the second quarter of 2009, the request to Latin America collapsed by 20% that of emerging Asia 15%, and the countries of Central and Eastern Europe (CEEC) of 13%. In addition, the collapse of commodity prices has hurt the country producers (mainly in Latin America and Russia), forcing them to dip into their reserves and sovereign wealth funds

Perspectives on emerging markets

Modes of public and private funding in emerging markets have also increased in the sense of a wider range of markets Financial, along with an increase in funds raised in markets, including national currency. In response to the banking crises of 1997-2001, structural reforms implemented have to restructure and consolidate the banking, open financial systems to investors foreign and strengthen supervision. Meanwhile, the importance of funding market has increased, through the emergence of new financial instruments. Not only we have seen the development of bond issues sovereign local currency (see above), but also, to a lesser extent, emissions private bonds, especially from institutions financial. In addition, the national stock exchanges have taken increasingly important in financing resident companies.

In contrast, middle-income countries experienced a smaller decline of GDP of only 3.2 points. The growth rate of emerging economies before the crisis was greater than in other economies, a dynamic that did not change after the recession and has helped to extend the perception that were more resistant to the crisis.

Globalization has become one of the 'guilty' of this situation. Contrary to some estimates, emerging economies found it difficult to decouple from the global economy and at the same time were part of the global production system, using foreign funds to finance investments and assets held abroad.

It was likely then that any significant collapse in global demand and financial centers were transmitted to countries with which they were linked. Emerging countries fall into this category. Moreover, these channels of transmission through trade and finance explained the best results from low-income countries, typically less connected to the epicenters of the crisis.

On a more optimistic, in the same way that emerging economies could not avoid the consequences of economic collapse, it is also true that grew at a faster rate after the crisis, relative to that experienced before, and the advanced countries. Our study also shows how the emerging economies began to recover sooner, thus returning to growth rates higher than the rest of countries. For evidence just look at the latest growth forecasts for the region, which is expected to Latin America's GDP to grow by about 4 or 5% annually, a figure similar to that of the East Asian Tigers.

The faster recovery of industrial production in emerging economies can be partially explained through the rebuilding of inventories, which were initially low and required replenishment when it became clear that the global economy would slow its freefall. Still, developing countries have shown significant heterogeneity in relation to the countries of Eastern Europe and Central Asia, much worse than emerging Asia. The results from Latin America were located in the middle of these two regions.

Even more significant is the fact that emerging economies were more resistant to the crisis with respect to its own past, but not with respect to developed countries. During the global crisis, emerging economies were able to resemble a little more developed countries and magnified the external impact.

While past crises harder to hit emerging economies to developed, this time the two groups of similar countries fell as a result of the financial system and the impact of amplification by a weak public sector.

This time there was a new element that completely changed the dynamics of the crisis. Emerging economies were ready and able to apply a wide range of countercyclical policies, which may help alleviate the negative effects of the crisis. For example, several emerging countries enjoyed adequate fiscal space and credibility to implement expansionary monetary and fiscal policies, to provide even higher than those in developed countries. For example, Argentina spent twice as France, Germany or the UK in discretionary fiscal measures in 2009-2010.

Analysis

Although these tools are available for developed countries for some time, were never options for emerging economies, which have their own history of pro-cyclical policies during episodes of seizure. Which brings me to the concussion that, contrary to past crises, the emerging economies' resilience to the global crisis of 2008-2009 may be due in part to the combination of macroeconomic and financial policies and stronger positions shift international financial safer.

Overcome for further economic development, the Latin American region, its dependence on commodity exports and build up competitive structures. A new challenge for Latin America is the production of biofuels. On the one hand, they can provide jobs and incomes in agriculture and make an important contribution to climate protection. On the other hand, it could become a major environmental impact - for example if more forest areas are cleared. It can also lead to undesirable price increases for staple foods.

Only a democratically governed and the most "sociable" Latin America have a good chance to successfully integrate into the world markets and world politics. The international development policy can accompany and support the governments of the countries of Latin America and the Caribbean and along the way.

Latin America and emerging Asia: the return to potential

The recession was short-lived and the recovery has been rapid and vigorous in the middle of 2009 in Asia and Latin America. The reactions of economic policy were not long in coming: they have lower interest rates combined Interest and fiscal stimulus packages. These monetary and fiscal policies of support have stimulated domestic consumption and increased confidence businesses, helping these areas to overcome the global financial crisis. Then growth in these areas has led to the recovery of world trade and fed the regional dynamics.

In the end, largely from emerging economies World in 2010 thanks to robust growth: 6.2% for all Latin America (7.5% in Brazil, Argentina 9.1%, 5.5% Mexico 5.2% 8.8% in Chile and Peru), Asia 8% faster and 10.3% in China. End of 2010, most of emerging Asia and Latin America have caught up or exceeded their level of activity in early 2008 and found their growth trajectory pre-crisis (Figures 4a, 4b and 4c). However, the strength of the recovery between different areas: Asia is the only area to have closed the output gap (Output gap), Latin America is catching up, and the main countries except Mexico have already exceeded their potential. Finally, the difference CEEC production continues to grow. End of 2010 several Latin American countries have reversed their trend pre-crisis (Argentina and Brazil), while others come close (Chile, Peru). Some countries such as Mexico, weakened by the crisis, or Venezuela (Down 1.4% of GDP in 2010 after stagnating in 2009), constrained by political issues and access to capital markets, are lagging behind. The recovery was mainly based on the components of domestic demand. The household consumption and business investment has resumed in all countries, supported notably by the return of foreign capital and a financial environment more accommodating.

Credit to the private sector resumed at a rapid pace. While investment rates have not recovered their pre-crisis level, they have rarely been so high. The return of demand has resulting pressure on production capacity - the utilization productive capacities are very high in Brazil and Argentina - and a strong import growth in 2010. The recovery seen in the current account beginning of 2010 has gradually given way to a further deterioration in second half. As on the eve of the crisis, a number of countries Latin America (Brazil, Argentina) are entering a phase of overheating with a resurgence of inflationary pressures driven by wage increases higher than productivity growth.

Regional Integration

In Latin America there is greater awareness to ensure that regional integration is politically and economically sensible to shape globalization. Model for the integration process is the European Union, which is next to the U.S.A.'s biggest trading partner and Latin America. After the failure of a pan-American free trade zone, the Central American Integration System (Sistema de la Integracion Centro Americana, SICA), the Caribbean Single Market (Caribbean Community, CARICOM), the Andean Community (Comunidad Andina de Naciones, CAN) and the Common Market of the South (Southern Common Market Sur, Mercosur) for the political and economic integration in the region of importance.

The association conducted since 2000, the EU negotiations with Mercosur are also important for the European economy. A final, things are starting yet, since the differences between the two economies have not yet been overcome. These include disagreements over access to the European market for agricultural products from Mercosur countries and on access to markets of Mercosur countries for industrial products from Europe.

In June 2007, Association negotiations with Central America and the Andean Community have begun. They should improve the access of these countries to the European market and make contributions to political cooperation. In 2007, with the Caribbean countries (CARIFORUM) Economic Partnership Agreements under the agreements between the EU and the ACP States completed, to be implemented in subsequent years. The future of relations between Latin America and Germany or the EU will be influenced substantially by the progress of regional integration.

Priority areas of cooperation with Latin America

In consultation with other donors and with the goal of optimal division of labor, the Federal Republic will intensify its development cooperation with Latin America even more strongly on the subject areas in which it has very much experience. The main areas of German cooperation with the countries of Latin America and the Caribbean have been defined: