Economies of Latin America and the Caribbean 2009

ECLAC Projects Economic Recovery in the Region to Be Faster than Expected, with 4.1% Growth in 2010

The U.N. body warns, however, that this recovery may not be sustainable over time.

The United Nations Economic Commission for Latin America and the Caribbean (ECLAC) has released its Preliminary Overview of the Economies of Latin America and the Caribbean 2009. ECLAC projects positive growth rates for most countries, but explains that there are doubts still about whether this recovery will be sustainable over time, given the continuing uncertain external scenario which may affect growth expectations in the region.

"The worst of the crisis is behind us. The motors of growth have been turned on again, but we don't know how long the fuel will last," stated ECLAC Executive Secretary Alicia Bárcena, in presenting the report.

Overcoming the crisis has been swifter thanks to a set of countercyclical policies that helped countries address the external turbulence effectively, says the report. These policies included reducing interest rates, increasing State-owned bank loans, expanding public expenditure and implementing a broad array of social programs, such as consumer subsidies and support for low-income households.The ECLAC report also examines in detail the evolution of the region's economies in 2009, as the crisis hit, putting an end to six years of consecutive economic growth in Latin America and the Caribbean. The region's economies will contract this year by -1.8% (better than the -1.9% estimated last July), which means that GDP per capita will fall about 2.9% Unemployment in the region will also be higher than in 2008. This year, it will rise to 8.3% (lower than the 9.0% projected earlier this year) of the economically active population, with a deterioration in the quality of new jobs.

For 2010, better growth expectations and the higher prices of some commodity exports from the region will boost fiscal income in the region, improving the fiscal balance. As growth consolidates, there may be a moderate inflationary pressure that could lead central banks to restrict monetary policies perhaps late in the year. Unemployment could drop to around 8% in 2010, about midway between the unemployment levels before and after the crisis, and this will have a positive effect on poverty indicators. Beyond the short-term, ECLAC stresses that the current crisis will lead to profound changes in the international scenario that will create a less favorable environment for growth than that experienced in the region between 2003 and 2008.

This poses the urgent need to redefine standards for productive and trade specialization, encourage innovation, include more know-how and diversification in products and seek new destination markets, with greater participation of Asian countries. Likewise, nations need to define the role of the State and provide it with the resources and instruments they need to prevent and address crises as well as promote sustainable economic and social development.