Monday, September 27

Economic crisis: Chile will be the only major Latin American economy to recover its pre-crisis per capita income this year | Economy

Copper cathodes ready for commercialization, at the BHP Biliton mine in Antofagasta (Chile).
Copper cathodes ready for commercialization, at the BHP Biliton mine in Antofagasta (Chile).Ivan Alvarado / Reuters

Recovery is making its way in Latin America, but it does so at many speeds. Among the large countries in the region, only one – Chile – will be able to fully recover the levels of pre-pandemic prosperity in 2021, quite an achievement if the starting point is taken into account: the bloc’s biggest crisis in 120 years. It will, according to the latest forecasts economic reports of the Organization for Economic Cooperation and Development (OECD) published this Monday, in the third quarter of 2021 -year and a half after the outbreak of covid-19-, at the same time as Japan, Poland or Finland and well before than the rest of the neighbors.

Colombia and Brazil will have to wait until the third quarter of 2022 to return to per capita income prior to the virus; Mexico until the equator of 2023 – despite the pulling power of its northern neighbor, the United States – and Argentina, which suffered the most in 2020 (when its GDP sank by 9.9%), until – at the earliest – early 2026. In all cases, however, the OECD applies a major upward revision to the growth forecasts published in December of last year of the current year and only lowers the projection for next year. Except in one: again, Argentina.

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In Chile, cruising speed in the vaccination process – an exception in the region and in practically the entire emerging bloc with more than 45% of the population completely vaccinated and 50% with at least one dose – is key for the OECD is confident of the “complete reopening of domestic activity throughout the second half of the current year”. All, despite the new wave of infections that the Andean country is suffering, which has forced new restrictions to be applied.

The improvement in global perspectives – on which the Andean country depends and much because of its exposure to copper exports – also greatly influences, and makes the South American country a unique case in Latin America, the region most shaken by the pandemic both in the sanitary as well as the economic. The Paris-based agency projects a 6.7% rebound this year and 3.5% to come, thanks largely to the pull of private consumption and the rising cost of copper, which accounts for half of exports. In line, job creation will also “gradually pick up,” according to technicians from the rich countries think tank.

Colombia and Brazil: 2022 target

Even greater will be economic growth this year in Colombia, the economy that will rebound the most among the largest in the region. But, starting from a greater collapse in 2020 (when it sank 6.8%, eight tenths more than Chile) and registering a slightly higher population growth, the return to GDP per capita before the crisis will take a little longer, with 2022 on the horizon. However, despite the social upheaval and the new restrictions on mobility decreed in recent months, its economy “has rebounded strongly” since the second half of last year thanks to increased consumption and investment.

The next in contention, Brazil, will rebound 3.7% this year, a remarkable figure but insufficient to return to activity levels prior to the health crisis after the 4.1% hit in 2020. In 2022, when the The OECD does hope that it will manage to close the gap, the largest economy in Latin America will expand by 2.5% thanks to the gradual rebound in consumption and investment. Although both projections improve compared to what was expected in December last year, when the agency published its latest global forecasts, compared to last March’s update, the Brazilian rebound remains the same this year and falls slightly (two tenths) in 2022.

The Brazilian authorities are, however, with an obstacle in the way when it comes to maintaining the stimuli that have given life to the economy in the worst moments of the pandemic: the increase in prices. “Inflation is doing the mix of fiscal and monetary policy more complicated ”, write the technicians of the organization. “Although an accommodative tone will still be maintained, the expected tightening of monetary policy will reduce support for the economy.” Brazil is one of the few emerging countries, along with Turkey and Russia, that has already raised interest rates to avoid the inflationary spiral.

Mexico: a journey of more than two years

The second largest Latin American economy, Mexico, will bounce 5% this year and 3.2% next year, five and two tenths more than the OECD forecast three months ago. This improvement, however, will not be enough for per capita income to return to pre-pandemic levels before mid-2023: a long journey of more than two years since the outbreak of the coronavirus.

The Paris-based organization values ​​the tailwind that the powerful fiscal stimuli that the United States is applying to its exports, as well as the vaccination schedule and the resistance capacity shown by remittances, a great source of foreign exchange for the economy Mexican. And it rules out inflationary pressures beyond the short term, in which the comparison effect with a completely atypical 2020 and the rise in energy prices has set off some alarms.

OECD economists, however, deny the biggest: “Inflation will go down given the large idle capacity.” To the point that they even see room for more monetary stimulus – in silver: lower interest rates – if they end up fulfilling their forecast and prices go down. Much more concerned about “the increase in inequality, poverty and gender gaps” left behind by the pandemic in the North American country.

Argentina, the one that most worries

But if a name worries the think tank In Latin America that is Argentina’s, which will not only be the economy that will take the longest to recover the levels of prosperity among the great countries of the region, but also the one that will delay the most in the emerging bloc. All, despite the accelerated rise in the price of soybeans, of which it is the third largest exporter in the world.

This year, growth will be around 6.1% in the southern nation, a figure far from negligible but also absolutely insufficient to alleviate the collapse of almost 10% registered in 2020 and that will deflate in 2022, to a slim 1.8 %. “Persistent macroeconomic imbalances and new restrictions on mobility will continue to weigh down demand and limit recovery,” the OECD technicians abound in the report. “The continued monetization of the fiscal deficit will continue to keep inflation high and, although job creation will recover slowly, high informality remains a cause for concern.”

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