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Latin America has not had one of their best economic years. The International Monetary Fund has predicted a lower-than-average 2.7 percent growth in Latin America's total economies. This is not surprising, seeing as several factors such as poor trade, inflation, and slow economic growth are affecting many nations from this region in a rather devastating manner. Here is a closer look.
Central America is suffering from hurt trade in its main economic products, including agricultural produce. Guatemala and Costa Rica, in particular, are finding it increasingly difficult to trade merchandise to its neighbor countries due to tightened border regulation, increased transportation and fuel costs, and a lack of quality roads and infrastructure. Even international exports are being affected by delayed shipments, which are especially problematic when it comes to the perishable quality of the exports. This lack of profitable trade and production has been seen in other Latin American countries, and the effects are apparent.
Mexico's economy, in particular, has gone from having an extremely high growth rate to a near-recession in the span of a year. One factor said to have contributed to this is the country's high dependence on the United States. The high majority of Mexico's exports go to the U.S., however, the number is reported to have dropped recently. Remittances from U.S. relatives of native Mexicans are another main part of the economy that has also seen a lack of growth in 2013. This could be seen as a result of the current U.S. economic troubles. Indeed, Latin America as a whole is so dependent on the U.S. that if the government shutdown's resolution would have gone any other way, Latin America would have been the first region of the world's economy to have been affected.
South America has also seen its fair share of troubles. Venezuela, in particular, is suffering from an economic crisis that has been depleting it of basic goods in its stores, such as oil, milk, and sugar. A supply of flour has returned to the country, but this provides small relief when looking at the bigger picture. Its currency, the bolívar, dropped 32 percent in value relative to the dollar, the biggest value drop in Latin America. Argentina is another country suffering from various economic woes. Inflation and unemployment are at very high rates, at 24 percent and 7 percent respectively. The country's pesos have also dropped 18 percent in value to the dollar, similar to Venezuela's currency.
Brazil is struggling with similar problems. Unemployment, while low, is starting to rise steadily, causing concern for the job market. Inflation is high, at 6 percent, and the country's growth rate is projected at a low 2.5 percent for the coming years. On top of all this, the 2014 FIFA World Cup is already taking its financial toll on its host nation, costing about $3.5 billion in temporary infrastructure refurbishing. Brazil is suing FIFA for the costs, a measure that, if successful, may save the country millions of dollars.
In spite of these grim figures, global businesses are seeing much hope in Latin America. Neuberger Berman is planning to take on private equity opportunities in the region. Lack of trade with the U.S. has the potential to be recovered from increasing trade relations with the European Union and China. Energy leaders are looking to Latin America as a major hub for renewable energy, and Latin America's overall economy is projected to rise to 3.1 percent by next year, a slow but sure increase. What do you think? How can Latin America find its way out of its economic struggles, and prosper once again?
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