Latin America and its Economic Outlook

Global markets have faced a rough beginning in 2016, and Latin America has been no exception. The World Bank projected that Latin America would not be growing at all in 2016, and the International Monetary Fund is projecting the growth at below 1%. In the last five years, Latin America has faced declining growth, and 2016 brings concerns of political friction and subsequent economic changes.

The GDP growth of Latin America has fallen from 6% in 2010 to negative .2% in 2015. Brazil is facing one of its longest recessions since the 1930s, and inflation has risen to 10.7%, which is the highest it has been in the last 12 years. Venezuela has been facing economic difficulties recently, and according to the International Monetary Fund, the economy shrunk by approximately 10% last year. Mexico is facing economic difficulties, as it heavily relies on exports and trade to grow its economy, and trade composes one third of Mexico’s GDP. Due to falling oil prices and global conditions, the Mexico peso has fallen in value compared to the U.S. dollar. Other than oil, low prices of copper and aluminum are negatively affecting Chile and Peru, who are large exporters.

In the beginning of the Millennium,growth in commodities was the engine behind the economic growth; however, recently it is anticipated that Latin America will be facing a low economic growth rate. This is due to the adverse effects of the global economic slowdown becoming more apparent, such as higher levels of informal employment and lower salaries. Latin America needs to continue its entrepreneurial growth, and this would be important to maintain the Latin American labor market. In addition, the other challenge that Latin America is facing is climate change; and if global temperatures continue rising, Latin America would be an area that would be severely affected. Another environmental concern would be trying to increase environmental stability and adaptation. In addition, another challenge that is currently being faced is the need for quality education to help grow human capital. These improvements would be important to compete with other nations on a global scale, and will help increase innovation and productivity.