On the Simón Bolívar International Bridge, commerce abounds, food, money exchange, hair buying and transportation are the most common businesses.
Cúcuta, Colombia, on July 1, 2022.Santiago Mesa
Large companies are seeking to change their location on a global scale and Latin America could benefit, pointed out specialists from the World Bank (WB) in their most recent Economic Report on Latin America and the Caribbean, published this Tuesday.
The region's Gross Domestic Product (GDP) will grow 1.4% in 2023 and 2.4% in 2024. These growth rates are "too low to make significant progress in reducing poverty," the multilateral emphasized. .
“The growth projections for Latin America and the Caribbean for 2023 have been progressively lowering in the last six months,” says the 96-page report.
“At the same time, the variance around market projections has increased, representing increased uncertainty on a global scale.
The recent wave of bank failures in the United States and Europe introduces additional uncertainty about whether advanced countries will moderate future interest rate hikes, the probability of a G-7 recession, and the path of future inflation.
Of the five largest economies in the region, Chile will have the worst performance this year, with a projected GDP contraction of -0.7%.
Mexico, Brazil, Colombia and Argentina will grow 1.5%;
and 0%, respectively.
The limited growth is due, in part, to the high inflation that has still plagued this part of the world since 2021. Central banks have responded with hikes in interest rates, which make the cost of money more expensive.
Two rating agencies foresee a wave of debt defaults due to the high costs of financing, especially between companies.
“The region has largely recovered from the pandemic crisis, but unfortunately it has returned to the low growth levels of the previous decade,” Carlos Felipe Jaramillo, WB vice president for Latin America and the Caribbean, said in a statement. .
"Countries must urgently accelerate inclusive growth, so that everyone benefits from development, and this will require maintaining macroeconomic stability and taking advantage of the opportunities that trade integration offers today."
Despite the uncertainty and volatility in the markets caused by the Russian offensive in Ukraine, which began in February of last year, Latin America has managed to return to the levels of employment and poverty that it had prior to the covid pandemic. -19 in 2020. The Bank expects average inflation in the region, excluding Argentina, to fall to 5% in 2023, after reaching 7.9% in 2022.
“The region's overall resilience is the result of hard progress in macroeconomic management over the past two decades.
Preserving this achievement will be paramount," said the Bank.
“However, fiscal imbalances remain high, with an estimated average of 2.7% of GDP in 2023, further eroding already shrinking fiscal space.”
The World Bank expects the level of indebtedness to rise to 64.7% of GDP this year, slightly below the 66.3% reached in 2022. The recent bank failures in the US and Europe add uncertainty, the multilateral added.
“Its repercussions on the banking system and capital flows in Latin America and the Caribbean remain to be seen,” the organization said.
“The region continues to be one of the least integrated, while trade openness and international direct investment have stagnated or declined in most cases over the last 20 years;
Countries must find ways to become attractive and take advantage of the trend towards company relocation,” William Maloney, chief economist for the region, said in the statement.
“In addition, harnessing the region's extraordinary comparative advantage in sustainable energy production, the commodities needed for emerging green industries, and its unique natural capital offers a potential new source of growth, but this will require policies to facilitate access to global markets, capital and technology.”
The organization recommends long-term policies, such as reducing systemic risks, boosting investment in infrastructure, and improving education.
In the short term, the Bank points out, countries can prioritize macroeconomic stability, promote progress in customs and transport regulations, and improve export and investment promotion agencies.
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