Economic and social overview of Latin America and Caribbean Meeting of the Regional Coordination Mechanism for Latin America and the Caribbean - Santiago, 24 January 2013 Antonio Prado, Deputy Executive Secretary
Contents • The region in the context of the global crisis: recent trends in economic and social development • Long-run challenges to achieve structural
change for equality
Crises have traditionally cut deep into the social fabric in the region LATIN AMERICA AND THE CARIBBEAN: COMPARISON OF PER CAPITA GDP AND POVERTY RATES, 1980-2011
Poverty GDP per capita
Source: ECLAC, on the basis of specia tabulations of household surveys
There has been a clear reduction in inequality since 2002, and this continued in 2011 LATIN AMERICA (18 COUNTRIES): GINI COEFFICIENT, 2002-2011 AND 2010-2011
Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of special tabulations of household surveys conducted in the respective countries. a
Data for urban areas in Argentina, Ecuador and Uruguay. Data for 2002 are from 2002 except for Brazil, El Salvador, Nicaragua, Paraguay and Peru (2001), Argentina (2004) and Chile (2000). Data for 2011 are from 2011 except for Costa Rica, Nicaragua and the Plurinational State of Bolivia (2009), El Salvador, Honduras and Mexico (2010) and Guatemala (2006). b Data for urban areas in Argentina. Data for 2010 refer to figures for 2009 in Brazil and Chile.
This crisis current is different: a recession caused by a financial crisis arising from private over indebtedness • Recessions of this sort are longer and impact more heavily on output and employment. • Recoveries are precarious and highly vulnerable to economic or financial volatility. • Necessary private debt reduction takes place in periods of slack economic activity and asset value slippage. • Deleveraging and recomposition of private savings make monetary stimulus measures less effective. • Emerging economies and South-South trade have been key in global growth
Since the beginning of this crisis, Latin America and the Caribbean showed a certain resilience Downside Trade contraction, especially towards Europe and China Adverse climate factors (soy) Insufficient investment limited the growth capacity (supply) Some exchange rate volatility (Brazil and Mexico) Lower financial inflows to the region
Upside GDP growth of 3.1% (above the global average of 2.2%) in 2012 Fall in unemployment (to 6.4%) and an increase in average wages Accommodative monetary policy and continued reserve accumulation Increased investment and consumption Fiscal prudence
External context 2012 • Financial, fiscal and competiveness imbalances in the Euro area were associated with: – A recession in the majority of the countries of the EZ, with economic growth of -0.5% – A slow process of joint problem solving, although with the decision of the ECB to intervene under certain conditions – Financial instability, though with improvements in the risk premiums in the EZ during the second half • Slowdown in China, from 9.2% in 2011 to 7.7% in 2012 • Modest growth in the USA, between 1.8% and 2.1%
• Absence of shocks in the oil market
Global economic growth decelerated GLOBAL GDP GROWTH BY REGION, 2010 – 2013 (in percentage) 12 10.3 10 9.2
7.7
8
7.9
7.7
6.0
5.7
6
5.1 4.7
4.5
4.3
4.0
3.8
4 3.1 2.1
2.7
2.4
2.2
2
1.5
2.4
2.1
1.8
1.7
1.5
0.6
0.3 0 -0.7
-0.5
-2 2010
World
Euro area
2011
United States
Latin America and the Caribbean
2012 a/
Developing economies
Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on UN/DESA. a/ Estimate. b/ Projection.
2013 b/
China
Japan
Regional GDP grew by 3.1% in 2012, above the global average (2.2%) LATIN AMERICA AND THE CARIBBEAN: CONTRIBUTION TO REGIONAL GDP GROWTH BY COUNTRY, 2004 – 2012a 7%
Brazil
6% 5%
Argentina
4%
The Caribbean
3% 2%
Mexico
1%
Central America
0% -1%
Rest of South America
-2%
2012
2011
2010
2009
2008
2007
2006
2005
2004
-3%
Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures. a Figures for 2012 correspond to estimations.
Latin America and the Caribbean
The majority of Latin America countries posted growth above 3.1% in 2012 LATIN AMERICA AND THE CARIBBEAN: GDP GROWTH RATES, 2012a (Percentages) Panama Peru Chile Venezuela (Bol. Rep. of) Costa Rica Bolivia (Plur. St. of) Ecuador Colombia Central America (9 countries) Nicaragua Uruguay Mexico Dominican Republic Honduras Guatemala Latin America Latin America and the Caribbean Cuba South America (10 countries) Haiti Argentina El Salvador Brazil The Caribbean Paraguay
10.5 6.2 5.5 5.3 5.0 5.0 4.8 4.5 4.2 4.0 3.8 3.8 3.8 3.5 3.3 3.1 3.1 3.0 2.7 2.5 2.2 1.2 1.2 1.1 -1.8 -4
-2
0
2
4
Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures. a Estimate
6
8
10
12
Growth in the Caribbean increased from 0.4% in 2011 to 1.1% in 2012 THE CARIBBEAN: GDP GROWTH RATES, 2012a (Percentages) Belize
4.2
Guyana
3.8
Suriname
3.6
Latin America and the Caribbean
3.1
Bahamas
2.5
Dominica
1.6
Saint Vincent and the Grenadines
1.5
The Caribbean
1.1
Trinidad and Tobago
1.0
Antigua and Barbuda
0.9
Saint Lucia
0.9
Barbados
0.2
Granada
0.2
Jamaica
-0.2
Saint Kitts and Nevis
-0.8 -2
-1
0
1
2
Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures. a Estimate
3
4
5
Consumption continued to be the most important driver of growth LATIN AMERICA: CONTRIBUTION TO GDP GROWTH, 2008 – 2012a (As a percentage of GDP) 10% 8% 6% 4% 2% 0%
-2%
Private Consumption
General Government Consumption
Investment
Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures. a Figures for 2012 correspond to estimations.
2012
2011
2010
2009
2008
-4%
Net Exports
GDP
The region’s investment coefficient has continued to grow persistently LATIN AMERICA: GROSS FIXED CAPITAL FORMATION AS A PERCENTAGE OF GDP, 1980 – 2012a (2005 constant dollars) 30%
25% 20% 15% 10% 5%
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
0%
Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures. a Figures for 2012 correspond to estimations.
FDI inflows remained above 120 billion dollars LATIN AMERICA AND THE CARIBBEAN: FOREIGN DIRECT INVESTMENT INFLOWS, 2008 – 2012a (In millions of dollars) 160,000 140,000
120,000 100,000 80,000 60,000 40,000 20,000 0 2008
2009
2010
Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures. a Figures for 2012 correspond to estimations.
2011
2012
January February March April May June July August September October November December January February March April May June July August September October November December January February March April May June July August September October November December January February March April May June July August September October
Inflation slowed, with some exceptions
LATIN AMERICA AND THE CARIBBEAN: CONSUMER PRICE INDEX, Jan 2008 – Oct 2012 (Rate of change over twelve months)
16%
14%
12%
10%
8%
6%
4%
2%
0%
2009 2010
CPI 2011
Food 2012
Core
International reserves accumulation continued throughout the region, though at a slower rate than in 2011 GROSS INTERNATIONAL RESERVES, 2001 - 2012 (Millions of dollars and as a percentage of GDP) 60%
13,772 50%
9,326 40%
62,212 13,120
30%
751 377,753
1,400
20%
45,274 10%
5,366 6,804 36,402
38,943
1,856 4,838 1,990 165,590 2,524 25,864 3,347
0%
October 2011
October 2012
Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures.
Some decline in commodity prices, but with increased volatility INTERNATIONAL PRICE INDICES OF COMMODITIES AND MANUFACTURES, 2008-2012 (2005=100, three month moving average)
Food Oils and oilseeds Minerals and metals Manufactured goods
Tropical beverages Forestry and agricultural raw materials Energy
Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on figures from the United Nations Conference on Trade and Development (UNCTAD) and the Netherlands Bureau for Economic Analysis (CPB).
Oct-12
Jul-12
Apr-12
Jan-12
Oct-11
Jul-11
Apr-11
Jan-11
Oct-10
Jul-10
Apr-10
Jan-10
Oct-09
Jul-09
Apr-09
Jan-09
Oct-08
Jul-08
Apr-08
Jan-08
360 340 320 300 280 260 240 220 200 180 160 140 120 100 80
Exchange rate volatility increased in Brazil and Mexico, with a greater diversity in exchange-rate trajectories NOMINAL EXCHANGE RATE, Jan 2008 – Nov 2012 (National currency per dollar, index 01/01/2008=100) 150 140 130 120 110 100 90 80 01-11-2012
01-09-2012
01-07-2012
Peru
01-05-2012
01-03-2012
Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures.
01-01-2012
Mexico
01-11-2011
01-09-2011
01-07-2011
01-05-2011
01-03-2011
Colombia
01-01-2011
01-11-2010
01-09-2010
01-07-2010
01-05-2010
01-03-2010
Chile
01-01-2010
01-11-2009
01-09-2009
01-07-2009
01-05-2009
01-03-2009
01-01-2009
01-11-2008
01-09-2008
01-07-2008
01-05-2008
01-03-2008
01-01-2008
Brazil
Although the trade channel was most affected, net financial flows to the region also declined LATIN AMERICA AND THE CARIBBEAN: GROSS CAPITAL FLOWS, 2008 – 2012a (In millions of dollars) 250,000
200,000 150,000 100,000 50,000 0 -50,000 -100,000
-150,000 -200,000 2008
2009
Portfolio investment outflows Other investment outflows Net financial flows (excl. net FDI and errors)
2010
2011 Portfolio investment inflows Other investment inflows
Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures. a Figures for 2012 correspond to estimations.
2012
In contrast with Latin America, the public debt situation in the Caribbean is a source of vulnerability LATIN AMERICA AND THE CARIBBEAN: PUBLIC DEBT AS A PERCENTAGE OF GDP, 2011-2012a Saint Kitts and Nevis Jamaica Barbados Granada Antigua and Barbuda Guyana Dominica Belize Saint Lucia Saint Vincent and the Grenadines Bahamas Brazil El Salvador Uruguay Colombia Argentina Panama Costa Rica Trinidad and Tobago Mexico Bolivia Nicaragua Latin America (19) Dominican Republic Honduras Venezuela Haiti Guatemala Suriname Ecuador Chile Peru Paraguay 0
20
40
60 2012
80
100
120
140
160
2011
Source: Economic Commission for Latin America and the Caribbean, based on official figures. a Figures for 2012 correspond to: September for Latin America, Bahamas and Belize; August for Suriname; June for Jamaica and Trinidad and Tobago; and March for Barbados.
The rise in consumption reflected improved labour market conditions: unemployment fell (to 6.4%) and wages increased
12.00
120.00
10.00
115.00
8.00
110.00
6.00
105.00
4.00
100.00
2.00
95.00
.00
90.00 2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011 2012 e/
-2.00
85.00
-4.00
80.00 Economic Growth
Unemployment Rate (left axis)
Source: Economic Commission for Latin America and the Caribbean, (ECLAC), based on official figures.
e/ Estimate.
Real Average Wages (right axis)
Real Average Salary (Index 2000 = 100)
Rates (percentages)
LATIN AMERICA AND THE CARIBBEAN: ECONOMIC GROWTH, INCREASE IN REAL AVERAGE WAGE AND VARIATION IN THE UNEMPLOYMENT RATE
Evolution of unemployment by sub-region URBAN UNEMPLOYMENT RATE, 2008 - 2012 (Percentage) 10
9 REST OF SOUTH AMERICA
8
BRAZIL 7
CARIBBEAN 6 CENTRAL AMERICA
5
MEXICO 4 2008 Brazil
2009 Rest of South America (7 countries)
2010 Mexico
2011 Central America (3 countries)
Source: Economic Commission for Latin America and the Caribbean, (ECLAC), based on official figures. e/ Estimate. For the Caribbean: First half of the year.
2012 e/ The Caribbean (3 countries)
Salaried employment grew more than own-account work, although at a lower rate than in 2011 LATIN AMERICA: ECONOMIC GROWTH AND EMPLOYMENT DYNAMICS, 2000 - 2012 (Percentage) 6 5 4 3 2 1 0 -1 -2
Salaried Employment
Own Account Workers
Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures. a/ January-September
GDP
Formal employment increased, but in various countries at a slower pace LATIN AMERICA: YEAR-ON-YEAR CHANGE OF FORMAL, SALARIED EMPLOYMENT (Percentage) 9 7 5 3 1 -1 -3 -5
Argentina
Brazil
Chile
Costa Rica 2009
Mexico 2010
2011
Nicaragua
Panama
Peru
Uruguay
2012 a/
Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures. a/ January-September, except Argentina and Panama, whose data correspond to the period January-June; and Uruguay, January-August.
Both poverty and indigence posted a fresh decline in 2011 LATIN AMERICA: POVERTY AND INDIGENCE, 1980-2012 a (Percentages and millions of people)
Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of special tabulations of household surveys conducted in the respective countries. a Estimate for 18 countries of the region plus Haiti. The figures above the bars refer to the percentage of total poor (indigents and non-indigent poor). The figures for 2012 are projections.
Wages were the main driver of higher income in poor groups... LATIN AMERICA (7 COUNTRIES): ANNUAL VARIATION IN TOTAL INCOME PER CAPITA AND INCOME SOURCE IN POOR HOUSEHOLDS,a 2010-2011 b (Percentages)
Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of special tabulations of household surveys conducted in the respective countries. a The percentage of the population analysed is the same for both periods and corresponds to the poverty rate for 2008 or nearest previous year. b Corresponds to the period 2009-2011 in Brazil and Chile. c Urban areas.
… but gaps between women and men have been widening, leading to greater feminization of poverty LATIN AMERICA (18 COUNTRIES): FEMININITY INDEX OF POVERTY, 2011
Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of special tabulations of household surveys conducted in the respective countries. a Urban
areas.
Social public spending has kept rising as precentage of GDP AMÉRICA LATINA Y EL CARIBE (21 PAÍSES): EVOLUTION OF SOCIAL SPENDING IN DIFFERENT ECTORS, 1990-1991 A 2008-2009. (in percentage of GDP) 6.6 a/ 20.0 17.9
18.0 16.0 14.0
12.0
3.5 a/
11.3
10.0
1.8 a/ 7.9
8.0 1.0 a/ 6.0
4.9
4.0
4.4
0.4 a/
3.7
3.1
2.7
2.0
1.2
1.6
0.0 Gasto Total social socialtotal
spending
Gasto en educación Spending in
education 1990-1991
Gasto en salud Spending in
health
Gasto en seguridad Spending in socialy asistencia social protection
1994-1995
Fuente: Comisión Económica para América Latina y el Caribe (CEPAL), sobre la base de cifras oficiales.
1998-1999
Gasto en vivienda Spending in y otros
housing and other
Balance, perspectives and challenges
In 2013, external demand will not be a source of dynamism •
European Union – Solvency problems persist both in terms of public debt and in the
financial system, as well as insufficient external adjustment – Low growth and a possible recession in 2013 – Institutional changes (fiscal union and a unified banking supervisor) will take time
•
United States: – Liquidity will continue to expand – Labour, housing and banking solvency indicators suggest possibilities
of increased growth in 2013 – There remains a risk of the fiscal cliff
•
China – Indicators suggest growth similar to or greater than that of 2012:
7.9% in 2013 compared to 7.7% in 2012
But a slight uptick in growth is predicted for the region (3.8%) in 2013 LATIN AMERICA AND THE CARIBBEAN: CONTRIBUTION TO REGIONAL GDP GROWTH BY COUNTRY , 2004 - 2013 7%
Brazil
6%
5%
Argentina
4%
The Caribbean
3% 2%
Mexico
1% 0%
Central America
-1%
Rest of South America
-2%
2013/b
2012/a
2011
2010
2009
2008
2007
2006
2005
2004
-3%
Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures. a/ Estimate b/ Projection
Latin America and the Caribbean
With a recovery in some countries and a small slowdown in others LATIN AMERICA AND THE CARIBBEAN: GDP GROWTH RATES, 2013a (Percentages) Paraguay Panama Peru Haiti Bolivia (Plur. St. of) Chile Nicaragua Colombia Latin America Uruguay Brazil South America (10 countries) Central America (9 countries) Latin America and the Caribbean Mexico Honduras Ecuador Cuba Costa Rica Guatemala Argentina Dominican Republic El Salvador The Caribbean Venezuela (Bol. Rep. of)
8.5 7.5 6.0 6.0 5.0 4.8 4.5 4.5 4.0 4.0 4.0 4.0 3.9 3.8 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.0 2.0 2.0 2.0 00
01
02
03
Source: Economic Commission for Latin America and the Caribbean (ECLAC). a Projection
04
05
06
07
08
09
The Caribbean will also grow, at 2.0%, but vulnerabilities remain THE CARIBBEAN: GDP GROWTH RATES, 2013a (Percentage) Guyana
4.9
Suriname
4.7
Latin America and the Caribbean
3.8
Bahamas
3.0
Trinidad and Tobago
2.5
Antigua and Barbuda
2.4
Belize
2.3
The Caribbean
2.0
Saint Lucia
1.9
Saint Kitts and Nevis
1.8
Dominica
1.7
Saint Vincent and the Grenadines
1.5
Granada
1.2
Barbados
1.0
Jamaica
0.1 .0
1.0
Source: Economic Commission for Latin America and the Caribbean (ECLAC) a Projection
2.0
3.0
4.0
5.0
6.0
In the short term The role of domestic demand (national and intraregional) should be strengthened and expanded, in order to: • Grow to achieve equality (through employment and wages) • Enhance investment dynamics • Avoid internal macroeconomic disequilibria (inflation or financial bubbles) • And external disequilibria (increasing current account deficits) • In the Caribbean: ensure fiscal consolidation, but with social protection • Strengthen regional demand through intra-regional trade
Longer-term challenges: structural gaps to be closed
Inequality
Investment
Productivity
Taxation
For the first time in recent history there have been advances in combating inequality
Investment, at 23% of GDP, is insufficient for development
Closing the external gap (with the technological frontier) and the internal gap (between sectors and actors)
Regressive tax systems; weak noncontributory pillar
International linkages Risk of “lock-in” of the export structure, with low value added and little investment in technology
Environmental sustainability Move towards sustainable production and consumption patterns
• In order to move towards productive convergence, policymakers must look beyond the price boom: economic policies based on a relevant, long-term, sustainable vision at the macroeconomic, productive and territorial levels.
• To take advantage of the opportunities provided by the international context, exports must have a higher value added and knowledge content, with the focus on diversification of production, integration of sustainable production processes, re-evaluation of global and regional partnerships and strengthening open regionalism. • Consensus on priorities and respective financing: a fiscal covenant with a redistributive impact – with access to innovation, job security and internalization of externalities. • New equation: State-market-society.
Risk of lock-in based on static comparative advantages AMÉRICA LATINA Y EL CARIBE: ESTRUCTURA DE LAS EXPORTACIONES POR NIVEL DE INTENSIDAD TECNOLÓGICA, 1981-2010 a (En porcentajes del total)
Productive structure and employment: concentrated in low-productivity sectors LATIN AMERICA (18 COUNTRIES): STRUCTURAL HETEROGENEITY INDICATORS, AROUND 2009 (Percentages)
Source: ECLAC, on the basis of R. Infante, “América Latina en el ‘umbral del desarrollo’. Un ejercicio de convergencia productiva”, Working Paper, No. 14, Santiago, Chile, June 2011, unpublished.
Access to financing for development for middle-income countries • The focus on per capita income does not reflect the broad and multi-faceted nature of the development process • ECLAC proposes an alternative approach based on structural gaps must be adopted • This implies: • Focusing cooperation and financing towards development, not only poverty reduction • Re-thinking the role and integration of middle income countries in the system of regional cooperation • New political dialogue at the global and regional levels
Strengthening the regional integration agenda • Intraregional trade, development of value chains, investment and infrastructure • Harnessing strategic opportunities with Asia, especially China • Enhancing the regional financial architecture • Closer regional cooperation to tackle global challenges (global governance, financing for development, Rio+20, development agenda beyond 2015).
ECLAC’s proposal: structural change for equality Close economic and social gaps, both internal and external
• Progress towards more knowledge-intensive activities • Reduction of production and territorial heterogeneity
Spread throughout the economic and social structure: • • • •
Production and technology capabilities Ample job opportunities and quality employment Social protection with universal access Environmental sustainability in the context of the technology revolution
Strengthen the role of the State as a guarantor of rights and driver of policies for sustainable economic and social development
