As we reported last July (“2011 Latin American Industrial Gas Report,” CryoGas, July 2012, p. 44), as a consequence of unfavorable external conditions, the Latin American economy is growing at lower rates than in 2011.
The International Monetary Fund (IMF) reports in its most recent review (World Economic Outlook, October 2012) that Latin America will continue growing, but at a slightly slower pace than anticipated in its April 2012 projection. The total world economy will grow a disappointing 3.3 percent in 2012 and 3.6 percent in 2013, with the United States growing at 2.2 percent in 2012, and the Euro area decreasing by -0.3 percent in the same period.
The Latin American Economy
Growth in the Latin American region decelerated in the first half of 2012. Activity outside the region also moderated, including in China and India. The recession in Europe continued, and the United States economy grew at a moderate level. Uncertainties about the Euro area and the fiscal cliff in the United States continue to threaten the much expected recovery. As a result, exports from Latin America were affected and prices of most commodities, which account for three-quarters of the region’s output, also suffered moderate losses.
Domestic demand growth, especially investment, cooled following the policy tightening adopted in most Latin American countries, and because of uncertainties about export markets. In spite of several government stimulus measures, the Brazilian economy, the largest in the region, had a dismal performance reflecting both poorer external conditions as well as internal problems, including high internal costs, some credit deterioration after several years of credit growth, and the effects of a strong Real. Simultaneously, most Latin American local currencies have appreciated, with the notable exception of the Brazilian Real, which in 2012 began reversing its previous appreciation.
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