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Following two consecutive years in the red, the economies of Latin America and the Caribbean aim to resume the path to growth this 2017, driven by the rising prices of raw materials and the recovery of international trade.
There are, however, clouds on the horizon, whether due to uncertainty about the performance of major world powers or the reappearance of the protectionist measures that caused economic disaster in the past.
According to the latest forecasts by the Economic Commission for Latin America and the Caribbean (ECLAC), the region will see modest growth of 1.3% of its Gross Domestic Product (GDP).
Latin America and the Caribbean closed 2016 with an average contraction of 1.1%, according to the annual report by this UN agency. South America was the most affected sub-region, with a decline of 2.4%, while the Caribbean contracted by 1.7% and Central America saw growth of 3.6%.
“We are at a turning point. Latin America and the Caribbean will resume growth but moderately and without clear engines driving it. Its recovery will be fragile as long as the uncertainties of the economic context continue,” stated ECLAC Executive Secretary Alicia Bárcena during the presentation of the report in Santiago de Chile.
Donald Trump’s entry into the White House on January 20 is another focal point for many countries in the region that are highly dependent on trade with the United States.
During the presidential campaign, Trump promised that he would tighten policy regarding immigrants (many of them of Latin American origin); renegotiate the trade agreements signed by Washington; and make companies that have relocated and invested abroad return to the U.S.
Should even a part of these plans be carried out, the impact will undoubtedly be felt south of the Rio Grande. In fact, the first movements are already being noted.
Huge U.S. automaker Ford announced on January 3 that it was scrapping a planned $1.6 billion assembly plant in Mexico. Much of that money will instead be invested in its factory in Flat Rock, Michigan.
While company President and CEO Mark Fields stated in an interview that the decision has nothing to do with Trump, few doubt that the president-elect's direct threats that the firm would have to pay higher tariffs on its cars manufactured outside the United States, played a key role in Ford’s plans.
GIANTS IN TROUBLE
The finances of Mexicans families are also facing a blow with gasoline price increases of up to 20% since the beginning of the year, which has generated popular unrest. According to official estimates, the Mexican economy grew close to 2% in 2016, one percentage point lower than in 2015, and will slow to 1.9% in 2017.
But Mexico is not the only giant in trouble in the region. Brazil and Argentina are experiencing political upheavals and economic adjustments that jeopardize their recent social progress. These three countries together represent more than three quarters of Latin American and Caribbean GDP, hence the importance of their economic performance for neighboring nations.
Brazil, the South American giant, where the right wing last year removed President Dilma Rousseff from power and applied a severe adjustment package, aims to recover from the recession and escape the negative numbers in 2017.
But the figures are not very encouraging. Although Brazil closed 2016 with a surplus in its current account of 47.692 billion dollars, the biggest since its historical recovery began in 1989, this difference between what the country buys and sells abroad hides the consequences of its economic slowdown of -3.5%. For 2017, the government of Michel Temer expects growth of 1%, but many international analysts and evaluating agencies view this figure as too optimistic.
Its neighbor Argentina is not experiencing better times. President Mauricio Macri’s neoliberal measures have increased the cost of living, destroying the purchasing power of the working class, with no sign of the supposed gains in terms of foreign investment and capital confidence. Argentine GDP contracted 2% last year, having grown 2.5% in 2015.
Most analysts agree that the price of major commodities will recovery this year, including oil prices, on which many economies in the Latin American and Caribbean region depend.
Although no one suggests that crude oil will see a return to its peak prices of over $100 a barrel, recent agreements by the Organization of the Petroleum Exporting Countries (OPEC) and other international dynamics are promoting price stabilization at over $50 a barrel.
The fall in international oil prices, in addition to the internal economic war, resulted in a tense situation for Venezuelan finances with the consequent impacts on the population. Despite the challenges, the government of Nicolás Maduro preserved the Bolivarian nation’s main social indicators and aspires to make a qualitative leap forward this year.
Maduro recently stated that 2017 will be the first year of its new history of the Venezuelan economy and the new production model. He recalled that in order to achieve this goal, the Executive has implemented measures such as the 15 Productive Engines of the Bolivarian Economic Agenda, the Local Supply and Production Committees (CLAP) and the Great Sovereign Supply Mission, which were strengthened during the most difficult periods this past year.
Low oil prices affected Ecuador too, also hit by the forces of nature. But in his New Year's address, President Rafael Correa was optimistic about the future of the country. He reiterated forecasts recently released by the Ecuadorian Central Bank, which indicate economic growth for 2017 of 1.42%.
“We successfully came through the perfect storm — oil price collapse and dollar appreciation —; abusive payments to Chevron; an earthquake of 7.8 degrees and almost 3,000 further quakes. Ecuador has already changed,” Correa said.
Bolivia, another petroleum producer, would also benefit from better raw material prices, although its economy has been diversifying under Evo Morales’ government and has seen average growth of 4.5% in recent years, one of the best in the region.
As such, 2017 is shaping up to be a promising year for Latin Americans and Caribbeans, but the threats of international unrest as well as those posed by internal forces striving to undo the changes of the last decade are still very much present. / Granma