Latin America and Caribbean Economic Outlook

CRITICAL ISSUES

Global fragility: multilateral trade, from integration
to security/ safety, financial system
Volatility of growth, liquidity and credit
Low investment and savings
Rising inflation
Overall social frustration with globalization calls for
new public-private partnerships
Fragile democracies: distributive tensions
High vulnerability to natural disasters

IMPACT OF RISING INFLATION

On the real economy and the productive
structure
Terms of trade
Economic growth
Balance of payments
On fiscal and monetary policies implying
economic policy coordination, tradeoffs and
dilemmas
On social variables namely poverty,
inequality and employment

WORRISOME SOCIAL FACTORS

Social expenditure rose from 10.1% to 16% of
GDP
Unemployment is still high but came from 10% to
7.7% but youth more than 2x higher
6 out of every 10 urban jobs are in the informal
sector
One out of every 5 persons is indigent
Fragility of democratic systems due to
unemployment, informality and inequity
Spread of low intensity conflicts, violence drugs
Expansion of international migration but less
remmitances
Fragmentation of the social institutional structure

MACROECONOMIC PROSPECTS

Macroeconomic stability is a prerequisite for
consolidating growth:
Fiscal management which, at the very least, does not
amplify the fluctuations typical of the economic cycle
A stable real exchange rate which provides an appropriate
level of competitiveness
Although major advances have been achieved in
terms of curbing nominal volatility, not enough
attention has been paid to real volatility
The high real volatility characteristic of the region
influences investment decisions, and economic
growth
The impact is especially pressing on the poor and
most vulnerable

KEY INGREDIENTS FOR ACHIEVING EQUITY

Public investment on human capital (education,
social protection, health)
Tecnological innovation as key instrument of
development
Stable economic growth until 2015: a rate of 3%
per capita and 4.3% in total GDP
Build consensus for a social cohesion covenant to
raise public social expenditure
Improve & increase taxation (the lowest in the
world-18% average)
Consolidate a regional financial architecture

IN SYNTHESIS

The region will record 4.7% of GDP in 2008 despite
the downturn in external conditions (slowdown in
growth in developed countries and the surge in
inflation)
In 2009 we estimate a 4.0% of GDP but will still be the
seventh consecutive year of growth at an annual
average rate of over 3% per capita
LAC has better fundamentals than before to handle
the current US financial crisis
Decrease in global liquidity and credit will affect
severely investment in the region
Risk of global stagflation, systemic risk and possible
contagion due to uncertainty of financial crisis.

Bibliography
*Economic Outlook of Latin America
and the Caribbean:Prospects
2008-2009,Alicia Bárcena,
Executive Secretary,Washington,
22 September,2008

Author:Dr Omar Gómez C,Senior,Ph.D.Post-Doctorate in Management of the Organizations from URBE,Maracaibo,Estado Zulia,Venezuela.Ph.D in Business Administration in Business Management from University of Aberdeen,South Dakota,United States.Ph.D in Political Economy from Thomas Alva Edison College,
United States.Economist from Universitatis Sancti Pauli Sigilium,Geneva,Switzerland.