Analysts believe the region will expand up to 5% this year
Even when slower, Latin American economies will keep their fast growth all along this year, according to the average forecast of analysts. According to the Latin Focus Consensus Forecast - based on more than 100 country reports - the region is now expected to expand 4.2% in 2005, while other observers are more optimistic and push figures up to 5%.
Argentina, Chile, Uruguay and Venezuela are, for different reasons, the countries that will lead the growth, with figures surpassing the 5% and, in the case of Argentina, over 6%. At the same time, Mexico, Brazil and Colombia outputs look less impressive, but remarkable as these economies will expand over 3%, little less than world's average.
Argentina's growth moderates
The robust economic expansion of last year is unlikely to carry through into this year, as domestic demand growth is showing incipient signs of moderation amid rising inflation and Central Bank tightening. In addition, the less favourable international setting is likely to exert downward pressure on growth in the external sector, analysts stated.
However, observers believe that the GDP growth for this year will be over 6%, while the most optimistic of them go even further by forecasting a 7.5% expansion, if some reforms are implemented. "Argentina should study a new strategy to place its added value products in the world market, reform its financial sector and fight poverty and unemployment by redistributing incomes to secure development," warns a report issued by the Economics department of the University of San Martin, in Buenos Aires
Brazil: Well despite tight monetary policy
Successive Central Bank interest rate hikes in the past several months have brought real interest rates to among the highest in the world. Nevertheless, domestic economic activity continues to proceed at a healthy if more moderate pace than last year, reads a document released by the Latin Focus Consensus Forecast. According to observers, the Latin America's biggest economy does not appear to feel the strain of a stronger currency and moderation in global demand, as the trade surplus continues to reach new record highs.
Chile stimulated by the value of copper
The outlook for the Chilean economy remains robust despite prospects for a moderation in global growth. Continued high demand for copper is maintaining prices for Chile's most important export commodity high and sustaining export volumes.
Chile's economy – the most stable in Latin America for years - is highly dependant on the exports of a handful of products, which explain over 70% of its incomes. They are copper, fruits and wine.
Uruguay and Venezuela: leftist recovering
The economies of Venezuela and Uruguay will keep on recovering this year after 2002's slumps. Venezuela’s revival has been fuelled by oil prices, as Uruguay's institutional stability is expected to absorb any possible impact caused by the transition to the new leftist government.
Mexico conditioned by political outcome
Large scale protests against Congress' decision to preclude Mexico City Mayor Lуpez Obrador from running in the 2006 Presidential elections manifest that old practices of the traditional parties to work behind the scenes to edge out political opposition come at a political cost in modern day Mexico. President Fox has back peddled and paved the way for Lуpez Obrador to participate in the July 2006 elections. The political situation in the country will play a decisive role in the recovering of country's economy after years of recession.