Latin America

Latin American Outlook Improves

The global economic recovery gained momentum in the fourth quarter of last year. The United States and China surprised to the upside and while the numbers for the remaining countries are showing a mixed picture, the data is, on balance, pointing towards an acceleration compared to the third quarter. However, whereas the growth figure from China once more underscored the resilience of the Asian economy, the U.S. numbers still exhibit several weak spots, as growth was mostly driven by an adjustment of inventories, an effect that will inevitably wane in the coming quarters. In the Euro area, the gap between strong and weak economies continues to widen and the more vulnerable economies (less nicely but memorably titled as PIIGS: Portugal, Ireland, Italy, Greece and Spain) are causing alarm among investors over their massive fiscal deficits. As a result, risk premiums for these countries have mushroomed, causing the euro to weaken to an eight-month low in foreign exchange markets. Latin America, in contrast, stands positively apart from Europe’s troubled economies. After decades characterised by economic crises, the region shines with low external debt levels, firm fiscal positions and solid macroeconomic fundamentals. Against this backdrop, the outlook for Latin America continues to improve and the Consensus expects a sound recovery for this year.