LAC OUTLOOK: PLANTING IN GOOD TIMES? Guillermo Perry Chief Economist LAC IADB Annual Meetings Okinawa, Japan April 2005

Transcription

1 LAC OUTLOOK: PLANTING IN GOOD TIMES? Guillermo Perry Chief Economist LAC IADB Annual Meetings Okinawa, Japan April 25

2 EXPORTS: Continue to lead? 2 Indices = ARGENTINA BRAZIL MEXICO VENEZUELA f 2 2 Indices = CHILE COLOMBIA PERU URUGUAY LAC Indices = Costa Rica Guatemala Jamaica Dominican Republic f f Note: Indices calculated with exports of goods, FOB, billions of US$. World Bank LDB Working database, Consensus Forecasts and EIU country risk reports for Uruguay and the Central American and Caribbean countries.

3 in spite of currency appreciation? 125 (Nominal Exchange Rates) Mexico Venezuela Guatemala Costa Rica Uruguay 1 75 January-3 July-3 January-4 July-4 January-5 Index: Jan. 3 =1 15 Argentina Brazil Chile Colombia Peru 85 Source: Bloomberg 65 January-3 July-3 January-4 July-4 January-5

4 Real Effective Exchange Rates have 125 not changed much 1 Costa Rica Guatemala Mexico Uruguay Venezuela Index: Jan. 3 = M1 23M5 23M9 24M1 24M5 24M9 25M Argentina Brazil Chile Colombia Peru Source: IMF M1 23M5 23M9 24M1 24M5 24M9 25M1

5 Terms of Trade Indices (1997 = 1) Argentina Colombia Mexico Chile Ecuador Peru Source: National Sources via Haver database.

6 Trade Millions of US$ Argentina Brazil Mexico Chile Peru Chile and Peru (Millions of US$ Jan-97 Jan-98 Jan-99 Jan- Jan-1 Jan-2 Jan-3 Jan-4 Jan Source: National sources via Haver database.

7 LAC: Current Account Balances ARGENTINA VENEZUELA LAC weighted avg. Percent of GDP f 25f 26f BRAZIL CHILE COLOMBIA MEXICO PERU LAC weighted avg. Percent of GDP f 25f 26f -6 Source: Consensus Forecast and Economist Intelligence Unit.

8 INVESTMENT: Better prospects Gross Fixed Capital Formation Index 1997= e 25 f 26 f ARGENTINA COLOMBIA VENEZUELA Gross Fixed Capital Formation Index 1997= e 25 f 26 f BRAZIL CHILE MEXICO PERU Source: Consensus Forecast, March 31, 25.

9 7 6 5 GDP DOMESTIC ACTIVITY: Some slowdown? average % change on previous year Brazil Chile Colombia Mexico Peru IPI f growth in % Brazil Chile Colombia Mexico Peru f Source: Consensus Forecasts.

10 DOMESTIC ACTIVITY: 3..and leveling off fast recoveries? 2 IPI GDP average % change on previous year f Argentina Uruguay Venezuela growth in % e 25f Argentina Uruguay Venezuela

11 24/6 IN PERSPECTIVE: one of the best periods Real GDP growth in Latin America & Caribbean Percent f Source: GDF & WDI database and DECPG for forecasts.

12 PLANTING IN GOOD TIMES? 6 Modest Increases in Primary Surplus Primary Balance of the General Government (% of GDP) f Argentina Brazil Ecuador Mexico f -1 Source: FITCH data and National Sources Chile Colombia Costa Rica Peru Venezuela -2

13 PLANTING IN GOOD TIMES? Debt ratios fall with appreciation Debt/GDP Exchange rate Brazil Chile Colombia Mexico Peru Argentina 12 (rhs) Uruguay (rhs) Index: 21= Brazil Chile Colombia Mexico Peru Argentina (rhs) Uruguay (rhs)

14 PLANTING IN GOOD TIMES? Advances in debt composition: Brazil % of total Selic-Indexed Exchange Rate-Indexed Fixed 2 1 Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb Apr Jun Aug Oct Dec Feb

15 PLANTING IN GOOD TIMES? Domestic capital markets revival? Banking Creditto to the Private Sector in and Foreign PublicCurrency Debt in Foreign and Public Currency Foreign Debt (Percent) (Percent) Bank Credit in foreign currency / total credit Foreign public debt / total debt Jan-97 Private Sector Bond Issuance Bonds Issued by the Private Sector Stocks (in billions) in Billions Pesos of Domestic market Dollars 23 External market Jan-98 Jan-99 Jan- Jan-1 Jan-2 Source: Central Bank of Mexico Jan-3

16 SOME STILL VULNERABLE Brazil: Debt dynamics under a 3 bp increase in US interest rates.55 3bp Combined Impact Base Case

17 SOME NOT ANY LONGER Mexico: Debt dynamics under a 3 bp increase in US interest rates bp Combined Impact Base Case

18 International Reserves: Increasing 2 LAC: Reserves and Imports Coverage Billions of US$ 15 Reserves excl. gold Imports coverage Argentina Brazil Chile Colombia Mexico Peru Venezuela Q1 98 Q2 99 Q3 Q4 2 Q1 3 Q2 4 Q3 Source: IMF via Haver database. Countries included are Argentina, Brazil, Chile, Colombia, Mexico, Peru and Venezuela

19 PLANTING IN GOOD TIMES? Trade negotiations Can we expect real advances in Doha? Will CAFTA and US/Andean Group TLC s go promptly through US Congress? Can Mercosur/EU TLC revive? Some effects from Mercosur/Andean Group and other bilaterals? Are countries pushing the complementary agenda?

20 PLANTING IN GOOD TIMES? Structural Reform: how stalled? CHILE: Education, innovation, financial sector ARGENTINA: Back to the future? BRAZIL: Progress in microeconomic reforms? COLOMBIA: Will reelection politics continue to delay reforms? PERU: Will political uncertainty finally affect the economy? ECUADOR: Can we avoid reversals? BOLIVIA: Is there a way out? VENEZUELA: Towards command and control?

21 PLANTING IN GOOD TIMES? Structural Reform: how stalled? MEXICO: Can Fox still deliver some? Future? CENTRAL AMERICA: Is CAFTA pushing up? COSTA RICA: Any hope for fiscal reform? NICARAGUA: Paralyzing politics? OTHERS: Better prospects? CARIBBEAN: DR: light out of the tunnel? JAMAICA: just enough to keep going? CARICOM/OECS: Coming to grips with reality?

22 THE END