August 13 th APRIL/2015 Ifo/FGV Economic Climate Index for Latin America 71 74 JULY/2015 Economic climate in Latin America improved slightly, despite worsening in Brazil The Ifo/FGV Economic Climate Index for Latin America (ECI) - developed in partnership between the German Ifo Institute and the FGV taking as a data source the Ifo World Economic Survey (WES) advanced 4% in July, compared with April, remaining at very low levels by historical standards. The improvement was driven by the decrease in pessimism regarding the six coming months, while the assessments for the current economic situation of countries in the region continued to worsen. Both the Expectations Index (EI) and the Present Situation Indicator (PSI) remain below average and in the unfavorable zone of the economic cycle (below points). Present Situation Chart 1: Economic Climate Index for world and Latin America (in points) 58 Expectations jul/04 jan/06 jul/07 jan/09 jul/10 jan/12 jul/13 jan/15 106 74 82 90 Economic Climate Index - Latin America Economic Climate Index - World The July survey keeps the trend observed since July 2013, when reporting an economic climate in Latin America less favorable than the average of the 117 countries surveyed. Worldwide, the economic climate recorded a soft fall, changing to 106 from 110 points between the surveys of April and July. The decline of the indicator is due to the worsening assessments of current conditions, which went to unfavorable from favorable, while expectations remained stable and in the favorable zone of the economic cycle. In countries / regions with greater weight in global trade flows, and thus in the global ECI, the economic climate worsened but remained favorable, as in the case of United States and the European Union. China, the world's largest exporter, reported deterioration in the economic climate driven by the drop in PSI, but expectations have improved and are in the favorable zone and above the average of the last ten years. Therefore, the improved expectations in the United States and China show a favorable trend for global growth though at a slow pace. It is noteworthy that the survey was conducted before the announcement of the China's currency devaluation, which could lead to an improvement in the expectations of that country, stimulated by exports.
1 20 Chart 2: Economic Climate Index for Selected Countries 150 (in points) 151 146 131 133 133 133 126 128 122 128 127 118 113 109 109 111 106 91 81 85 89 82 75 70 6264 45 57 4948 0 European Union United States Japan Germany France United Kingdon China India Russia South Africa jan/15 apr/15 jul/15 Brazil In the group of Latin American countries studied by the Survey, the economic climate has improved in Colombia, Ecuador, Mexico and Peru, despite all of them remain with the ECI below historical average and only Colombia and Peru are in the favorable zone of the economic climate. It stands out the particular case of Peru, which reports a favorable ECI since July 2009 (only in April 2015 the index was in the neutral zone), despite being a country dependent on exports of commodities. The ECI decreased in Argentina, Brazil, Chile, Paraguay and Uruguay. In Paraguay and Uruguay the economic climate changed to unfavorable from favorable, but is above 90 points, and therefore near the neutral zone. The worsening in these countries can be attributed in part to the recessionary conditions of its Mercosur partners, Argentina and Brazil. In Argentina all indicators worsened and the ECI stood at 66 points, with PSI and EI in the unfavorable zone of the cycle (50 and 82 points, respectively). The result, nonetheless, exceeded that of Brazil, which recorded an ECI of 48 points, with PSI reaching rock bottom (20 points) and EI presenting stability in relation to the survey of April, in 76 points. Bolivia and Venezuela kept the ECI, but in different situations. Venezuela continues with all indicators at the lowest possible level of the survey from July 2013. In Bolivia the ECI, although unfavorable, is near the neutral zone and only five points below the historical average of the last ten years. The assessment of the current situation is favorable in this country. The concern is in the unfavorable expectations since January 2015, possibly influenced by the Brazilian recession and by oil prices. The survey brings this quarter a survey on inflation expectations for 2015 and 2020. Venezuela reports an inflation rate for 2015 of 116% and 68% for 2020. Experts do not project improved economic conditions in that country. In 2015, after Venezuela, the highest expected inflation was determined in Argentina (28%), followed by Brazil (8.8%). By 2020, after Venezuela, we see Argentina (10.6%), Bolivia (6.2%) and Brazil (5.3%). In short, the Latin America Survey of July 2015 shows that the region is still far from the global recovery, although the analysis by countries shows great heterogeneity of situations. 2
76 63 66 110 92 Chart 3: Economic Climate Index for Latin America countries 131 (in points) 127 127 119 113 107 99 92 90 90 85 84 84 68 72 57 4948 46 93 20 20 20 20 0 Argentina Bolivia Brazil Chile Colombia Ecuador Mexico Paraguay Peru Uruguay Venezuela jan/15 apr/15 jul/15 RANKING OF COUNTRIES Previous Position Present Position Country ECI of the last 4 quarters Apr/15 Apr/15 1 1 Paraguay 121 2 2 Peru 115 117 3 3 Bolivia 110 105 4 4 Colombia 106 5 5 Uruguay 97 7 6 Mexico 91 86 6 7 Chile 89 85 8 8 Ecuador 71 68 9 9 Argentina 61 63 10 10 Brazil 55 53 11 11 Venezuela 20 20 3
APPENDIX PRESENT SITUATION INDEX (IN POINTS) PSI jan/13 apr/13 jul/13 oct/13 jan/14 apr/14 jul/14 oct/14 jan/15 apr/15 jul/15 10 years Latin America 98 102 90 88 82 72 64 58 58 98 Argentina 78 88 74 74 44 34 34 38 52 50 96 Bolivia 116 114 114 116 148 1 126 148 1 116 116 104 Brazil 92 94 66 84 84 68 42 30 30 22 20 110 Chile 172 164 132 108 86 50 82 36 127 Colombia 118 112 106 110 146 168 152 114 124 Ecuador 126 116 46 95 Mexico 114 66 82 78 78 78 56 66 74 86 Paraguay 122 158 154 134 130 110 136 136 108 106 Peru 154 152 128 138 128 112 82 74 94 141 Uruguay 144 110 130 112 114 136 126 110 114 124 108 143 Venezuela 20 20 20 20 20 20 20 20 20 20 20 EXPECTATIONS INDEX (IN POINTS) EI jan/13 apr/13 jul/13 oct/13 jan/14 apr/14 jul/14 oct/14 jan/15 apr/15 jul/15 10 years Latin America 104 86 96 102 98 96 96 92 82 90 99 Argentina 130 74 56 106 88 82 84 Bolivia 68 68 89 Brazil 144 128 84 106 94 74 68 84 84 76 76 108 Chile 92 90 36 68 76 82 92 110 144 106 Colombia 94 138 116 136 128 94 82 54 114 103 Ecuador 74 74 46 52 20 46 77 Mexico 126 114 112 112 124 118 126 116 112 78 106 101 Paraguay 158 166 136 122 130 110 118 118 90 112 Peru 126 114 82 110 126 112 150 162 126 144 121 Uruguay 108 78 86 82 82 86 76 78 114 Venezuela 36 20 20 20 20 20 20 20 20 20 64 ECONOMIC CLIMATE INDEX (IN POIN) ECI jan/13 apr/13 jul/13 oct/13 jan/14 apr/14 jul/14 oct/14 jan/15 apr/15 jul/15 10 years Latin America 109 103 88 88 95 90 84 75 71 74 99 Argentina 104 67 72 77 77 75 57 47 63 76 66 90 Bolivia 108 107 107 108 124 113 124 110 92 92 97 Brazil 118 111 75 95 89 71 55 57 57 49 48 109 Chile 132 127 88 104 104 95 89 75 85 113 68 117 Colombia 106 106 122 113 138 137 131 117 90 84 107 113 Ecuador 107 73 84 46 86 Mexico 113 114 106 89 103 98 102 97 84 72 90 94 Paraguay 162 145 128 130 105 125 127 127 99 109 Peru 133 111 119 132 134 112 116 131 119 131 Uruguay 126 95 105 95 109 104 95 93 129 Venezuela 30 28 20 20 20 20 20 20 20 20 20 62 4
M e t h o d o l o g i c a l N o t e The Latin America Economic Survey aims for monitoring and forecasting of economic trends, based on quarterly information supplied by economy experts in their respective countries. The survey is - simultaneously - applied with the same methodology in all countries of the region, a method that allows the construction of an agile and comprehensive picture of the economic situation in countries and economic blocks. In July 2015, were consulted 1101 economic experts in 117 countries, being 141 in Latin America. The survey generates information of both qualitative and quantitative nature. The Economic Climate Index (ECI), is the synthesis indicator, comprised of two items of qualitative nature, the Present Situation Index (PSI) and the Expectations Index (EI), which deal, respectively, with the general economic situation in the country at the moment and for the upcoming six months. The individual responses are combined for each country without any weighting. For the average value of each index to be reached, 9 points are assigned to positive responses (+), 5 to indifferent responses (=) and 1 to negative responses (-). The ECI represents an arithmetic mean of the two indices that comprise it. The process of aggregating data for a particular group of countries or continent is made according to the relative share of foreign trade (exports + imports) in each country regarding the total in the region. According to specific criteria of the survey, the phase of the business cycle the country is at the moment is determined by a combination of PSI and EI. When the two indices exceed the average limit of 5 points, the economy is in the "boom" phase. When both are below 5 points, there is recession. The phase of decrease occurs when the PSI is higher and EI is lower than 5 points. And the recovery phase with a higher EI and the PSI lower than 5 points. Indicators on this report are presented considering the value 5 as. Thus indicators above are in the favorable zone and below in the negative zone. 5