Daniel Titelman Director Economic Development Division

Daniel Titelman Director Economic Development Division

Economic trends in the region continue to be marked by: Uncertainty and risk in the global economy: External demand remains sluggish, which reflects low growth rates of GDP and international trade Volatility in financial and foreign exchange markets Commodities prices remain low Within a heterogeneous regional context there have been: Declines in domestic demand (investment and consumption) Rising fiscal constraints Strong currency depreciations Increases in the unemployment rate and a slowdown in domestic credit

Growth of international trade remains sluggish YEAR-ON-YEAR RATE OF CHANGE IN THE VOLUME OF WORLD TRADE, SEASONALLY ADJUSTED INDEX, JANUARY 2003 TO JUNE 2016 (Percentages) 20% 15% 10% 5% 7.7% 2.4% 1.3% 0% -5% -10% -15% -20% Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of figures from the World Trade Organization (WTO).

Commodity-exporting countries experience additional declines in their terms of trade 10 LATIN AMERICA AND THE CARIBBEAN (GROUPS OF SELECTED COUNTRIES): VARIATION IN THE TERMS OF TRADE, 2012-2016 a (Percentages) 5 1,2 1,7 0-5 -3,0-2,8-2,3-1,7-1,3-10 -15 Latin America Brazil Exporters of minerals and metalsᵇ Exporters of agro-industrial productsᶜ Mexico Central America, Haiti and Dominican Republic 2012 2013 2014 2015 2016ᵃ -13,8 Exporters of hydrocarbonsᵈ The Caribbeanᵉ a Projections. b Chile and Peru. c Argentina, Paraguay and Uruguay. d Bolivia (Plurinational State of), Colombia, Ecuador, Trinidad and Tobago and Venezuela (Bolivarian Republic of). e Excludes Trinidad and Tobago.

WITHIN A CONTEXT OF HETEROGENEOUS SUBREGIONAL AND NATIONAL DYNAMICS, SOUTH AMERICA IS THE SUBREGION THAT CONTRACTS

The intensity of the deceleration is heterogeneous at the level of subregions and between countries LATIN AMERICA: YEAR-ON-YEAR VARIATION OF GDP, 2009-2016 (In percentages, on the basis of constant dollars of 2010) 10% 8% 8% 6% 6% 4% 2% 0% -2% -4% -6% 4% 2% 0% -2% -4% -6% -8% -8% -10% I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I -10% I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I II IIIIV I 2009 2010 2011 2012 2013 2014 20152016 2009 2010 2011 2012 2013 2014 20152016 Brazil South America excl Brazil Mexico Central America Note: The Caribbean is not included due to a lack of quarterly national accounts statistics.

The decline is explained by a fall in domestic demand, in particular of investment and consumption LATIN AMERICA: YEAR-ON-YEAR VARIATION OF GDP, 2008-2016 (In percentages, on the basis of constant dollars of 2010) 15% South America 14% 12% 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% Latin America I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I 2008 2009 2010 2011 2012 2013 2014 2015 2016 General government consumption Private consumption Investment Net exports GDP 10% 5% 0% -5% -10% I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I 2008 2009 2010 2011 2012 2013 2014 2015 2016 General government consumption Private consumption Investment Net exports GDP 10% Mexico and Central America 8% 6% 4% 2% 0% -2% -4% -6% -8% -10% I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I 2008 2009 2010 2011 2012 2013 2014 2015 2016 General government consumption Private consumption Investment Net exports GDP Note: The Caribbean is not included due to a lack of quarterly national accounts statistics.

Investment has been in a contractionary cycle since 2014, which explains its negative contribution to GDP growth 40% LATIN AMERICA: YEAR-ON-YEAR VARIATION OF GROSS FIXED CAPITAL FORMATION, WEIGHTED AVERAGE, 2008-2015 (In percentages, on the basis of constant dollars of 2010) 30% 20% 10% 0% -10% -20% -30% I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I 08 09 10 11 12 13 14 15 16 Latin America South America (excl Brazil) Brazil Mexico Central America Note: The Caribbean is not included due to a lack of quarterly national accounts statistics.

Exports and imports continue to fall, albeit less acutely LATIN AMERICA (19 COUNTRIES): YEAR-ON-YEAR VARIATION IN THE VALUE OF EXPORTS AND IMPORTS OF GOODS, 2016 a (Percentages) Latin America -3.5-6.8 Brazil -19.0 0.0 Exporters of metals and mineralsᵇ -6.3-7.1 Exporters of agro-industrial productsᶜ México -1.1-0.7 2.7 0.6 Exports Imports Central America, Haiti and Dominican Republic -3.9-2.7 Exporters of hydrocarbonsᵈ -19.9-16.7 a Projections. b Chile and Peru. c Argentina, Paraguay and Uruguay. d Bolivia (Plurinational State of), Colombia, Ecuador, Trinidad and Tobago, Venezuela (Bolivarian Republic of). -25-20 -15-10 -5 0 5

International reserves exhibit a slight recovery in the first five months of 2016 Billions of dollars 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Percentages 1,000 LATIN AMERICA AND THE CARRIBBEAN: INTERNATIONAL RESERVES, 2000-2016 a (Billons of dollars and percentages of GDP) 20 900 800 700 600 18 16 14 12 500 400 300 200 100 0 10 8 6 4 2 0 Gross international reserves of the Caribbean (left axis) Gross international reserves of Latin America (left axis) In percentages of GDP, Latin America and the Caribbean (right axis) a Data till May.

Slowing economic activity has resulted in a higher unemployment rate I II III IV I II III IV I II III IV I LATIN AMERICA AND THE CARIBBEAN (12 COUNTRIES): YEAR-ON-YEAR CHANGE IN EMPLOYMENT, UNEMPLOYMENT AND PARTICIPATION RATES, FIRST QUARTER OF 2013 TO FIRST QUARTER OF 2016 (Percentage points) 2.0 1.5 1.0 UNEMPLOYMENT RATE New series Old series 2013 7.2% 6.2% 2014 7.0% 6.0% 2015 7.4% 6.5% 2016 (projected) 8.1% 0.5 0.0-0.5-1.0 2013 2014 2015 2016 Employment rate Unemployment rate Participation rate Note: The countries included are Argentina, Brazil, Chile, Colombia, Costa Rica, Ecuador, Jamaica, Mexico, Paraguay, Peru, Uruguay and Venezuela (Bolivarian Republic of).

IN THE AREA OF POLICIES

Rising fiscal constraints in Latin America and improvements in the Caribbean LATIN AMERICA AND THE CARIBBEAN: CENTRAL GOVERNMENT FISCAL INDICATORS, SIMPLE AVERAGES, 2009-2015 (Percentages of GDP) Latin America (19 countries) The Caribbean (13 countries) 24 12 35 12 22 20 18 10 8 6 4 30 25 10 8 6 4 16 14 12 10-0,3 0,1-1,0-0,2-0,6-1,0-1,0-1,9-1,6-2,8-1,9-2,3-2,8-3,0 2009 2010 2011 2012 2013 2014 2015 2 0-2 -4-6 20 15 10 0,7 0,6-0,2 0,0 0,0 0,1-0,7-2,6-2,6-3,6-3,6-3,3-4,5-4,0 2009 2010 2011 2012 2013 2014 2015 2 0-2 -4-6 Overall balance (right axis) Total revenue (left axis) Total expenditure (left axis) Primary balance (right axis)

Guatemala Dominican Rep. El Salvador Paraguay Panama Venezuela (Bol. Rep. of) Peru Ecuador Mexico Honduras Chile Colombia Nicaragua Costa Rica Uruguay Bolivia (Plur. State of) Argentina Brazil LA-18 OECD-34 TAX burden and TAX Structure 40 35 30 25 20 15 10 5 0 LATIN AMERICA: TOTAL TAX REVENUES, 2000 AND 2014 (In percentages of GDP) 2014 2000 25 20 15 10 5 0-5 -10-15 LATIN AMERICA: AVERAGE EFFECTIVE TAX RATE OF THE PERSONAL INCOME TAX AND THE REDUCTION IN INEQUALITY DUE TO THIS TAX (In percentages) Average effective rate (total) Average effective rate (decile 10) Reduction in Gini due to PIT Average effective rate (total) Average effective rate (decile 10) Reduction in Gini due to PIT LA-16 EU-27 Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures as well as estimates.

Tax evasion reached 6.7 points of GDP in 2015 LATIN AMERICA: TAX REVENUES AND ESTIMATED EVASION, 2015 a (Percentages of GDP and billions of dollars) 11.1 9.2 4.3 (~ 220) 2.4 (~ 120) 6.8 6.8 Total estimated evasion: US$340 billion (6,7% of GDP) Personal income tax and corporate income tax b/ Effective collection VAT c/ Estimated evasion Source: Economic Commission for Latin America and the Caribbean (ECLAC). a Effective tax collection and estimated evasion is calculated on the basis of figures for both taxes expressed in dollars; the sum of these are presented as a share of the GDP of the countries represented (weighted average). For this reason the values of effective tax collection presented here differ from the values typically presented that use a simple average. Finally, these shares relative to GDP are applied to the GDP of Latin America to estimate the regional values in dollars. b Estimate based on Argentina, Brazil, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Mexico and Peru. c Estimate based on Argentina, Bolivia (Plurinational State of), Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Mexico, Nicaragua, Panama, Peru and Uruguay.

Brasil Argentina Public debt trends reveal differing levels of vulnerability Honduras Colombia El Salvador Costa Rica Uruguay Panamá Haití AL-19 R. Dominicana México Ecuador Nicaragua Bolivia (Est.Plur.de) Guatemala Venezuela (Rep. Bol.de) Paraguay Perú Chile Jamaica Barbados Granada Belice Antigua y Barbuda Bahamas Santa Lucía CAR-13 Dominica San Vicente y las Granadinas Saint Kitts y Nevis Guyana Trinidad y Tabago Suriname LATIN AMERICA AND THE CARIBBEAN: CENTRAL GOVERNMENT GROSS PUBLIC DEBT, 2014, 2015 AND FIRST QUARTER OF 2016 (Percentages of GDP) Latin America The Caribbean 80 70 60 50 40 30 20 10 69 140 127 120 107 53 100 46 80 43 43 80 79 78 76 41 41 73 72 38 68 36 35 65 34 34 32 60 29 27 51 48 24 23 43 21 20 37 18 40 20 0 0 2014 Primer semestre de 2016 2014 2015

Uruguay Costa Rica Brasil Haiti Dominican Rep. El Salvador Mexico Guatemala Colombia Paraguay Chile Nicaragua Argentina Latin America Peru Honduras Venezuela (Bol. Rep. of) Panama Ecuador Bolivia (Plur. State of) There has been a contraction in public capital expenditures Nicaragua Chile Mexico Brazil Paraguay Costa Rica Peru Uruguay El Salvador Dominican Rep. Venezuela (Bol. Rep. of) Honduras Colombia Haiti Latin America Panama Guatemala Argentina Ecuador Bolivia (Plur. State of) LATIN AMERICA: CENTRAL GOVERNMENT CAPITAL EXPENDITURES, 2014-2015 (Percentage of GDP) LATIN AMERICA: YEAR-ON-YEAR CHANGE IN CENTRAL GOVERNMENT CAPITAL EXPENDITURES, 2015 (Percentage points of GDP) 18 2 16 14 12 2015 2014 1 0 0.7 0.50.40.20.2 0.2 10-1 0.0-0.1-0.1-0.1-0.2-0.3-0.4-0.5-0.5-0.5-0.7 8 6 4 2 0-2 -3-4 -5-1.7-2.5-4.0

Inflation dynamics differ between the economies of South and those of Central America Apr Oct Apr Oct Apr Oct Apr Oct Apr Oct Apr Oct Apr Oct Apr Oct Apr LATIN AMERICA AND THE CARIBBEAN: YEAR-ON-YEAR VARIATION OF THE CONSUMER PRICE INDEX (CPI), WEIGHTED AVERAGE, JANUARY 2008 TO MAY 2016 (Percentages) 26% 190% 21% 160% 16% 130% 11% 100% 6% 70% 1% 40% -4% 10% 2008 2009 2010 2011 2012 2013 2014 2015 2016 Latin America and the Caribbean (excl Venezuela (Bol. Rep. de)) South America (excl Venezuela (Bol. Rep. de)) Central America and Mexico The Caribbean Venezuela (Bol. Rep. de)

Mar May Sep Nov Mar May Sep Nov Mar May Sep Nov Mar May Mar May Sep Nov Mar May Sep Nov Mar May Sep Nov Mar May Inflation trends have conditioned the direction of monetary policy LATIN AMERICA: COUNTRIES THAT USE A MONETARY POLICY RATE AS THEIR PRINCIPAL INSTRUMENT, JANUARY 2013 TO JUNE 2016 (Percentages) 8.0 7.5 7.0 6.5 6.0 5.5 5.0 4.5 4.0 3.5 3.0 2.5 2.0 16 14 12 10 8 6 4 7.0 6.5 6.0 5.5 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2013 2014 2015 2016 2013 2014 2015 2016 Chile Colombia Paraguay Peru Brazil (right axis) Costa Rica Guatemala Mexico Dominican Republic

Latin America and the Caribbean: GDP growth forecasts, 2016 and 2017 (In percentages, on the basis of constant dollars of 2010) Country or Region GDP Growth Forecasts, in percent EE 2016 2016 2017 América Latina y el Caribe -0.8-0.9 1.5 Argentina -1.5-1.8 2.5 Bolivia (Estado Plurinacional de) 4.5 4.5 4.3 Brasil -3.5-3.4 0.5 Chile 1.6 1.6 2.0 Colombia 2.7 2.3 3.2 Ecuador -2.5-2.5 0.2 Paraguay 2.8 4.0 3.8 Perú 3.9 3.9 4.0 Uruguay 0.5 0.6 1.2 Venezuela (República Bolivariana de) -8.0-8.0-4.0 América del Sur -2.1-2.2 1.1 Costa Rica 4.3 4.2 4.1 Cuba 1.0 0.8 2.0 El Salvador 2.3 2.2 2.3 Guatemala 3.5 3.3 3.4 Haití 1.5 1.5 2.0 Honduras 3.4 3.5 3.7 México 2.3 2.1 2.2 Nicaragua 4.5 4.5 4.5 Panamá 5.9 5.4 5.7 República Dominicana 6 6.5 6.3 América Central y México 2.6 2.5 2.6 América Central 3.8 3.7 4.0 América Latina -0.8-0.9 1.5 Antigua y Barbuda 3.5 3.5 3.0 Bahamas 0.5 0.5 0.9 Barbados 1.6 1.6 2.1 Belice 0.8 0.8 1.5 Dominica 4.2 4.2 1.2 Granada 1.9 1.9 2.9 Guyana 4.4 4.4 5.2 Jamaica 1.2 1.2 1.3 Saint Kitts y Nevis 4.7 4.7 3.0 San Vicente y las Granadinas 2.3 2.3 1.8 Santa Lucía 1.2 1.2 2.0 Suriname -4-4.0 1.5 Trinidad y Tabago -2.5-2.5 0.8 El Caribe -0.3-0.3 1.4 Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures and budgets, and estimates.

In conclusion The region confronts an external context of slow growth and rising uncertainties. GDP is expected to contract (-0.9%) for the second year in a row, albeit with important subregional and country level differences: South America (-2.2%), Central America (3.7%), English-speaking Caribbean (-0.3%). Inflation and employment dynamics also exhibit differences between the economies of the north and the south of the region. Returning to a path of growth requires reversing the fall observed in public and private investment. Productivity growth is also a key challenge for advancing on a path of growth that is dynamic and stable.