At the beginning of the year, government economic teams in most Latin American countries were devising strategies to cushion the blows that could come from international events such as the trade war between the United States and China, the delay in ratifying a trade treaty, or the strengthening of the dollar. However, as the months went by, the impacts that began to be avoided came from within.
The Secretary-General of the OECD, José Ángel Gurría, said it well when he assured that the presidents of the Latin American region and the world were living the "geography of discontent".
From one moment to the next, and without anyone expecting it, the proliferation of protests in Ecuador, Chile, Bolivia, Peru, and Colombia, began to contrast with the reports of economic growth in the region from the IMF (International Monetary Fund), the World Bank and ECLAC, which highlighted the economic boom in the Chilean, Bolivian or Colombian economies, the same countries that for several weeks had people in the streets as the protagonists of social discontent that arose for various reasons: from a very high cost of living and excessive tax payments to the disappointment of not being able to retire.
"This context of generalized economic deceleration was compounded by growing and urgent social demands with pressures to increase social inclusion, both in terms of income and public goods. Faced with this scenario, the region cannot tolerate adjustment policies and requires policies to stimulate growth and reduce inequality," warned ECLAC Executive Secretary Alicia Bárcena.
The task is urgent and that is what the countries of Latin America should concentrate on, because according to ECLAC this is the sixth consecutive year of low growth for the region, something that will not improve in 2020, but rather will continue. "One fact that should be a warning is that per capita GDP has contracted by 4% between 2014 and 2019," said Bárcena.
The warnings have been clear. In the first half of the year, 18 of the 20 Latin American economies slowed their growth and by the end of this year, 14 Latin American economies will be growing at less than 1%.
"The number of countries with growth of 1% or less in 2019 is the highest in many years," the board said.
This economic setback has consequences, as explained by Shelly Shetty, director of Sovereign Ratings for Latin America at Fitch Ratings. "Fitch expects a slight economic recovery, but fiscal, political, and governance risks will challenge the region's economic and rating prospects in 2020," she said.
She added: "Despite more favorable external financing, the conditions of global economic slowdown and idiosyncratic domestic problems may increase the downside risks. The increase in protest activity in the region reflects long-standing institutional weaknesses and high-income inequality, which pose a risk to the prospects for 2020.
Despite the bleak scenario in 2019, then jump to 2020 will be significant, as the least optimistic of the international bodies or rating firms point to regional GDP growth for 2020 of 1.3%, which is the case for ECLAC, after coming in at a projection of just 0.1% this year. Next on the optimistic scale is Fitch Ratings, which says the region will grow 1.7% next year, after an incipient 0.8% in 2019. The IMF and the World Bank are the most optimistic with growth projections of 1.8% and up to 2.1% (in the case of the IMF) if Venezuela is removed from the list.
Which countries will see the most growth?
If the analysis of economic growth projections for next year is done by country, the rankings, although they vary according to the organization, are not entirely dissimilar. For example, among the main economies of Latin America, for the IMF the five that will grow the most next year are Panama, with a variation of 5.5% in its GDP, followed by Paraguay (4%9 ), Bolivia (3.8%), Colombia (3.6%) and Peru (3.6%).
In the case of the World Bank, the top 5 of the highest annual production will be Panama (4.6%), Bolivia (3.6%), Colombia (3.6%), Peru (3.2%), and Paraguay (3.1%).
ECLAC, which updated its economic projections for the region in the second week of December, has the following ranking: Panama (3.8%), Colombia (3.5%), Peru (3.2%), Bolivia (3%), and Paraguay (3%).
Although not all Latin American countries are in the OECD, they include in independent data the figures of some countries and those are Colombia (3.5%), Chile (2.4%), Brazil (1.7%), Mexico (1.2%). As a report of Latin American newspapers, we include in this report Spain, whose growth projection for 2020 is 1.6%, that is 0.4 percentage points less than the 2% of GDP growth calculated for 2019.
In the case of Spain, the factor that has influenced incipient growth is the governance crisis that has had the head of government Pedro Sanchez, who until mid-November reached an agreement with the leader of United We Can, Pablo Iglesias, to form a coalition government.
Although Colombia is among the countries with the best scenario for 2020, the national government and that of the countries in the region still have challenges ahead. As Fitch Ratings makes clear: "Most countries are expected to grow below potential and recovery remains weak, especially in the context of weak 1% growth during 2014-2018. In addition, growth in Latin America will be the weakest among the different regions of the world," Shetty explained.
ECLAC's recommendations for improvement in 2020
One of the recommendations made by ECLAC to Latin American governments to guarantee a rise in GDP next year is fiscal sustainability. To achieve this, in addition to making structural reforms in tax systems, they suggest: "improving progressiveness by strengthening taxes on wealth, reducing tax evasion that represents 6.3% regionwide, reassessing tax expenditures that represent 3.7% of regional GDP and implementing a new generation of taxes on the digital economy and the environment.