Latin America faces the ‘contagious’ effect: the powers of the region slow down in 2018

Latin America is infected by the restraint of the global growth. The region, diverse and agitated, closed 2018 in bad shape, with its main powers slowing down. Its exposure to international trade (now threaten by the trade war) and the political uncertainty affected the growth potential of several countries, which are also highly exposed to the current weaker development of global trade.

Actually, Colombia was the only Latin American economy that boosted its growth in the last year in comparison to 2017, while Argentina entered into recession once again.

In a context of global downturn, Latin America begins to show signs of exhaustion while seeking greater regional stability. In its latest forecasts, the International Monetary Fund (IMF) alerted that the growth in Latin America will be hit by the general weakening of the economy.

Of the four largest powers in the region, Colombia was the only one that accelerated its growth in 2018, raising its GDP by 2.7%, in line with the forecasts of the Colombian government and analysts. Last year’s growth is the highest since 2016, when the Colombian economy improved by 2%.

Colombia was the only one that accelerated its growth in 2018, raising its GDP by 2.7%

The economic improvement also had an impact on industry: in 2018, the Colombian manufacturing industry managed to get out of the recession, after registering a growth of 2%. The previous year, the sector reduced its activity by 1.8%, with fashion being one of the most harmed industries in this regard. The IMF predicted last January that the Colombian economy will grow by 3.3% in 2019.

Brazil, meanwhile, recorded a low growth in the last year, in full change of government after the victory of Jair Bolsonaro. The country, the largest consumer market in Latin America, grew 1.1% in 2018, in line with the previous year.

Brazil grew by only 1.1%, well below the forecasts set at the beginning of the year

The forecasts for Brazil at the beginning of 2018 considered a growth of 3%, but the truck drivers’ strike in May and the political uncertainty due to the election of a new president lowered the predictions for its economy. However, the IMF was more optimistic with the South American country and forecasted an increase of 2.5% for this year.

The Mexican economy grew by 2% in 2018

Another country that suffered the consequences of the elections was Mexico. The Mexican economy grew by 2% in 2018, a tenth less than in the previous year, when the country’s GDP grew by 2.1%. The IMF already warned at the beginning of the year about a downturn in the Mexican economy, which will grow by 2.1% this year.

In addition to the presidential elections, the uncertainty about the renegotiation of the North American Free Trade Agreement (NAFTA) also had an impact on the development of the Mexican economy during the last year.

Of the big four in Latin America, Argentina was the only one that entered into recession. After growing by 2.9% in 2017, the country closed again 2018 in the red, with a fall of 2.6%, registering its worst year since 2009. The intervention of the IMF and the inflation of almost 50% were the obstacles that the Argentinian economy had to face last year.