Economies of Latin America and the Caribbean

During much of 2007, the Latin American and Caribbean region witnessed a great deal of volatility in financial markets owing to uncertainty about the impact that the financial crisis in the United States could have on that country's and the world's real economies. This crisis has not, however, had any significant repercussions in terms of the level of economic activity or international trade, and most of the economies in the region have continued to grow rapidly. This growth -estimated at 5.6% for the region as a whole- has been driven primarily by domestic demand, with particularly sharp increases being noted in private consumption and gross capital formation.

The region also received a larger inflow of foreign direct investment than at any time since 1999 (about US$ 95 billion), as well as a somewhat less remarkable but still sizeable inflow of portfolio investment. These flows were reflected in a hefty surplus on the financial account. As a result, net international reserves climbed steeply (by the equivalent of 3.5% of regional GDP), while the region's external debt, measured as a percentage of GDP, continued to shrink; however, its levels of country risk rose in response to turbulence in financial markets.

The outlook for 2008 will depend, to a large extent, on developments in the world economy. Although the most likely scenario is a slowdown in the United States economy followed by a partial recovery, the possibility of a recession cannot be ruled out. The more probable outcome, however, remains that of a fairly slight slackening of the pace of growth in the world economy that would have a limited impact on emerging economies. In the case of Latin America and the Caribbean, these factors are expected to result in a moderately lower economic growth rate in 2008 (4.9%) than in 2007. Source: ECLAC.

America Latina