Signs of growth but Latin America still a ‘work in progress’
By Daniel Murray, global head of research, EFG Asset Management, 22 Mar 18
After a multi-year slowdown, 2017 was the year in which Latin America’s growth resumed. But each country is still, very much, its own economic and investment story.
The picture across the region is, however, far from uniform. In Venezuela, the output of the economy is in sharp decline as the inflation rate heads to 1,000% plus, well into the territory generally regarded as hyperinflation (over 500%).
Living standards, which have been in decline since president Maduro came to power in 2013, are projected to sink further. The IMF forecasts a shrinkage in GDP per capita every year until 2022.
The end result will be that Venezuela, which had a similar-sized GDP as Argentina in 2007, will be about one-sixth of its size by 2020.
Quite how the difficult situation will come to an end, and then be reversed, is hard to foresee.
The monetary reforms used in other economies to curb hyperinflation (such as dollarisation) do not appear to be an option; and the economy is far away from adopting the policymaking infrastructure that characterises most of the developed world.
