BCN-06,07 Trade tension, strong dollar hit Latin America’s growth

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ZCZC

BCN-06

LATAM-ECONOMY-GROWTH

Trade tension, strong dollar hit Latin America’s growth

MEXICO CITY, Aug 24, 2018 (BSS/AFP) – Latin America’s economic growth is
set to come in lower than expected this year, as US protectionism and
widespread wariness of emerging markets put a drag on the region, a UN panel
said Thursday.

The Economic Commission for Latin America and the Caribbean (ECLAC) slashed
its growth forecast for the region by 0.7 point to 1.5 percent, saying the
“complex global scenario” had dimmed the outlook since its last report in
April.

It has been a tough year for emerging markets across the board, with global
trade tension taking its toll and the strong US dollar battering many
currencies and bonds — notably in Argentina and Turkey, which have faced
full-blown currency crises.

ECLAC cited a laundry list of problems slowing Latin America’s economies:

— “trade disputes between the United States, China and other nations”

— “growing geopolitical risks”

— “a decline in capital flows toward emerging markets in the last few
months and a rise in sovereign risk levels”

— “depreciations of local currencies against the dollar”

— “a global economic expansion that is tending to lose momentum”

It has been a roller-coaster ride for emerging markets in recent years, and
Latin America has been whipped around as much as any region.

Growth in the emerging economies helped pull the world out of recession
after the 2008 financial crisis, but the lingering effects of that crisis
have taken their toll — now exacerbated by the impact of US President Donald
Trump’s protectionist policies and the soaring dollar.

Latin America’s economies posted solid growth of 6.2 percent in 2010, but
then tipped into a two-year regional recession in 2015.

The region’s gross domestic product returned to growth of 1.2 percent last
year. But now its tepid recovery is in jeopardy.

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BCN-07

LATAM-ECONOMY-GROWTH 2 LAST MEXICO CITY

– Trump effect –

Some Latin American countries have found themselves in Trump’s firing line.

The most notable case is Mexico, which sends some 80 percent of its exports
to the United States under the North American Free Trade Agreement.

Trump has insisted on renegotiating that deal, and threatened to scrap it
altogether.

The US president has hit Brazil, Mexico and Argentina with steel and
aluminum tariffs or quotas, along with the European Union, Canada and other
countries.

The region also has suffered the indirect effects of the current global
climate, one “marked by uncertainty and volatility,” said ECLAC.

– Uneven outlook –

Ironically, Latin America’s fundamentals remain relatively solid.

ECLAC predicted the region-wide primary deficit would fall to 0.5 percent
of GDP this year, and that average inflation would remain within the expected
range at 6.5 percent to June — excluding regional basket-case Venezuela.

But the outlook is uneven across the region, said the head of the United
Nations panel, Alicia Barcena, who presented the report in Mexico City.

“Mexico and Central America are doing better than South America in 2018,”
she said.

Brazil, the region’s largest economy, will grow 1.6 percent this year, up
from 1.0 percent last year, ECLAC predicted.

Mexico, the second-largest, will grow 2.2 percent, up from 2.0 percent last
year.

Argentina, the third-largest, is meanwhile facing a contraction of 0.3
percent, down from 2.9 percent growth last year.

Oil giant Venezuela, which is plunged in a political and economic crisis,
is facing a contraction of 12 percent, after shrinking 13 percent last year,
ECLAC said.

BSS/AFP/HR/0940