The Coming Decade for Latin America: Belleza Del Sur
By The Futures Company, 2012
With Europe’s economies stagnating, China worrying about sustaining growth and property bubbles, India faltering, and the US showing only limited signs of a post-crash recovery, Latin America remains one of the few regions exhibiting continuing growth and healthy long-term prospects.
At the individual country level, Brazil passed the UK recently to become the world’s sixth largest economy; by 2020 Mexico may well have become the tenth largest1
. On a city scale, measured by contribution to GDP, Paris (currently sixth), Osaka (currently seventh) and Washington DC (currently 11th) will be overtaken in 2025, respectively, by Mexico City, São Paulo and Buenos Aires2
. Although there are dangers in talking about such a large and complex region in general terms, it is worth identifying a confluence of factors running in Latin America’s favor at present. These include:
- a young population, giving a ‘demographic dividend’ in many countries;
- a ‘political dividend’ in the shape of center and centerleft governments, which in turn have an economic impact both by reducing the region’s historically high levels of economic inequality and by increasing levels of social protection, which encourages lower savings rates and increased consumption;
- a ‘technology dividend’ from the take-up of mobile, which increases economic growth; and
- a ‘China dividend’ in which demand from China has reduced the region’s historical dependence on the United States. China is now Brazil’s biggest economic partner.
The Futures Company produces consensus-based forecasts for the main Latin American economies. Rates of growth have recently slowed. In some cases quite sharply, and this in turn reflects the region’s increasing economic connections with China and East Asia, which are also slowing. But the signs are that the region will continue to outperform Europe and the United States, not least because of its demographic advantages.1. http://www.pwc.com/en_GX/gx/world-2050/pdf/world-in-2050-jan-2011.pdf
We also see unemployment rates decreasing across the region, as these growing economies create jobs within their national borders, and people also move from informal to formal work.
These new jobs will enable consumer expenditure to rise year-on-year, in line with the projections in the box below.
The economic benefits from growth will be enjoyed by consumers who will see their disposable incomes and their purchasing power increase.
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