Despite the “headwinds” suffered by Latin America as a result of inflation, high interest rates and the weakness As a global economy, the region is headed for a “cyclical rebound” at the end of the year that will last through 2024, according to the Intelligence Unit of the British group The Economist.
Analysts anticipate that in the coming months the inflation and Latin American central banks will cut rates, although the region’s joint Gross Domestic Product (GDP) will grow “only” 1.3% in 2023.
During a virtual conference, The Economist experts anticipate that BrazilChile and Peru will lower their interest rates in the second half of this year, followed by Colombia and Mexico next year.
“This will be the seed of a cyclical upturn of the economy that will extend to 2024,” said Robert Wood, chief economist at the Intelligence Unit for Latin America and the Caribbean.
Yet “without progress in terms of reforms that boost productivity, we are not expecting a stellar year either,” stressed the analyst, who anticipates a growth between 2% and 2.5% in 2024.
The decisions taken by the central banks of large countries such as Brazil and Mexico will mark the state of mind of investors, indicated Wood, who stressed at the same time that countries such as Costa Rica and Uruguay have already led the way with rate cuts.
The Intelligence Unit of The Economist highlighted at the same time that the foreign direct investment (FDI) in Latin America rebounded in 2022 to its highest level in a decade.
Investments that were delayed by the pandemic of covid-19, together with the high price of raw materials, have contributed to this “boom”, said the analyst Erica Fraga.
as third factor determinant for this increase in investment, Fraga pointed to the tendency for US firms to bet on closer production points, given the geopolitical tensions in the Pacific and global problems in supply chains.
This has been particularly evident in Mexicodue to its proximity to the United States, but we believe that other countries in the region may be benefiting or may potentially benefit,” added the expert.
The diversification of some Latin American economies regarding raw materials has also been “positive” for the regional economy, he stressed.