Latin America. Two Kinds Of Crises

(Video length 00:04:10)

The crisis in Latin America shows two very different types of economic decline:

  • Argentina, Venezuela, Mexico, and Brazil are likely to see a sharper fall in economic output than the average of the zone and the rest of the world, driven by a combination of: Weak economic growth in 2019 when Mexico was in stagnation, Argentina and Venezuela were in crisis and Brazil was already in a modest slowdown. Added to this, large fiscal and trade imbalances as well as highly interventionist government policies (except in Brazil) with high dependence on commodity prices. This negative combination is likely to impact 2020 growth deepening the crisis and lead to a weaker recovery in 2021.
  • Chile, Colombia, Dominican Republic, Bolivia, and Costa Rica are likely to suffer a small decline in the economy, much better performance than the eurozone or the United States as well as the average of LatAm. Challenges remain, but these economies are likely to benefit from having prudent fiscal and monetary policies in the past, an open economy, and few barriers to investment.

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