Second-half 2005 outlook

Some economists expect the Latin American region to see a modest growth deceleration for 2005 overall, with one of the primary factors being a slowing of the global economy. “Latin America is moving in the same direction and speed as the world economy — it is following the same international cycles,” says Alfredo Coutino, senior economist at Economy.com.

The International Monetary Fund has projected that global economic growth will decline in 2005 to a 4.3- percent pace, from 2004’s 5.1 percent clip, in part because of the impact of higher oil prices. Coutino has estimated that overall 2005 growth in Latin America will decline to roughly 4.5 percent from 2004’s 5.7-percent reading. Economists seem to agree that slower growth globally is a risk to the Latin American region.

“If China has an inflation problem or slows down too much, it could revalue its currency,” explains Bernal. “That would have ripple effects on the financial markets and investors will react by taking more risk-averse positions. You buy a house not only because you like the house, but because you like the neighborhood. “

De la Fuente adds, “I think rates in the States are ultimately going to go up, but I think the region is poised to live with that. But if you get a global downturn, or a fall in commodity prices, the region is less prepared to live with that. Asians have been major buyers of Latin American products.”