By all accounts, 2019 was a challenging economic year for Latin America. Stalled growth in the largest economies of Brazil and Mexico, together with recession in Argentina, hyperinflation and economic collapse in Venezuela, and growing social unrest in countries as diverse as Bolivia, Chile, and Haiti all added up to a bleak regional panorama. In December, the UN Economic Commission announced that the period from 2014 to 2020 was the lowest period for economic growth in Latin America in past seven decades, clocking in a GDP growth rate of 0.1% in 2019.
Will 2020 be any better? At best, the evidence is mixed, and specter of the coronavirus epidemic handcuffing economic growth in the United States and Europe will have significant impacts in Latin America that will be further intensified if the pandemic overtakes the fragile health systems in the region. This week the Inter-American Development Bank announced that it will be postponing its annual meeting that was scheduled to take place next week in Colombia. With Argentina reporting the first death from coronavirus in Latin America over the weekend, the decision seems prescient. At a minimum, the global decline in tourism will affect a range of economies and the slowdown in China and the U.S. will further complicate the economic picture.
However, Latin America was already in trouble long before the coronavirus arrived. In late January, the International Monetary Fund identified the region’s challenges stemming from both structural and cyclical factors – where chronic factors like low investment and productivity are coinciding with a period of depressed commodity prices and social unrest. However, even the modest IMF projections for Latin America of 1.6% growth in 2020 and 2.3% growth in 2021 may soon look wildly rosy if the global economic slowdown continues. As a result, Latin America’s economic policymakers will be charged with managing the downside risks posed by the global economy while intensifying efforts to boost productivity and enact long-delayed fiscal reforms.
Several countries like Colombia, the Dominican Republic and Panama – not to mention the broader Caribbean and especially oil-rich Guyana – offer the possibility to achieve sustained economic growth in 2020 despite the strong headwinds. But all eyes will also be on the larger economies – especially Brazil, Mexico, and debt-ridden Argentina – to see how they navigate the choppy economic waters that surely lie ahead. With smart policies and political will, Latin America will be able to enact policies to ensure that the new decade far outpaces the economic performance of the 2010s.
By all appearances, the region will face a long, hard fight back to growth – but it is surely a fight worth having.