Friday, January 06, 2006

Latin America:After all,positive ecoomic signals

In its latest report, the LAEC (Latin America economic Comission, CEPAL in Spanish), has indicated three important advances with social implications :
Employment generation: According to LAEC ´s report, in the year 2005; 5,6 million people found employment in urban zones ,reducing unemployment from 10,3 to 9.3% (17.8 million people).However ,an increasing proportion of new employment opportunities are in the category of temporary. On the other hand, unemployment reduction has also been helped by a decrease in Labor force Participation from 59,5 to 59,2 %.The secondary worker hypothesis would be a plausible explanation ,as economic conditions are improving ,it is not necessary to have too many people within a family group looking for a job.. At the same time ,it is interesting to take note that, some proportion of those not in the Labor force, are moving back to the educational system .Sure, Master and Doctoral programs are on the rise, along with specialization courses. Education is a good investment opportunity in Latin America!.-
Economic growth : The expectation for this year , is to have economic growth slightly over 4%,following a three year of continuing economic expansion. This growth; is explained by the international positive conditions, (world economy grew 3,5% last year), and dynamism of domestic demand ,although it can not be ruled out the impact of the previous reforms ,which have created the conditions to take advantages of such opportunities. On this regards, there are still a long way to go. Most of the progress done on the economic front, must be complemented on the institutional front. The modernization of the State, the improvement on the quality of education, the incentives for entrepreneurship, should be on the regional agenda. Between 1990-2002, annual economic growth in the region was 2,6 %, but other related economies (the whole developing economies)are growing faster (5,7% between 2003-2006). The situation calls for a deepening of the global trade orientation, or export growth strategy. Unfortunately ,easy money coming from the higher prices of natural resources, mainly those one related to the energy sector, are introducing some confusion concerning the right direction to follow over.
Implications : The most important implications of continuing growth and increasing employment ,is the reduction on poverty. In fact since 2002 poverty has decreased from 44% to a 40,6% in the year 2005. Given that the first condition to reduce poverty ,is to create wealth , in the “ Post Washington consensus era”, further reduction in poverty level, will depend more on the ability of regional government to pursue policies complementary with growth.
Lower external vulnerability: In the last three years, regional current account is on the surplus side.(0,5% (2003),0,9% (2004),and 1,5% (2005)).This is something nobody expected .Latin America is exporting capital, it does not depend that much on external resources ,as it was in the previous fifty years. However, while in the south cone the current account surplus will be 3% as a percentage of GDP (2005), in Mexico and the Central America countries ,there will be a current account deficit equivalent to 1,8% of GDP. So, there is a mixed reality concerning current account, based upon different factors explaining its results. The overall balance, indicates that it is necessary to increase domestic investment, currently below 1998 levels. Investment, is the key variable to support growth. Also, it means that as long as there is an increase of foreign currency ,the exchange rate appreciate, helping to keep inflation pressures on line, but eventually hurting exporting sectors , and domestic product which compete with cheaper imported products. So, local Firms must have efficient management model, and the State must complement them.-

1 comment:

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