Sunday, March 29, 2015

Commodities prices and Latin America economies

Commodities prices has been declining.This means that those economies whose public budget depend upon commodities prices , will have troubles to make the balance whether public expedenditures keep the pace without adjustment. But ,the implications of this situation go even further : a.- According to the Interamerican Development Bank, there is a reasonable probability for latin american economcies to have a lower rate of economic growth, in case that Europe, China and Japan have also lower economic growth than expected.The decrease in the rate of economic growth though ,is different within different groups of economcies, such as those oil exporter. metal exporter and so on.The estimated average economic growth for South America is 3,8%( (2015-2017), in the best scenario,and 2,9% in the weaker scenario.- b.- If the USA economy keep the pace even with higher interest rate, economic growth for South America would be 3% instead of 2,9% according to the EDB.(source : c.- Foreign investment could be affected in commodities sector, because of commodities prices volatility.So, even it is not that much relevant its share in these countries ´s GDP, the ECB suggest better policies to manage prices uncertainty.- d.- The more complex problem for those econimies more vulnerable to commodities prices fluctuations, is to adjust expenditures, and the path they will follow to implement it, unless the get external financial resources , but sooner or later expenditures will have to be revisited.This will put more pressure on economic growth, to the downward side specially if affects consumption. The positive side of the story is that global economy seems to have found the track of economy growth back from the financial crisis of 2008.In Europe, Germany and Spain are in the position to lead the recovery to a more sustainable level, and lower prices of oil will push that performance further.-