Latin America economy foreign trade exports imports IED Brazil Mexico

Course summary (Economy and integration of Latin America)
Economy of Latin America and the Caribbean. Regional integration. Economic relations with China. Innovation and technological change

After six years of uninterrupted growth, the GDP of Latin America and the Caribbean is expected to fall by 1.8% and per capita GDP by close to 2.9% in 2009. The global crisis hit the region hard at the end of 2008 and in early 2009, taking a toll on all of its countries. However, a recovery began to take shape in the second quarter and became more widespread in the second half of the year.

The economic slowdown cut into labour demand, and the unemployment rate is expected to rise to about 8.3% for the region overall, while the new jobs that have been created are of poorer quality. The effects of the crisis were channelled through the real sector of the economies, damaging what had been the main engines of regional growth. Exports plunged, while the contraction of economic activity worldwide, together with the drop in international trade flows, lowered commodity prices, which hurt the region’s terms of trade. At the same time, income from remittances and tourism fell, with Mexico and countries of Central America and the Caribbean suffering the most, and Foreign direct investment plummeted by 37%.

Example of the course Economy and integration of Latin America:

Growth is projected at 4.1% for 2010 and is expected to be somewhat higher in the countries of South America than in the rest of the region, given their larger domestic markets in some cases, greater export-market diversification and closer trade ties with China. On the other hand, growth is expected to be slower in some of the more open economies that have a less diversified portfolio of trading partners and a heavier dependence on manufacturing. The same can be said of the Caribbean economies, some of which are facing complex financial and exchange-rate situations.

However, it remains to be seen whether or not the developed economies will be able to sustain growth once the copious stimulus packages implemented by the United States and Europe are withdrawn. This, together with increasing unemployment and the still-volatile international financial market, raises questions about the strength of the recovery that began in 2009.

Foreign direct investment (FDI) flows to Latin America and the Caribbean will rebound in 2010, rising 40% to 50%, after dropping in 2009 as a result of the global crisis, according to ECLAC's annual report on FDI. The report "Foreign direct investment in Latin America and the Caribbean 2009" asserts that the expected increase this year would allow the region to resume the levels of FDI of 2007, which totaled over US$100 billion.

FDI is expected to rise significantly in 2010 due to a better outlook for growth in Latin America and the Caribbean, long-term trends of foreign investment in the region and expected inflows to the area's main recipient countries. Due to the global crisis, in 2009 FDI flows to the region shrunk by 42% (to US$76.681 billion) with regard to the historical record of US$131.938 billion in 2008.

The drop in foreign investment was generalized in all of the subregions in Latin America and the Caribbean. FDI flows towards South America diminished 40%, while those to Mexico and the Caribbean Basin dropped 45%. Brazil continued to be the main recipient of FDI, followed by Chile, México, Colombia and Argentina. Among the region's medium-sized and large economies, Chile is the country with the highest proportion of FDI with regard to its GDP (8%).

As in the past, the services sector received the most amount of FDI in 2009, while the primary sector (agriculture, mining and hydrocarbons) experienced a relative drop. The United States continued to be the main investor in the region, followed by Spain and Canada.

Regional integration in Latin America: Mercosur, Andean Community, SICA, NAFTA, ACS, CARICOM, ALADI, UNASUR, ALBA, ALCA, SELA ...

Source: ECLAC / CEPAL

America, Latin, Economy, foreign trade, Exports, Imports, Latin America, Caribbean, integration, regional, Relationships, Economics, China, Innovation, technological change