Latin America´s economies are expected to shrink by 0.8 percent in 2016, this year, likely deepening crises in two of the region´s most politically unstable countries, Venezuela and Brazil, according to a new report from the Economic Commission for Latin American and the Caribbean released on Tuesday.
The Economic Survey of Latin America and the Caribbean 2016 forecasts that Venezuela's economy will contract another 8 percent following a 5.7 percent decline in economic growth last year. Venezuela has been hit hard by the global drop in oil prices and is experiencing food shortages in some neighborhoods as the country's conservative politicians challenge President Nicholas Maduro's socialist government.
And in Brazil, which is experiencing the worst economic downturn since the Great Depression, ECLAC predicts another 3.5 percent by year's end. Brazil's Senate is scheduled to vote next month whether to remove from office the twice-elected President Dilma Roussef on corruption charges, in a move widely called a coup by the international community.
Gross Domestic Product in Suriname is expected to fall by 4 percent, and 2.5 percent in Ecuador and Trinidad and Tobago. Conversely, the Dominican Republic economic growth is expected to increase by 6 percent, followed by Panama by 5.9 percent, Saint Kitts by 4.7 percent, and Nicaragua by 4.5 percent.
“The capacity of countries to accelerate economic growth depends on the spaces for adopting policies that support investment, ECLAC Executive Secretary Alicia Barcena said during the presentation of the report on Tuesday in Santiago, Chile.
Economic contraction in Latin America and the Caribbean as a whole is expected to be slightly sharper than in 2015 with a 0.8 decline in growth versus 0.5 percent last year. South America will suffer the brunt of the decline was a 2.1 percent recession as a subregion, while the Caribbean will contract by 0.3 percent and Central America is set to grow 3.8 percent as a result of trade factors and remittances.
Similarly, despite politicla instability, violence and population loss, Central America’s so-called Northern Triangle is also set to see its economies expand, with Guatemala, Honduras, and El Salvador projecting 3.5, 3.4, and 2.3 percent increases, respectively. The gains come with no appreciable rise in inflation, ECLAC said.
The report comes against a global economy that continues to struggle since the 2008 financial crisis. Plummeting commodity and oil prices, and rising unemployment have combined to reduce consumer demand. Barcena urged Latin American government officials to adopt pro-cyclical investment policies to help reverse the downturn.
“Faced with an economic contraction, the region needs progressive structural change with a big environmental push that promotes development based on equality and sustainability,” ECLAC’s Barcena argued.
Earlier this year, ECLAC published a report called Horizons 2030 arguing that increased social inclusion and efforts to combat climate change should be prioritized as central development strategies for the region to ensure increased equality and sustainability.
The new report also argued that countries should work to strengthen tax collection and tackle problems of tax avoidance to increase resources to support investment.