Some of the best-known international institutions have just released their economic forecasts for Latin America in 2014, and most of them agree that this will be a better year than 2013 in the region. The big question is whether they aren't too optimistic.
The United Nations Economic Commission for Latin America (ECLAC) projected that Latin America's economy will grow by 3.2 percent this year, up from 2.6 percent last year.
ECLAC head Alicia Bárcena told me in an interview from the commission's headquarters in Santiago, Chile, that she expects higher growth in the region this year because Latin America's two largest economies, Mexico and Brazil, will grow more than last year, and because the U.S. economic recovery will help many countries increase their exports to the U.S. market.
In addition, Europe's crisis seems to have bottomed out, and China's economy has not fallen as much as some feared, all of which will further help Latin American exports, she said.
“We are moderately optimistic,” Bárcena told me. “But we aren't talking about major growth. We're talking about a 3.2 percent growth, which remains a pretty mediocre growth rate, even if it's better than last year's.”
According to ECLAC's forecast, among the fastest-growing countries in the region will be Panama (7 percent,) Peru (5.5 percent,) Bolivia (5.5 percent,) Colombia (4.5 percent,) Ecuador (4.5 percent,) and Chile (4 percent.)
Mexico's economy will grow by 3.5 percent this year, Brazil's by 2.6 percent, Argentina's by 2.6 percent, and Venezuela will grow by only 1 percent, becoming the slowest-growing economy in the region, according to ECLAC's projections.
A separate economic forecast released by the World Bank earlier this week sounds equally upbeat about the world economy, and about Latin America in particular.
The World Bank's annual forecast, entitled Global Economic Prospects, says that high-income economies are “appearing to be finally turning the corner five years after the global financial crisis,” and that growth will pick up in developing countries,
Latin America's economy will grow by 2.9 percent in 2014, up from a 2.5 percent growth rate last year, the World Bank report says.
Among the fastest growing economies in the region will be Panama (7.3 percent,) Peru (5.5 percent,) Bolivia (4.7 percent,) Colombia (4.3 percent,) and Mexico (3.4 percent,) it says. Argentina and Brazil will grow at moderate rates (2.8 percent and 2.4 percent, respectively,) and Venezuela will virtually not grow at all (0.5 percent,) the report says.
Looking beyond this year's projections, the World Bank study says that “the regional economic outlook is projected to strengthen over the medium term.” It projects that Latin America's economy will grow by 3.2 percent in 2015, and by 3.7 percent in 2016, largely thanks to an expected expansion of global trade.
The International Monetary Fund is scheduled to announce its official 2014 economic growth projections next week, but top IMF officials have already painted a bright picture for the year.
IMF managing director Christine Lagarde told me in an interview late last year that “2014 will be a bit better than 2013 across the board.” As for Latin America, she told me the region will grow by about 3.1 percent, up from 2.7 percent in 2013.
Lagarde said she expects Mexico, Chile, Colombia and Peru to be among the region's best-performing economies.
My opinion: While international institutions have some of the world's best economists, I tend to take their economic projections with a dose of skepticism. Past experience has taught me that they tend to err on the side of optimism, perhaps because they are under tacit pressure from governments of their member countries, or because, when in doubt, they want to create a climate of confidence.
A year ago at this time, the United Nations' ECLAC forecast that Latin America's economy would grow by 3.8 percent, and by its own end-of-the-year account the region ended up growing by only 2.6 percent. Likewise, a year ago the World Bank projected that the region's economy would grow by 3.5 percent in 2013, and by its own account it ended up growing by 2.5 percent.
The good news is that Latin America's economy will most likely grow this year. The bad news is that — if past projections are any indication — it probably won't grow by as much as major international institutions are prodicting.