SANTIAGO, Chile, Tuesday July 26, 2016 – Recovery of growth in Latin America and the Caribbean depends on invigorating public and private investment, according to the Economic Commission for Latin America and the Caribbean (ECLAC).
The UN organization gave that assessment today as it presented its Economic Survey of Latin America and the Caribbean 2016, in which it forecasts that the region will contract -0.8 per cent this year. This marks a steeper decline than in 2015 (-0.5 per cent).
It stressed the urgent need to mobilize investment—both public and private—to promote the region’s economic recovery and meet the challenges imposed by the 2030 Agenda for Sustainable Development.
“The capacity of countries to accelerate economic growth depends on the spaces for adopting policies that support investment. These policies should be accompanied by efforts to change the conversation between the public sector and private companies. Increasing productivity is also a key challenge for moving forward along a path of dynamic and stable growth,” Alicia Bárcena, Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC), said during the press conference in Santiago, Chile where the report was presented.
The survey indicates that in the external arena, the global economy will maintain low levels of growth, which will be accompanied by a slow expansion in trade, which has not managed to recover the levels seen before the international financial crisis.
On top of that, the report points to deteriorated prices for the region’s commodities exports and greater international financial uncertainty and volatility, which have increased since the United Kingdom voted to leave the European Union (Brexit). This decision has also produced greater risks to the world’s future growth.
In the regional sphere, the report forecasts a -2.1 per cent contraction for South America in 2016, mainly due to a deterioration in its terms of trade, weaker external demand and a significant deceleration in domestic demand, which reflects a sizeable fall in domestic investment.
Declines All Around
The Caribbean will suffer a -0.3 per cent contraction in its Gross Domestic Product (GDP), ECLAC said.
According to the report, six countries are expected to show an economic contraction in 2016: Venezuela (-8.0 per cent), Suriname (-4.0 per cent), Brazil (-3.5 per cent), Trinidad and Tobago (-2.5 per cent), Ecuador (-2.5 per cent) and Argentina (-1.5 per cent).
On the other hand, regional growth will be led by the Dominican Republic (6.0 per cent), Panama (5.9 per cent), Nicaragua and Bolivia (4.5 per cent), and Costa Rica (4.3 per cent).
“Faced with an economic contraction, the region needs progressive structural change with a big environmental push that promotes development based on equality and sustainability, as we have proposed in our institutional document Horizons 2030: Equality at the Centre of Sustainable Development, which we presented in Mexico last May,” Bárcena said.
In its Economic Survey 2016 ECLAC calls for resuming the path of growth and mobilizing financial flows for development financing.
To achieve that, it said, countries must change their fiscal structures to improve tax collection and progressivity, strengthen income taxes (both for individuals and companies), and fight tax evasion and avoidance, which reached the equivalent of 6.7 points of the regional GDP in 2015 at an estimated US$340 billion.
It added that it is necessary to promote renewed public-private coalitions and policies that create appropriate incentives to channel financing towards development goals.