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Daniel TitelmanDirectorEconomic Development DivisionECLAC - United Nations

Economic and Social Perspectiveof Latin America and the Caribbean

New York. September 2019

The region is confronted with an international context with growing complexity

Uncertainty and Deceleration

Subdued global economic activity and international trade

Growing uncertainty, volatility and financial fragility

Trade conflict and increase in geopolitical tensions

Economic and Social Perspective of Latin America and The Caribbean

3.1

2.3 2.21.9 1.8

2.4

4.5

6.87.2

2.01.6

3.0

2.2

2.9

0.8

1.41.9

4.3

6.66.8

2.8

2.32.6

1.8

2.5

0.81.3 1.2

4.1

6.2

7.2

2.1

1.4

0

1

2

3

4

5

6

7

8

World Developedeconomies

UnitedStates

Japan UnitedKingdom

Eurozone Emergingmarket anddevelopingeconomies

China Indiaᵇ Transitioneconomies

RussianFederation

2017 2018 2019

Synchronization in slowdown of global growth

SELECTED REGIONS AND COUNTRIES: GDP GROWTH RATE 2017, 2018 AND FORECASTS 2019

(Percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on the median of various specialized sources: GEP data (World Bank, June 2019), OECD (Economic Outlook, May 2019), WEO (IMF, April 2019), European Commission (Spring 2019 Forecasts), Capital Economics (accessed June 11, 2019), European Central Bank (Projections as of June 6, 2019), WESP (United Nations, May 2019) and Central Bank of India ( accessed June 11, 2019).


Marked weakening of world trade

YEAR-ON-YEAR CHANGE IN THE VOLUME OF WORLD TRADE, JANUARY 2003 TO JUNE 2019

(Based on seasonally adjusted index, three-month rolling window, in percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on the Netherlands Bureau of Economic Policy Analysis (CPB), World Trade Monitor.

SELECTED REGIONS AND COUNTRIES: YEAR-ON-YEAR CHANGE IN THE VOLUME OF

WORLD TRADE(Based on seasonally adjusted index, in percentages)

-2%

0%

2%

4%

6%

8%

10%

EstadosUnidos

Japón Eurozona Otraseconomíasavanzadas

China Economíasemergentes

de Asia

Europa delEste y

Central

2017 2018 y-to-date

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

Jan-

03

Oct

-03

Jul-0

4

Apr-

05

Jan-

06

Oct

-06

Jul-0

7

Apr-

08

Jan-

09

Oct

-09

Jul-1

0

Apr-

11

Jan-

12

Oct

-12

Jul-1

3

Apr-

14

Jan-

15

Oct

-15

Jul-1

6

Apr-

17

Jan-

18

Oct

-18

Jul-1

9

ene 2003 - jun 200 78%

jul 2011 - dic 20152%

20161,5%

2017 4,9% 2018

3.4%


Generalized declines in commodity prices are expected…

ANNUAL VARIATION IN INTERNATIONAL COMMODITY PRICES, 2016 TO 2019a(In percentages, based on average annual prices, weighted according to the average

export basket of Latin America and the Caribbean)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on data from the World Bank; International Monetary Fund (IMF); Economist Intelligence Unit; Bloomberg; Energy Information Administration (EIA), "Short-Term Energy Outlook", June 2019; Capital Economics and Central Bank of Chile, Monetary Policy Report, June 2019 for the price of copper.a The figures correspond to projections.b This category includes oil, natural gas and coal.

2016 2017 2018 2019a

Agricultural products 4 0 1 -3

Foods, tropical beverages and oilseeds 6 -1 -2 -4

Foods 9 0 -3 0

Tropical beverages 1 -2 -10 -10

Oils and oilseeds 2 -1 1 -8

Forestry and agricultural raw materials -2 5 13 2

Minerals and metals -1 23 4 -1

Energyb -16 23 26 -10

Crude oil -16 23 29 -10

All commodities -4 15 10 -5

All commodities excluding energy products 2 11 3 -2


The economic slowdown observed in the last five years continues Loss of dynamism in the engines of economic growth: no

contribution to growth from investment and net exports

Overall slowdown in 2019: 21 out of the 33 countries in Latin America and the Caribbean (17 out of 20 in Latin America)

At the regional level


-5.0-1.8

0.10.20.20.30.50.50.5

0.80.91.0

1.41.61.6

1.92.02.12.12.12.22.32.52.5

2.82.92.93.13.13.23.33.5

4.04.6

4.95.5

5.99.9

Venezuela (Bol. Rep. of)NicaraguaArgentinaBarbados

SOUTH AMERICAEcuadorUruguay

CubaLATIN AMERICA

LATIN AMERICA AND THE CARIBBEANBrazilHaiti

MexicoCENTRAL AMERICA AND MEXICO

Trinidad y TabagoParaguay

JamaicaSaint Lucia

THE CARIBBEANBelize

SurinameThe Bahamas

El SalvadorSaint Vincent and the Grenadines

Costa RicaChile

CENTRAL AMERICAGuatemala

Saint Kitts and NevisColombia

PeruGranada

HondurasBolivia (Plur. State of)

GuyanaPanama

Dominican Rep.Antigua and Barbuda

Dominica

GDP growth projections for 2019(Percentages, constant 2010 dollars)

Source: Economic Commission for Latin America and the Caribbean (ECLAC).


Restricted macroeconomic policy space

Restriction of the structural fiscal space that limits countercyclical policies

Fiscal consolidation due to insufficient revenues to cover public spending

Greater indebtedness has not translated into productive investment

Higher depreciations would limit monetary stimuli to aggregate demand

The fall in productivity and the export structure (reprimarisation) do not help to face external vulnerability


Investment is no a driver for growth

LATIN AMERICA: CONTRIBUTION OF PRIVATE CONSUMPTION, GENERAL GOVERNMENT CONSUMPTION, FIXED INVESTMENT AND EXPORTS TO GDP GROWTH, 2015 TO 2019

(Percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures.

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

I II III IV I II III IV I II III IV I II III IV I

2015 2016 2017 2018 2019

Gross fixed capital formation

Exports of goods and services

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

I II III IV I II III IV I II III IV I II III IV I

2015 2016 2017 2018 2019

Private consumption

General government consumption


Fiscal consolidation continues to reduce deficits as income levels are insufficient to cover expenses

• LATIN AMERICA (16 COUNTRIES): CENTRAL GOVERNMENT FISCAL INDICATORS, 2010-2019

• (Percentages of GDP)

• LATIN AMERICA: GROSS PUBLIC DEBT OF THE CENTRAL GOVERNMENT, 2018 AND FIRST QUARTER OF 2019


Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures.Note: Simple averages. The figures for 2019 correspond to: projections derived from budgets or official estimates for the end of 2019.

-2.0 -1.7 -2.1 -2.6 -2.9 -3.1 -3.2 -3.1 -2.9 -2.8

18.1 18.2 18.2

21.2 21.1 21.0

18.9 18.6 18.4

-0.3 0.1 -0.3 -0.8 -1.0 -1.0 -1.0 -0.8 -0.4 -0.2

-6

-4

-2

0

2

4

6

8

10

12

10

12

14

16

18

20

22

24

26

2010201120122013201420152016201720182019

Global balance (right axis)Total revenues (left axis)Total expenditure (left axis)Primary expenditure (left axis)Primary balance (right axis)

8677 53 51 5049 48 45 43 4240 39 38 39 3635 33 26 25 2217

8979

5349 4747 47 45 43 42

39 38 373434

2623 21

18

0

10

20

30

40

50

60

70

80

90

Arg

entin

aB

razi

lC

osta

Ric

aC

olo

mbi

aU

rug

uay

Hon

dura

sE

l Sal

vado

rS

AE

cuad

or

LA

-18

CE

NT

RD

omin

ica

n R

ep.

Nic

ara

gua

Pa

nam

aB

oliv

iaM

exi

coH

aiti

Chi

leG

uat

ema

laP

eru

Pa

rag

uay

2018 Mar-19


In the Caribbean, although fiscal consolidation continues, more revenue is expected with possible increases in spending

• THE CARIBBEAN (12 COUNTRIES): CENTRAL GOVERNMENT FISCAL INDICATORS, 2010-2019


• THE CARIBBEAN: GROSS PUBLIC DEBT OF THE CENTRAL GOVERNMENT, 2018 AND FIRST QUARTER OF 2019


Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures.Note: Simple averages. Dominica is excluded. The figures for 2019 correspond to: projections derived from budgets or official estimates for the end of 2019.

125 103 91 81 72 67 66 65 64 62 60 60 46 43

125

94 89 84

64 60

42

0

20

40

60

80

100

120

140

160

Ba

rbad

os

Jam

aica

Be

lize

Su

rinam

e

CA

R-1

3

St

Vin

cent

and

the…

Ba

ham

as

Dom

inic

a

An

tigu

a a

nd B

arb

uda

Sa

int L

ucia

Gre

nad

a

Trin

idad

an

d T

oba

go

Gu

yana

Sa

int K

itts

and

Ne

vis

2018 Mar-19

-3.0 -2.9 -2.6-3.4

-2.7 -2.5 -2.4 -2.6-1.2 -1.5

25.827.0

27.728.3 28.2

29.2

25.0 25.426.4

0.6 0.7 0.8-0.1

0.6 0.7 1.0 0.81.6 1.3

-6

-4

-2

0

2

4

6

8

10

12

10

12

14

16

18

20

22

24

26

28

30

2010201120122013201420152016201720182019

Global balance (right axis)Total revenues (left axis)Total expenditure (left axis)Primary expenditure (left axis)Primary balance (right axis)


LATIN AMERICA AND THE CARIBBEAN: CENTRAL GOVERNMENT TOTAL REVENUES BY COMPONENT, 2017-2019

(Percentages of GDP)

Although revenue is expected to remain stable, the economic slowdown and lower commodity prices could have a negative

impact on government revenue

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures.Note: Simple averages. Dominica is excluded. The figures for 2019 correspond to: projections derived from budgets or official estimates for the end of 2019.

15.4 15.6 15.6 14.1 14.0 14.016.8 17.2 17.3

21.0 21.8 22.1

2.7 2.7 2.62.8 2.6 2.4

2.6 2.7 2.7

4.8 5.2 5.6

18.1 18.2 18.216.8 16.6 16.4

19.4 19.9 20.0

25.827.0 27.7

0

5

10

15

20

25

30

2017 2018 2019 2017 2018 2019 2017 2018 2019 2017 2018 2019

Latin America(17 countries)

Central America,Dominican Rep. and

Mexico

South America (8countries)

The Caribbean(12 countries)

Tax revenues Other revenues


6.6 6.7

4.02.3

Income tax Value-added tax

Effective tax revenues Tax non-compliance

LATIN AMERICA: TAX NON-COMPLIANCE OF INCOME TAX AND VALUE-ADDED TAX, 2017

(Percentages of GDP)

Estimated tax evasion in 2017:6.3% of GDP (US$ 335 billion)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.Note: the estimates of tax evasion are based on national studies on tax non-compliance with income tax and value-added tax. The figures correspond to a weighted average based on GDP at current prices in dollars. The countries included are Argentina, Brazil, Chile, Colombia, Costa Rica, the Dominican Republic, Ecuador, El Salvador, Guatemala, Mexico, Panama, Peru and Uruguay for the ISR; and, Argentina, Bolivia (Plurinational State of), Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Mexico, Nicaragua, Panama, Paraguay, Peru and Uruguay for VAT.

99

85

0

20

40

60

80

100

120

2000

2002

2004

2006

2008

2010

2012

2014

2016

LATIN AMERICA AND THE CARIBBEAN: ESTIMATES OF GROSS OUTFLOWS FROM GOODS TRADE MISINVOICING, 2000-2015

(Billions of US dollars)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on estimates from the methodology developed by ECLAC.

Tax evasion and illicit financial flows represent a significant loss of revenues


Public capital expenditure is reaching historically low levels, while interest payments continue to rise

• LATIN AMERICA (16 COUNTRIES): CENTRAL GOVERNMENT CAPITAL EXPENDITURES, 2000-2019


• LATIN AMERICA (16 COUNTRIES): CENTRAL GOVERNMENT INTEREST PAYMENTS, 2000-2019


Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures.Note: Simple averages. The figures for 2019 correspond to: projections derived from budgets or official estimates for the end of 2019.

4.2

3.63.2

3.1

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

200

02

001

200

22

003

200

42

005

200

62

007

200

82

009

201

02

011

201

22

013

201

42

015

201

62

017

201

82

019

Latin America (16 countries)

Average 2000-2006

Average 2000-2006: 2.9% of GDP

1.7

2.3

2.5

2.7

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

200

02

001

200

22

003

200

42

005

200

62

007

200

82

009

201

02

011

201

22

013

201

42

015

201

62

017

201

82

019

Average 2000-2006: 2.4% of GDP

Latin America (16 countries)

Average 2000-2006


Monetary authorities continue to make use of the available space to stimulate aggregate demand…

LATIN AMERICA (SELECTED COUNTRIES): MONETARY POLICY RATE IN THE COUNTRIES THAT USE IT AS THE MAIN POLICY INSTRUMENT, JANUARY 2016 TO

JUNE 2019(In percentages)


Countries that maintained or reduced their rates

Countries that increased their rates

0

2

4

6

8

10

12

14

16

Ene

Mar

May Ju

l

Sep

Nov

Ene

Mar

May Ju

l

Sep

Nov

Ene

Mar

May Ju

l

Sep

Nov

Ene

Mar

May

2016 2017 2018 2019

Brazil Chile Costa Rica Colombia

Guatemala Paraguay Peru

0

1

2

3

4

5

6

7

8

9

Ene

Mar

May Ju

l

Sep

Nov

Ene

Mar

May Ju

l

Sep

Nov

Ene

Mar

May Ju

l

Sep

Nov

Ene

Mar

May

2016 2017 2018 2019

Honduras Mexico Dominican Rep.


Rising inflation induced by currency depreciations also reduce policy space to stimulate aggregate demand…

LATIN AMERICA AND THE CARIBBEAN: VARIATION RATES OF THE CONSUMER PRICE INDEX (CPI) IN 12 MONTHS, WEIGHTED AVERAGE, JANUARY 2015 TO MAY 2019

(In percentages)


2017 2018 May-18 May-19Latin America and the Caribbean excl Venezuela (Bol. Rep. of)

5.7 7.0 5.0 8.1

South America excl Venezuela (Bol. Rep. of)

5.3 8.2 5.2 9.8

Central America and Mexico 6.4 4.7 4.7 4.8

The Caribbean 3.7 2.0 2.5 3.1

0

2

4

6

8

10

12

Jan

-15

Mar

-15

May

-15

Jul-

15

Se

p-15

Nov

-15

Jan

-16

Mar

-16

May

-16

Jul-

16

Se

p-16

Nov

-16

Jan

-17

Mar

-17

May

-17

Jul-

17

Se

p-17

Nov

-17

Jan

-18

Mar

-18

May

-18

Jul-

18

Se

p-18

Nov

-18

Jan

-19

Mar

-19

May

-19

Latin America and the Caribbean excl Venezuela (Bol. Rep. of)South America excl Venezuela (Bol. Rep. of)Central America and MexicoThe Caribbean


In addition to less policy space, productivity has exhibited a downward trend in the last years

LATIN AMERICA: LABOUR PRODUCTIVITY, 2000 TO 2018(Percentages)


-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.020

00

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018


Unemployment rates remain at high levels accompanied by a deterioration in working conditions

At the beginning of 2019 there was a deterioration of the quality of employment:

- Self-employment is expanding more than salaried labor

- Increase in informal labour

- Increase in hourly underemployment

LATIN AMERICA AND THE CARIBBEAN: URBAN UNEMPLOYED RATE AND NUMBER, 2013 TO 2019(Percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), based on official figures.a Estimate.

16.0 15.817.0

21.222.7 23.1 23.4

7.1 6.9

7.3

8.9

9.3 9.3 9.3

0

5

10

15

20

25

5

6

7

8

9

10

2013 2014 2015 2016 2017 2018 2019ᵃ

Urb

an

un

em

plo

yed

(in

mill

ion

s)

Op

en

urb

an

un

em

plo

yme

nt r

ate

Urban unemployed (right axis) Open urban unemployment rate (left axis)


After rising in 2015 and 2016, poverty held steady in 2017 and extreme poverty continued to trend upwards

Source: ECLAC, on the basis of Household Survey Data Bank (BADEHOG). a Estimate for 18 countries of Latin America and the Caribbean. b The figure for 2018 is a projection.

LATIN AMERICA: POVERTY AND EXTREME POVERTY RATES, 2002–2018 a

(Percentages)

LATIN AMERICA: POPULATION LIVING IN POVERTY AND EXTREME POVERTY, 2002–2018 a

(Millions of persons)

Poverty is projected to have fallen slightly in 2018, while extreme poverty has remained unchanged


LATIN AMERICA (15 COUNTRIES): GINI COEFFICIENT OF INCOME INEQUALITY, 2002–2017a

Source: ECLAC, on the basis of Household Survey Data Bank (BADEHOG).a The calculation of the Gini coefficient included zero incomes.b Urban total.c Figures for 2017 not comparable with those of previous years.d Figures from 2010 onward not comparable with those of previous years.e Figures for 2017 refer to 2016.f Figures for 2016 estimated on the basis of the 2016 statistical model for MCS-ENIGH continuity.g Figures for 2002 refer to the urban area.h Average based on nearest available year’s data for each of the 18 countries.

Income distribution inequality fell notably between 2002 and 2017 (from a Gini coefficient of 0.53 to 0.47)

The reduction in inequality lost momentum between 2014 and 2017

Colombia, El Salvador and Paraguay posted Gini reductions of over 1% per year

Bolivia, Chile and Ecuador saw yearly falls of just over 0.5%

Honduras and the Dominican Republic saw a deterioration in 2016


Preliminary estimates for three countries show that wealth distribution is more unequal than income distribution

Physical and financial assets are highly concentrated in the upper income strata

This is not reflected in inequality of current income as measured by household surveys

Gini Chile (2017)

Uruguay (2013/2014)

Mexico (2015/2017)

Total assets (physical and

financial)

0.72 0.67 0.78a

Current income b 0.45 0.39 0.50

CHILE, MEXICO AND URUGUAY: GINI COEFFICIENT OF ADJUSTED PHYSICAL AND FINANCIAL ASSETS AND OF PER CAPITA CURRENT INCOME, HOUSEHOLDS

Source: ECLAC, on the basis of Central Bank of Chile, the Household Financial Survey 2017 of Chile; the National Household Survey 2015 of Mexico; data from the National Banking and Securities Commission (CNB) of Mexico; the database of the Economics Department of the Faculty of Social Sciences at the University of the Republic of Uruguay, the Uruguayan Household Financial Survey, 2013–2014; and Household Survey Data Bank (BADEHOG).a Gini coefficient of contracts held by individuals in brokerage firms, 2015-2017.b Gini coefficient calculated on the basis of individual per capita income distribution. The data for Mexico refer to 2016.


Four instruments to expand the fiscal space

Reducing tax evasion and illicit financial flows

Re-evaluate tax expenditure to align them with productive investment

Promote the adoption of taxes on the digital economy, environmental and related to public health

Stimulatory countercyclical policies

Four public spending and investment policies

Protect double inclusion (labour and social) from social spending

Redirect public investment towards the adaptation and use of innovative technologies with natural resources

Promote public-private agreements for infrastructure and renewable energy

Re-design tax incentives for industrial policies

Multilateral regional space to reduce fiscal

asymmetries

Adopt regional and global agreements to reduce tax evasion, avoidance and illicit flows.

Reduce harmful tax competition

Revision and convergence of the use of tax incentives for investment

Reduce global asymmetries and deepen the dialogue with transnational corporations

FISCAL POLICIES


Promote economic growth without compromising exchange and price stability

Stimulate aggregate demand according to available space.

Use monetary policy to promote activities of greater productivity.

Strengthen the ability of central banks to address the effects of foreign exchange volatility:

Instruments such as credit lines and swaps between central banks

Strengthening the regional financial architecture.

Adapt regulation to financial flows to higher volatility environments

MONETARY POLICIES

Orient investment towards knowledge-intensive sectors and more dynamic sectors that drive increased productivity

Investment stimulus policies must incorporate innovation, learning and quality jobs

Articulate investments towards sectors with greater environmental sustainability: renewable energy, electromobility, green infrastructure and sectors linked to the circular economy

PRO INVESTMENT AND PRODUCTIVITY POLICIES


Inverse correlation between productivity and inequality (as opposed to the “big trade-off”)

Productivity and Gini index, 2014(Purchasing power parity (PPP) 2011 dollars and percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of University of Groningen, Penn World Table [online database] https://www.rug.nl/ggdc/productivity/pwt/, and Harvard University, Standardized World Income Inequality Database (SWIID) [online database] https://dataverse.harvard.edu/dataset.xhtml?persistentId=hdl:1902.1/11992.Note: The Gini index is expressed in percentage terms. Productivity is expressed in output per employee in 2011 PPP dollars.


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