March 4th, 2021

The Latin American Economic Outlook

Exploring opportunities for Italian

companies in Latin America

The partnership between CAF & CDP Workshop

The Covid recesion in Latin America: Deep and uneven

Source: CAF (GVAR) projections, Official Sources and Bloomberg

Economic Growth by country(baseline, % annual)

GDP Growth Latin America(% annual)

7,5

7,4

8,9

5,0

3,5

4,6

3,0

4,7

4,9

4,2

3,0

2,6

2,9

3,9

5,0

-18,0

-11,6

-11,1

-10,0

-9,0

-8,2

-8,0

-6,9

-6,0

-6,0

-5,9

-5,6

-5,1

-4,3

-0,5

-20,0 -15,0 -10,0 -5,0 0,0 5,0 10,0 15,0

PANBARPERARGMEXBOLECUCOL

DOMCHI

URYT&TCRI

BRAPRY

2020 2021

* Note: Latin America (LA-7) includes Argentina, Brazil, Chile, Colombia, Mexico, Peru and Uruguay. The scenarios are based on assumptions about external conditions, particularly in the recovery of China and the US. In the optimistic scenario, there would be a stronger rebound in the US (5.2% vs 3.8% at the base), thanks to the full approval of the stimulus package and a greater acceleration in the vaccination program. It is also assumed that stimuli are not withdrawn in China, so growth increases (9.6% vs 8% at the base). In the pessimistic scenario, there would be a slower recovery Both in the US (2.4%) and China (6.5%) due to delays in the vaccination process and lower fiscal stimuli. The baseline scenario incorporates a moderate advance in the vaccination process in Latin American countries, delaying the removal of restrictions on mobility.

4,3%

6,7%

-7,0%

2,4%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Baseline Optimistic

Tailwinds for recovery: Global trade, commodity prices

Source: CBP Netherlands Bureau of Economic Analysis, WTO Short-Term Indicators

Global Trade(% change, 3-month moving average)

Commodities(30-day average price, Dec 2019 index = 100)

Source: Bloomberg LP

-30%

-20%

-10%

0%

10%

20%

2015 2016 2017 2018 2019 2020 2021

Volume Value

0

20

40

60

80

100

120

140

160

feb 20 mar 20 may 20 jun 20 ago 20 sep 20 nov 20 ene 21 feb 21

Oil Industrial Metals Soja

Tailwinds for recovery: Financial conditions

Source: Bloomberg, Institute of International Finance

US Treasury Bills Yield and Volatility Index

(30-days moving average)

Net non-resident portfolio flows to Emerging Markets

(Bn .USD)

Sovereign Risk Spreads in Latin America

(JP Morgan EMBI+, EMBIG)

0

10

20

30

40

50

60

70

0,0

0,5

1,0

1,5

2,0

2,5

3,0

may 19 ago 19 nov 19 feb 20 may 20 ago 20 nov 20 feb 21

10Y 2Y VIX(rhs)

-100

-70

-40

-10

20

50

80

110

may 19 ago 19 nov 19 feb 20 may 20 ago 20 nov 20 feb 21

Equity Debt

0

300

600

900

1.200

1.500

1.800

ene 20 abr 20 jun 20 sep 20 nov 20 feb 21

Grado de Inversión

No grado de inversión

Headwinds for recovery:Second wave and slow vaccine roll out

Source: Google Local Mobility Reports, Our World in Data Oxford.

Google mobility data(% Change compared to January 2020. Average workplaces,

supermarkets and pharmacies, shops and leisure and transport stations)

-100

-80

-60

-40

-20

0

20

feb 20 may 20 jul 20 sep 20 dic 20 mar 21

AL ITA USA

Vaccination(Accumulated vaccines per 100 inhabitants)

0

5

10

15

20

25

26-dic-20 17-ene-21 08-feb-21 02-mar-21

ARG BRB BOL BRA CHLCOL ECU MEX PAN PRYPER ITA USA

Headwinds for recovery:Second wave and slow vaccine roll out

Source: Google Local Mobility Reports, Our World in Data Oxford

Vaccination(Accumulated vaccines per 100 inhabitants)

-100

-80

-60

-40

-20

0

20

feb 20 may 20 jul 20 sep 20 dic 20 mar 21

ARG BOL BRA CHL COL

ECU MEX PAN PRY PER

Google mobility data(% Change compared to January 2020. Average workplaces,

supermarkets and pharmacies, shops and leisure and transport stations)

0

5

10

15

20

25

26-dic-20 17-ene-21 08-feb-21 02-mar-21

ARG BRB BOL BRA CHLCOL ECU MEX PAN PRYPER ITA USA

30

40

50

60

70

80

90

100

110

2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023

Latin AmericaWorldEmerging Markets and Developing Economies

Our baseline scenario is a protracted recovery

Source: CAF Projections, World Economic Outlook, IMF Jan-2021

GDP Index(2019=100)

GDP Growth(% change annual)

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Latin AmericaWorldEmerging Markets and Developing Economies

The contraction had a severe social impact…Increase in poverty and inequality in Latin

America(percentage points)

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20

25

30

35

40

45

50

55

60

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

PIB per cápita

(USD-PPP consta

ntes)

Índ

ice

de

Gin

i, va

lore

s 0 a

100

(gr

is)Ta

sa d

e po

brez

a, %

(roj

o)

Gini - Crisis COVID hace retroceder 10 años Pobreza - Crisis COVID hace retroceder 10 años

Pobreza - Crisis COVID hace retroceder 8 años Pobreza - Crisis COVID hace retroceder 6 años

Gini - Crisis COVID hace retroceder 8 años Gini - Crisis COVID hace retroceder 6 años

PIBpc (PPP constantes de 2011)

7,1

4,9Poverty rate

Gini Index

An estimated 2.7 million companies, mostly micro establishments, would have closed in the region in 2020,

leading to the loss of 8.5 million jobs

… and a debt legacy

Fuente: Fuentes Oficiales y Proyecciones CAF

Primary fiscal deficit (% GDP) Gross Financing Needs (% GDP) Gross Debt (% GDP)

0,0

5,0

10,0

15,0

20,0

25,0

MEX PRY CHL URY PER PAN BOL COL VEN ARG ECU BRA

2020 2021

0,2

-1,3-2,0

0,2

-1,4-2,2

-4,4-4,0-3,5

-5,3-4,6

-4,0

-8,4

-2,9

-12,0

-10,0

-8,0

-6,0

-4,0

-2,0

0,0

2,0

MEX

URU CR

I

DOM

ECU

PRY

COL

ARG

PER

PAN

CHI

VEN

BOL

BRA

2020 2021

0%

20%

40%

60%

80%

100%

120%

140%

160%

BBD

ARG

BRA

TTO

URY CR

IBO

LM

EX COL

ECU

PAN

DOM

CHL

PER

PRY

2020 2019

… and a debt legacy

Fuente: Fuentes Oficiales y Proyecciones CAF

0,0

5,0

10,0

15,0

20,0

25,0

MEX PRY CHL URY PER PAN BOL COL VEN ARG ECU BRA

2020 2021

0,2

-1,3-2,0

0,2

-1,4-2,2

-4,4-4,0-3,5

-5,3-4,6

-4,0

-8,4

-2,9

-12,0

-10,0

-8,0

-6,0

-4,0

-2,0

0,0

2,0

MEX

URU CR

I

DOM

ECU

PRY

COL

ARG

PER

PAN

CHI

VEN

BOL

BRA

2020 2021

Primary adjustment vs Debt (% GDP)

ARG

BRA

URU

CRI

BOL

MEXCOL

ECU

PANCHI

PER

0,0%

1,0%

2,0%

3,0%

4,0%

5,0%

6,0%

7,0%

8,0%

-0,2 -0,1 0 0,1 0,2 0,3 0,4 0,5

Chan

ge in

prim

ary

inco

me

2021

-20

20 (%

GDP

)

Distance from sustainable debt thresholds (% GDP)

Primary fiscal deficit (% GDP) Gross Financing Needs (% GDP)

The fiscal policy challenge

STIMULUSGradual consolitation

Recover growth Use fiscal space

PrductivityFiscal Institutions Social Inclusion State Capacities

A comprehensive reform agenda to build back better…

…and to consolidate protuctive potential

Energy

Infrastructure

Mining

Telecoms

Agri-business

Financial services

Value chains

Trade services

Tourism

Pharmaceuticals

Digital transformation

Green transformation

Never let a good crisis go to waste

Winston Churchill

Detrás de todolo que hacemos estás tú

www.caf.com@AgendaCAF