South American Real Estate News

Slide gateway to south america's news resource Brings you local news and views from the region Experienced Investment news local knowledge information resource for investors real estate marketing Gateway to South America Real Estate News line Icon home Icon home Icon home brokerage services Click here now for real - estate opportunities Experienced argentina brazil chile paraguay peru uruguay agro business lifestyle real estate marketing Gateway to South America Real Estate Services high end residential Farm investment tours Icon home Icon home Icon home Icon home brokerage services
Slide Real Estate News Service South American Focused 1000's Of Happy Subscribers Argentina - Brazil - Chile- Paraguay - Peru - Uruguay Bilingual Posts Free Subscriptions

It could be the 1930s all over again for Latin America

Post available in: English

During the 1920’s Depression, Latin America was buffeted by a collapse in commodity prices, a slowdown in world trade and a massive capital outflow. The same shocks are hitting the region today, but this time one has to add a decline in remittances (crucial for Central America and the Caribbean) and a productivity freeze, due to having much of the labour force under lockdown. Back then, the economic contraction was brutal.

Between 1929 and 1933, output fell by 10 per cent in Argentina and Mexico and by an eye-popping 37 per cent in Chile. Brazil and Colombia also suffered sharp initial drops, but by 1933 had recovered pre-Depression income levels. In the era of Covid-19, Latin America is well on its way to replicating that dismal performance.

Back in mid-April the IMF predicted the region’s economy would shrink by 5.2 per cent in 2020 alone, with particularly sharp drops of 6.6 per cent in Mexico and 5.7 per cent in Argentina. Those forecasts are already outdated. Actual 2020 contractions will probably be much larger. In the alphabet soup of alternative economic paths, a V-shaped recovery for Latin America looks farfetched — unless, that is, a vaccine arrives quickly and, with it, a worldwide resumption of growth. The virus came late to the region and some countries — Brazil, Ecuador and Mexico — have been remarkably inept at containing it.

In others, high public debt and spotty access to international capital limit what governments can do to counteract the effects of the pandemic. Only Chile and Peru have the fiscal space to finance aggressive containment policies. Even there, new cases of contagion and Covid-19-related deaths are up sharply in the past two weeks. Under the Inter-American Development Bank’s mildest scenario, Latin America’s economy contracts by 6.3 per cent in 2020-22. In the most extreme case, the cumulative contraction reaches 14.4 per cent — not too different from what the region experienced in the Depression.

In the 1930s, the countries that recovered quickly were those, mostly in South America, that adopted unorthodox measures. They cut interest rates and allowed their currencies to depreciate after leaving the gold standard. Most also defaulted on their foreign debts — except in the Caribbean, where platoons of US Marines guaranteed repayment. Today, flexible exchange rates are the new orthodoxy, so that is not a constraint. But availability of dollar finance is. Unless institutions such as the IMF and the IADB sharply step up their lending, a new wave of debt defaults could make it the 1930s all over again.


(Visited 45 times, 1 visits today)
Gateway to South America

About Gateway to South America

Gateway to South America was established in 2006 as a single office in Buenos Aires. The company has since expanded into a vibrant regional network, servicing the Southern Cone clients in Argentina, Brazil, Chile, Paraguay, Peru and Uruguay with professional real estate marketing services. If you enjoy reading our news site please share it on your social media below.

Post available in: English


Comments from our readers

Visit us on LinkedInVisit us on FacebookVisit us on TwitterVisit us on Pinterest