Latin American economies in the race to the bottom

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Prospects for Latin America are dire this year amid the paralysis in domestic activity; collapse in prices for export commodities; massive job losses; pullback in remittances; rising debt vulnerabilities; and limited scope by governments to adequately respond to the crisis. Consequently, our Consensus Forecast currently sees Latin America’s economy contracting 5.1% this year, which would mark one of the worst contractions in the continent’s history.


Of the region’s largest economies, economists currently see Mexico suffering the most severe recession, with our Consensus Forecast projecting a 7.1% contraction this year. Social distancing measures are set to hammer household spending; investment will be derailed amid elevated uncertainty; and exports will crumble as the pandemic ravages global demand. The shaky finances of debt-saddled Pemex and economic difficulties in the U.S. are major risks ahead.


Commenting on the implications of Brazil’s most recent monetary policy meeting, Alberto Ramos, chief Latin America economist at Goldman Sachs, noted:

Overall, Brazil is moving rapidly towards a zero real rates uncharted financial territory. The economy never operated in such an environment. It may turn out that the new territory is market friendly and hospitable, but we do not know until we operate there for a bit.”

Source: Focus Economics

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