Despite Brazil’s 1.5% Shrinking, South America Will Have Positive Year

The South American economic group Mercosur will end 2009 with positive rates of economic activity in spite of the global crisis, although some members such as Brazil and Paraguay might not be able to contain the downfall and will end in red numbers.

This is the main conclusion of the meeting of Finance ministers and Central bank presidents from the four full members of the trade block (Argentina, Brazil, Paraguay and Uruguay) plus Venezuela in the process of incorporation, in Asuncion, previous to the presidential summit.

"The levels of growth we are anticipating are more encouraging than some of the estimates from multilateral organizations," said Dioní­sio Borda, Paraguay's Finance minister and host of the meeting, following the presentation of the first Mercosur macroeconomic indexes.

The report includes data on the four full members plus data on Bolivia and Chile, associate members, and Venezuela.

Borda said that all member countries expect to finish 2009 with positive growth, with the exception of Chile forecasted to contract 1%, and Paraguay which will also fall between 3 and 4%. Bolivia on the other hand is signaled as the best performer with 4% expansion.

"Our analysis shows common elements in our countries such as an expansive macroeconomic, monetary and fiscal policy, to help mitigate the effects of the global crisis," said Borda.

Regarding Paraguay's negative performance Borda attributed it mainly to the impact of an ongoing drought that has punished agriculture and livestock, rather than the impact of the global crisis.

"Turbulence will pass and we will return to normal," said Borda who pointed out that all members of Mercosur expect positive indicators for 2010 with strong signs of consolidating recovery.

However, Mercosur optimism contrasts with the latest IMF report on economic prospects for the Americas, according to which Latinamerica and the Caribbean will experience a strong contraction this year, ranging on average 1.5%.

The IMF reports says Venezuela will be the hardest hit since after expanding 4.8% in 2008, it will contract 2.2% this year, while Ecuador that had a positive performance of 5.3% last year will fall back to a negative 2%.

Argentina is forecasted to end 2009 with a 1.5% retraction after expanding 7% in 2008, while Brazil should fall 1.3% after last year's 5.1% growth. Peru which had the strongest expansion, 9.8% is forecasted to grow 3.5%; Uruguay, 8.9% and 1.3% in 2009; Bolivia, 5.9% in 2008 and 2.2% this year; Paraguay, 5.8% and minus 0.5%; Chile, 3.2% and a contraction of 1% while Colombia, 2.5% and zero growth in 2009.

Mercopress