Despite strong policies, Latin America headed for recession
Washington - Latin America will follow the rest of the world into recession this year, despite governments' best efforts to insulate the region from the worst effects of a devastating global financial crisis, the International Monetary Fund said Wednesday.
South America and Mexico will contract 1.6 per cent in 2009 before recovering slightly to 1.6-per-cent growth next year. The slowdown follows a growth rate of 4.2 per cent in
2008, according to the IMF's updated World Economic Outlook.
Brazil will contract 1.3 per cent, Argentina will shrink 1.5 per cent and Mexico 3.7 per cent this year as the continent has become engulfed in a three-part crisis involving a financial downturn, plunging exports and sharply lower commodity prices.
"Brazil like other countries in Latin America is suffering from a combination of shocks," IMF economist Charles Collins told reporters in Washington, but added that increases in government spending had "helped to cushion" the blow.
The IMF's figures were revised down sharply from its last forecast in January, when the global lender predicted a growth rate of 1.1 per cent for the region. Brazil at that time was still expected to grow at 1.8 per cent.
The only countries expected to show positive growth this year were Peru, with 3.5 per cent, Uruguay at 1.3 per cent and Chile, which will eke out growth of 0.1 per cent.
Still, the IMF said the crisis has been less extreme for Latin America than in many other parts of the world. Stronger fiscal policies developed over the last decade have helped also to give governments room to spend more money as the crisis developed. (dpa)