Latin America's Growth Prospects

The slowdown in economic growth posted by Latin America and the Caribbean in 2011 continued through the first half of 2012, prompting ECLAC to project that economic activity would expand by 3.2% for the year as a whole. Private consumption was the main driver of growth, thanks to favourable labour market trends, an expansion of credit and, in some cases, an increase in remittances. In a number of countries, brisk investment (especially in the construction sector) and net exports helped temper the slowdown. Overall, though, foreign trade was the primary channel through which the faltering global economy impacted the economic performance of Latin America and the Caribbean: the price of most of the region’s main export commodities trended down, and external demand cooled markedly, particularly in Europe and Asia. As a result, most of the countries are seeing deteriorating terms of trade and slightly wider balance-of-payments current account deficits reflecting a downturn in the trade balance.