07 November 2010 07:00 [Source: ICIS news]
(adds GDP of Peru and G7 to table) RIO DE JANEIRO (ICIS)--The Latin American Petrochemical Association (APLA) is celebrating its 30th anniversary at a time when several of the region's economies have blown past the global recession.
Fast growth increases chemical demand since it tracks GDP growth. And this year, nearly all of the largest economies in Latin America would expand rapidly, according to the October World Economic Outlook by the International Monetary Fund (IMF).
That trend should continue through 2015, with Brazil, Chile, Colombia and Peru growing by 4.09-5.72%/year, according to the IMF, which calls the countries the LA-4. That growth is nearly twice as rapid as the G7 industrialised nations including France, Germany, Italy, Japan, Canada, the UK and the US.
Rafael Amiel, director for Latin America for IHS Global Insight, said the LA-4 countries have addressed economic stabilisation and macro-economic management.
“Those are the ones that have done their homework,” he said.
The nations learned lessons from the Asian fiscal crisis of the late 1990s, and they followed the Basel agenda, essentially a banking blueprint, Amiel said. Their exchange rates are determined by the market and not by government intervention - removing the volatile swings from the past, he added.
Fiscal management is sound, with Chile actually posting surpluses as high as 10% in one year, Amiel said. “Peru is the same story, going from deficits to surpluses.”
Meanwhile, Colombia and Brazil have cut large deficits to small ones, he said.
Banks are better capitalised and the quality of performing loans are higher, he said. “There is prudence in the management of banks in Latin America.”
South America's other major economy, Argentina, will not quite match the rate of growth of the others. In 2011-2015, its economy should grow by 3-4.03%/year, the IMF said.
Argentine exports soared as the Brazilian economy expanded, increasing by 80% from 2005-2009, according to the Inter-American Development Bank (IDB).
Argentina is still a world power in natural resources, Amiel said. “The fields in the countryside in Argentina are so rich, they will grow by themselves.”
Mexico, the second largest economy in Latin America, should recover from several simultaneous hits. The IMF expects the economy to grow by 3.92-4.96%/year from 2011-2015.
Venezuela, however, will lag behind all of the region's major economies, growing by just 0.511-1.749%/year in 2011-2015, the IMF said.
Moreover, the other countries still have risks.
In Brazil, credit was growing quickly to the point where it could threaten the quality of loans, Amiel said. The IMF warned of overheating for the region, particularly if the countries spend too much time unwinding stimulus programmes.
The IMF also said the commodity boom in China could falter, threatening exports. The LA-4 has prospered immensely from that boom, with exports to China growing by triple digits from 2005-2009, the IBD said.
In Colombia, coal, natural gas and crude oil are being exploited near their full potential, Amiel said, and oil production may not grow after 2015. Meanwhile, Chile still needs to put some infrastructure in place.
Argentina also faces challenges despite its record of spectacular growth before the recession. Inflation is likely 25%/year, much higher than the official rate of about 6-8%, Amiel said. Also, earlier debt defaults have made it more expensive for Argentina to borrow money, he added.
Mexico - Latin America's second largest economy - suffered a series of recent shocks. Its economy is tied closely to the US, and both tumbled in 2009, Amiel said. Mexico was also hit by the crash in oil prices and the outbreak of the swine flu.
Mexico was recovering, but the economy is now facing uncertainty from violence, Amiel said. “Bottom line: new ventures are less likely because of the risks.”
The following lists expected GDP growth in percentages for the largest economies in Latin America
Year 2010 2011 2012 2013 2014 2015 Argentina 7.469 4.027 3 3 3 3 Brazil 7.54 4.126 4.136 4.087 4.14 4.135 Chile 5.031 6.01 4.6 4.5 4.5 4.5 Colombia 4.689 4.578 4.566 4.5 4.5 4.5 Mexico 4.84 3.917 4.955 4.655 4.3 3.847 Peru 8.905 5.998 5.707 5.719 5.72 5.719 Venezuela -1.302 0.511 1.007 1.139 1.31 1.749 G7 2.507 2.035 2.539 2.435 2.33 2.195
source: IMFPaul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy
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