America and Europe may be haggling over austerity vs. stimulus, but Latin America has smartly righted itself from the global financial crisis. An article in today’s New York Times states the return to growth has surprised even most government planners. In Brazil, for instance, growth could reach a brisk 7.3%; Mexico’s growth may be 5% in 2010. Peru’s GDP in April was 9.3% higher than a year before. Strong demand in Asia for Latin American commodities such as iron, ore, tin, and gold is the primary culprit. But savvy macroeconomic management has surely played some role. All told, the World Bank forecasts growth to be 4.5% for Latin America this year (pdf.), only slightly below the 5% growth chalked up during the “boom period” of 2005-2007.
Hidden within the World Bank study are a few nuggets: Figure B3.3 notes capacity utilization in Argentina, Brazil, and Mexico. Brazil is nudging north of 82% capacity utilization, which should warrant some concern over inflation. Going from “good problems” to countries with more serious concerns Venezuela is dubbed to have suffered the most from the recession. And given Chávez’s populist economic management recovery will be tough. As the World Bank notes: “endemic high inflation, power shortages and electricity rationing, restricted access to foreign currency, and an unfriendly policy mix towards the private sector delaying [are] weakening the recovery.”
