SOURCE: DominicanToday

Dominican Republic’s economy will grow 6 percent this year as the recovery begun in the second half of 2009 strengthens, affirmed the UN Economic Commission for Latin America and the Caribbean (Cepal) in its regional Economic Study 2009-2010 disclosed today.

The study also says Latin America’s economy will grow 5.2 percent this year, and a 3.7 percent increase of the GDP per inhabitant

“The growth is higher than anticipated, but the performance is very heterogeneous within region,” said Cepal executive secretary Alicia Bárcena when announcing the figures.

The study stresses the growth in Mercusur countries and those “which had a greater capacity to implement policies and those with strong internal markets, boosted by the regional space and the high participation in the exports to Asia.”

According to the report Brazil will lead South America growth this year with 7.6%, Uruguay (7%), Paraguay (7%), Argentina (6.8%) and Peru (6.7%), followed by Panama (5%), Bolivia (4.5%), Chile (4.3%) and Mexico (4.1%).

Rounding out the field will be Colombia with 3.7%; Ecuador and Honduras 2.5%, Nicaragua and Guatemala 2%, and Venezuela with minus 3%.

Haiti’s economy will fall 8.5 percent as the January quake also devastated its economy, whereas others of the Caribbean will also post negative figures.

Cepal said the level of the region’s economic activity had a positive impact on jobs, which would lead to a fall in unemployment as much as 7.8 percent, 0.4 percentage points lower than the 2009 rate.

Private consumption, increased investment and a jump in exports are the three elements the study says contributed the most to Latin America’s resurgence.

source: Terra.com

Honduras’ Deputy Foreign Minister Alden Rivera announced that former United States president Bill Clinton and Mexican businessman Carlos Slim will travel to Honduras on November 4-5, 2010 to help encourage private investment.

Honduras is among the most severe in Latin America. Approximately 53% of the population is rural, and it is estimated that 75% of the rural population lives below the poverty line, unable to meet basic needs.

The country still has high rates of population growth, infant mortality, child malnutrition and illiteracy. These and other social and economic factors reflect its status as the second poorest country in the Western Hemisphere, after Haiti.

“The visit is aimed at promoting the country as a tourism destination to the world, thereby attracting foreign investors,” said Mr. Rivera.

Mr. Slim is listed by Forbes Magazine as the world’s richest person, with a net worth estimated at US$60.6 billion.

Mr. Clinton oversees the William J. Clinton Foundation, which has an endowment estimated at US$46 billion.

Both Mr. Slim and Mr. Clinton are working with the government of Spain on a philantropic program, valued at US$150 million, to improve healthcare in Central America and southern Mexico.

“Ideas have consequences” says Giancarlo Ibárgüen, Executive President of Francisco Marroquín University, who sat down with us to talk about the necessary ingredients to stimulate free market competition – especially in Latin America.

U.S. Secretary of State Hillary Clinton, in an speech today in Washington D.C., applauded countries in the Americas for sustaining economic growth during the global recession, expressed her vision of the Western Hemisphere becoming “a model” for cooperation around the world and singled out Brazil for its long-term commitment to closing wide economic inequalities.

The wide-ranging speech provided another indication of the growing closeness between the U.S. and countries in Latin America and the Caribbean and the leadership Clinton has shown in understanding the deeper challenges and issues with individual countries.

Clearly economic inequality was a major theme. “We’re really trying to work with governments and the private sector to increase economic opportunity,” she said.
She also underscored a longstanding talking point for her which reasserts the principal that many Latin America countries are failing to raise tax revenues, and as a result continue to falter. “Too many other countries, you look at the tax revenue to GDP percentage, it’s among the lowest in the world. That is unsustainable,” said Clinton.

Contrasting that approach has been Brazil, which has followed through on a decades-long plan to raise sufficient tax revenue to lift up the neediest in their society. Clinton praised these efforts.

Finally, Clinton signaled that free trade pacts with Panama and Colombia are still in a holding pattern, which was not good news for either country.  To read the full text of the speech, visit the State Department website.

SOURCE: Reuters

WASHINGTON (Reuters) – The U.S. government said on Thursday it was time for Honduras to be readmitted to the Organization of American States, which suspended the Central American nation after a coup last year.

The creation this week of a truth commission to investigate events surrounding the June coup that ousted former President Manuel Zelaya was a sign that his elected successor, President Porfirio Lobo, was committed to national reconciliation, a U.S. State Department official said.

“It is time for them to be reintegrated,” Deputy Assistant Secretary of State for Western Hemisphere Affairs Craig Kelly told Reuters at a Latin American investment summit.

The OAS is a hemispheric forum that groups all democratic countries in the Americas.

Several Latin American governments, including Venezuela and Brazil, have yet to recognize Lobo’s legitimacy as president, while international human rights groups say attacks on Zelaya supporters have continued since Lobo took office in January.

Kelly said Lobo was dedicated to taking on the human rights challenges Honduras faces, such as the murder of journalists.

“It is clear he is sincere,” he added. Kelly praised Lobo for appointing a human rights adviser, Ana Pineda, “a woman of real integrity who really wants to take on these issues.”

Many Latin American nations have sent ambassadors back to Tegucigalpa and are doing normal business with Honduras, Kelly said.

Zelaya was ousted by soldiers after his opponents accused him of trying to change the constitution to run again.

Brazil, which sheltered Zelaya in its embassy in Tegucigalpa for months after he secretly returned from exile, has not ruled out relations with the new government, but wants a common Latin American position.

Lobo has been recognized by the United States, the European Union and most of Central America. But the Unasur group of South American nations, including heavyweight Brazil, shuns contact with him and threatened to boycott a EU-Latin American summit in Spain later this month if Lobo attended.

The Honduran Foreign Ministry said on Thursday that Lobo would not attend the summit.

SOURCE: Forbes

By Nouriel Roubini and Bertrand Delgado

We maintain that Latin America–LatAm–will expand in 2010 after contracting more than 2% in 2009. Better global growth prospects and solid commodity prices will support growth in the region. However, differentiation in domestic demand dynamics will play a key role.

We have revised upward our growth expectations for Brazil, Mexico, Argentina and Peru; maintained our projection for Colombia; and lowered them for Chile (due to the earthquake) and Venezuela. Mexico will benefit the most from the upward revisions to our U.S. growth outlook, while domestic demand will likely catch up in Q2 2010. Meanwhile, Brazil’s stronger-than-expected domestic demand will be enhanced by the relatively benign external backdrop.

Inflation will likely climb in 2010 but it will remain within the central bank inflation target ranges, except for Mexico. In most countries, high food prices, as a result of adverse weather conditions, have continued to deteriorate inflation dynamics and expectations at the beginning of 2010, while demand-pull inflation pressures have stayed relatively calm.

Moving forward we expect those dynamics to revert. Inflation pressures stemming from food prices will likely normalize as seasonal effects wear off, while the closing of the output gaps, though at different speeds, will exert upward pressure on prices. Moreover, the lack of external supply side shocks on prices and stable/strong currencies will play in favor of our inflation outlook for the region.

Current account deficits should widen in 2010–and surpluses will narrow–as growth in domestic demand will likely outpace external demand. Meanwhile, positive global financial conditions and risk appetite, together with LatAm’s attractive growth dynamics, will likely continue drawing capital flows, reducing balance of payments issues whenever they arise. Moreover, international reserves will likely continue growing as central banks intervene to avoid sharp appreciation of the currencies and to improve external buffers.

We still believe that wider growth and interest rate differentials, as well as a relatively weak U.S. dollar and solid commodity prices, will continue to support LatAm currencies. Since we expect the Fed will remain on hold for a prolonged period of time, until Q1 2011 or perhaps beyond, and China will only map out excess liquidity slowly, global liquidity conditions will stay elevated and risk appetite–in the absence of systemic events–will remain supportive.

Lastly, the presidential electoral cycle in the main LatAm countries continues with Colombia in May and Brazil in October. In both cases a second voting round will likely be needed to determine the next president. In Colombia it is our view that whoever wins the elections is likely to maintain Colombia’s current domestic security and market-oriented policies.

The latest polls by Ipsos Napolen Franco (March 2010) suggest Juan Manuel Santos from the U party and Noemi Sanin from the Conservative party–both strong supporters of President Alvaro Uribe’s successful policies–are leading the pack with 36% and 17% of responses, respectively. In Brazil, regardless of who takes power among the leading contenders, the current economic policy will most likely be maintained.

However, the markets will pay close attention to fiscal dynamics and initiatives on structural reform after the elections. The latest Datafohla poll (March 2010) indicates that Jose Serra from the Social Democratic Party leads the race with 36% of responses, followed by Dilma Rousseff from the Workers Party with 27%. Serra also leads the race in a possible second round.

Nouriel Roubini is a professor at the Stern Business School at New York University and chairman of Roubini Global Economics. Bertrand Delgado is a Senior Research Economist at RGE.

SOURCE: The Guardian

Travel through pretty much any country in Latin America and you see the influence: a football stadium for Costa Rica, scholarships for Venezuela, a car factory for Uruguay, billion-dollar loans for Brazil. All from China.

The Asian superpower has moved into a region the US once considered its backyard and discreetly established itself as a major economic player.

There are new and expanded embassies in Caracas and Brasilia, Mandarin language classes in La Paz and Buenos Aires, Chinese tourists in Machu Picchu, red flags with five gold stars fluttering from tankers steaming through the Panama canal. Last week President Hu Jintao travelled to Brazil to sign, among other things, a five-year strategic plan between China and South America’s biggest economy.

China has supplanted the US as Brazil’s biggest trading partner, a boom repeated across the region. Once almost invisible in Latin America, China has seen its trade here rise from $10bn a year in 2000 to well over $100bn today. Latin officials are rolling out the red carpet to Chinese delegations and hopping on planes not only to Beijing but also Guangzhou, Nanking and Shanghai.

Unlike the Russians, who grab attention by sending warships to visit anti-US leaders, such as Venezuela’s Hugo Chávez, but struggle to deliver economic deals, the Chinese are all business. They are importing soy from Argentina, copper from Chile, iron ore from Brazil and zinc from Peru, and export clothes, cars and electronic equipment across the region.

The trade helped Latin America to weather the global economic crisis, but there is concern about a “neo-colonial” pattern in which the region’s commodities are sucked abroad while industry loses out to cheap imports aided by China’s undervalued currency. When Argentina accused China of dumping goods, Beijing bared its teeth and banned Argentine soya oil, citing safety concerns.

After China’s earthquake, Hu cut short his trip to Brazil and cancelled visits to Chile and Venezuela, where he was due to sign an oil deal. The premier would come another time, said Chávez. Venezuela’s leader has declared himself a Maoist, but that scarcely matters to the Chinese. They just want the oil.

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By Kirk Laughlin

Pursuing new lower cost sourcing destinations is a prudent move for outsourcing customers trying to beat back recent currency volatility and continue exploiting cost arbitrage, advises an Everest Research Institute analyst.

“As companies are starting to expand, we’re seeing interest in areas beyond India and the Philippines,” says Anand Ramesh, a research analyst at Everest Research, who notes that on the global stage, places like Egypt, Kenya and Colombia are more frequently popping up on the radar as emerging destinations as companies diversify their sourcing portfolios to manage currency risks.

In Latin America, some of the countries that are seen as emerging  – and increasingly popular – lower-cost options include Nicaragua, Honduras, El Salvador, Peru and Colombia.

The global recession threw currencies around the world into unusual trending patterns, causing some markets to look more attractive – while others, because of currency appreciation, became less appealing from a cost arbitrage perspective. Currency movements in fact are a bigger deal to customers whose bases are in Latin American than those in India, Ramesh argues.

He figures that LATAM offers customers a savings of about 40% (over prevailing costs in the home country), versus a savings of about 60% generally in India. The cushion is therefore wider in India, which permits customers to better absorb currency changes in a way that doesn’t immediately impede their ability to sustain operating surpluses. “If you have a change in the currency in Latin America and it drops the cost savings to around 20 to 25%, then the whole business case is put into question, based in part on cost of management overhead,” says Ramesh, who recently published an Everest Report on the topic: “What is the True Impact of Currency Changes on Offshore Cost Arbitrage.”

The Mexican peso and the Brazilian real have shown increasing stability recently. The one currency that does stand out as a potentially a beacon of stability in the region would be in El Salvador – where the currency is pegged to the U.S. dollar, making it “easier for U.S. customers to interpret,” says Ramesh.

He advised customers who are already in major cities to seek out talent in second or third-tier locations within that country and re-locate them into the higher cost geographies.

“At the end of the day, how currency behaves is anyone’s guess,” says Ramesh. But being vigilant about lowering the full scope of operating costs is especially important in this era where more countries rise up to become sourcing hopefuls.

Mexico’s economy, recovering from its worst recession in decades, could grow as much as 5 percent in 2010, the country’s central bank head said on Sunday, raising his outlook in line with analyst views.

Central Bank Governor Agustin Carstens told an annual Inter-American Development Bank meeting in the Caribbean resort of Cancun that Mexico’s economy could grow between 4 percent and 5 percent this year.

“We are in a strong recovery process … it’s very likely that Mexico will end this year growing between four and five percent,” Carstens told reporters. “Aggregate demand is growing faster in Mexico. That means the output gap will probably close down faster than we anticipated some months ago.”

In January, Carstens said Mexico’s economy would likely grow between 3.2 percent and 4.2 percent in 2010. In February he told Reuters he shared the finance ministry’s view that 2010 growth looked set to come in around 3.9 percent.

Economists and the government say exports, consumer demand and credit from banks are all growing faster than expected.

However, the growth still looks unlikely to make up for a 7 percent decline in gross domestic product last year, the largest in Latin America and caused largely by a plunge in U.S. demand for Mexican-made cars and other exports.

Analysts say the impact on Mexico of the recession in the United States, its main trading partner, was exacerbated by a lack of major economic reforms in areas like tax, the oil industry and labor laws.

Carstens added that the central bank could move to raise interest rates if it finds that recent tax increases are starting to push up consumer prices. (Writing by Robin Emmott; Editing by Catherine Bremer and Diane Craft)