As the United States and Europe still stagger under the financial crisis, Latin America finds itself in a unique position: leading a recovery.
Thanks to banking reforms and increased trade ties beyond the hemisphere, the region is about five months ahead of most industrialized nations in rebounding, said Augusto de la Torre, World Bank chief economist for Latin America and the Caribbean, on Tuesday.
While the real gross domestic product in Latin America is expected to shrink 2 percent to 2.5 percent this year, it should rebound about 3 percent next year, he said at the 13th Annual Americas Conference in Coral Gables.
In the past, Latin American economic woes have often led to regional bank panics, hyperinflation and political instability. This time the troubles have been largely contained.
Peru’s GDP is expected to grow 2 percent to 2.5 percent this year, putting it among the handful of countries in the region that will see positive growth in 2009.
Peruvian Foreign Minister José Antonio García Belaúnde attributed the performance to a sound banking system, which steered clear of risky bets, and free trade agreements with the United States and China.
Indeed, de la Torre said nations such as Brazil, Argentina and Chile, which have strong trade ties with China, are recovering much faster than those that rely on U.S. trade. Mexico will see GDP fall about 7 percent this year amid stalled demand for its goods north of the border.
Despite the positive news, the region is still feeling the pain. Unemployment is rising, budget gaps are increasing, and about 8 million to 10 million people will be pushed into poverty, subsisting on less than $4 per day, said Pamela Cox, World Bank vice president for Latin America and the Caribbean.
Still, with a regional economy about the size of China but much higher rates of consumption, Latin America could be a powerful engine in the global recovery, de la Torre said.
“Latin America can actually help the world more than people think,” he said.
Miami Herald special correspondent Alejandra Labanca contributed to this report.