The economic outlook for Latin America and the Caribbean in 2016 is complex amid the global slowdown and experts have urged countries in the region to diversify their economy and add value to their exports.
The region's economies shrank by 0.4 percent on average in 2015 and will grow by just 0.2 percent in 2016, according to a latest report from the Economic Commission for Latin America and the Caribbean (ECLAC). "2015 was very difficult for Latin America.
While we see 2016 with slightly more optimism, we are not talking about a great recovery. It will be a bit better than 2015, leading to a far brighter future for 2017," said Alicia Barcena, ECLAC's executive secretary. Last year was also characterized by a deceleration of emerging economies, which grew by only 3.8 percent.
For 2016, the world is expected to grow at an average rate of 2.9 percent, which is broken down into a 4.3-percent growth for emerging economies and a 2.2-percent growth for developed countries, the report said.
According to ECLAC, the low growth rate of Latin American economies signifies the end of "the commodity supercycle," and a decrease in exports. "Growth must return to reverse the contracting cycle of investments in a context of slow recovery and a fall in trade," the report said.
"We need to diversify our economy and add more value to Chile's exports to the world," Andres Rebolledo, director of economic relations at the Chilean Foreign Ministry, told Xinhua. "Dropping demand internationally has affected the prices of raw materials, including copper, Chile's principal export.
As a country, we must diversify its production base in the long term," Rebolledo said. "To do so, we need to associate our foreign trade with innovation and development among our companies...we will therefore foment a level of productivity which will be far more in tune with the export model we seek to achieve," he said.
Rebolledo also said China's adoption of "the new normal" featuring economic restructuring and slower growth has had an impact on Latin America and is expected to offer the continent numerous opportunities. Furthermore, the region must now deal with the U.S. interest rate hike in December 2015, the first time since 2008, which may happen again in 2016.
This measure will certainly impact the entire world in 2016 as it will require governments to promote currency flow while trying to stabilize their own economies, experts said. Central banks in Mexico and Chile have increased their own interest rates following the U.S. measure and others may follow suit or risk a capital flight.
Under such new circumstances, the space is limited for governments to adopt brand-new policies without making large modifications such as controls on public spending, modifying exchange rates to stimulate the economy and controlling inflation, experts said.
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