1. THE ECONOMIES OF LATIN AMERICA AND THE CARIBBEAN: SITUATION AND PROSPECTS Inés Bustillo Director, Washington Office Economic Commission for Latin America and the Caribbean Washington DC – 20 May 2009

2. The developed countries have entered a recession DEVELOPED COUNTRIES: “GDP GROWTH” (Percentages)

3. * Forecast on a Q4 to Q4 basis. ** Average does not include the Mortgage Bankers Association. Note: the CBO, IMF, and OECD forecasts on a Q4 to Q4 basis are -1.5%, -2.2%, and -3.5%, respectively, for 2009. Projections on US economic growth

4. Economic situation prior to crisis

5. Regional GDP was up by 4.6% in 2008, completing sixth consecutive years of economic growth LATIN AMERICA AND THE CARIBBEAN: GDP GROWTH, 2008 (Percentages) The per capita GDP of the Latin American and Caribbean region grew by more than 3% for the fifth year in a row

6. Higher growth rates, lower unemployment and better-quality jobs have helped improving poverty indicators. LATIN AMERICA AND THE CARIBBEAN: EMPLOYMENT AND UNEMPLOYMENT Growth has been coupled with improvements in labour-market indicators

7. LATIN AMERICA: EVOLUTION OF POVERTY AND INDIGENCE LEVELS, 1980 – 2008 a (In percentages and millions of people) Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of special tabulations of household surveys conducted in relevant countries. a Estimate for 19 countries of the region, including Haiti. The figures appearing above the bars in each chart represent the percentage of the population and the total number of poor persons (indigents plus non-indigent poor). b Projections. In 2008, poverty levels decreased slightly, but no reduction was seen in indigence

8. Transmission channels and impact

9. One by one, the engines of growth are shutting down The real economy  Slowdown in exports  Falling commodity prices  Lower remittances  Reduced revenues from tourism  Smaller inflows of foreign direct investment (FDI) The financial sector  Higher cost of external credit  Reduced availability of international financing The international crisis is being transmitted to the region through various channels, though not to the same extent in all the countries

10. Commodity prices are falling but they may remain relatively high COMMODITY PRICE INDICES (2000=100)

11. The region’s terms of trade continued to improve in 2008 but are expected to worsen in 2009 LATIN AMERICA (19 COUNTRIES): TERMS OF TRADE, 2008-2009 (Percentages)

12. Not all the economies are exposed in the same way Latin America: degree of exposure of the demand components (% of GDP)

13. Amidst increased volatility, the perceived risk associated with emerging economies is on the rise Risk has increased less than in other crises

14. Preparedness to face crisis:  Reserves  Public debt

15. LATIN AMERICA AND THE CARIBBEAN: ESTIMATED GROWTH FOR 2009 (%) In 2009, the region’s growth is expected to slow dramatically

16. Evolution in the level of activity will have a negative impact on labor-market indicators LATIN AMERICA AND THE CARIBBEAN: OCCUPATION AND UNEMPLOYMENT

17. Economic policy responses

18. The response capacity to the crisis is also different Scope of measures to tackle the crisis f Monetary and Financial Policy a b c a c e g h i j k l m a c d Reduction or relaxation of reserve requirements Exchange-rate and external trade policy Financing of exporters Tariff cuts Obtaining credit from international financial bodies Sectoral Policies Housing Small and medium-sized enterprises Sectoral policies Employment and social policies Promoting job creation Social programmes Increased tariff or import restrictions Provision of liquidity in national currency Fiscal Policy Tax cuts or increased subsidies Spending increased or brought forward (infrastructure)

19. The impact of the announced measures is different COUNTRIES THAT ANNOUNCED QUANTIFIABLE INCREMENTS IN 2009 PUBLIC EXPENDITURE Estimated impact as % of GDP

20. Beyond the current cycle

21. Lessons learned  Avoiding protectionism  Preventing the crisis from increasing inequity as a result of biased measures  Protecting the countries’ capacity to maintain social spending, especially spending aimed at building human capital  Continuing to invest in infrastructure  “Green deal”

22. THE ECONOMIES OF LATIN AMERICA AND THE CARIBBEAN: SITUATION AND PROSPECTS Inés Bustillo Director, Washington Office Economic Commission for Latin America and the Caribbean Washington DC – 20 May 2009