Paraguay Leads Latin American Growth; Venezuela Shrinks 1.6%

By Dialogo
December 16, 2010

With GDP expansion of 9.7%, Paraguay will lead regional growth in 2010, followed closely by Uruguay, Peru, Argentina, and Brazil, which have rebounded strongly from last year’s crisis, while the Venezuelan economy will shrink 1.6%, according to ECLAC data.

Paraguay is seeing a notable recovery of its economy after it contracted 3.8% in 2009 due to the international crisis and the effects of a persistent drought.

This year the Paraguayan economy was favored by the growth of the agricultural and livestock sector – especially soy production – by good climatic conditions, and by cattle production, according to the report by the Economic Commission for Latin America and the Caribbean (ECLAC).

A GDP growth rate of 3.5% is expected for 2011.

Uruguay and Peru also rank high on the charts.

After recording 2.9% growth last year, the Uruguayan economy will expand 9%, the second highest rate of growth in the region, followed by Peru with 8.6%.

The Peruvian economy was stimulated by the growth of domestic demand in the context of low inflation, a reduction in the budget deficit, and a current-account balance of payments surplus.
The forecasts for 2011 point to a 6% expansion.

Argentina, meanwhile, will grow 8.4% in 2010, while a 4.8% expansion is expected for 2011.

ECLAC estimates that Brazilian GDP will grow 7.7% in 2010 and 4.6% next year. In 2010, the Brazilian economy consolidated its recovery, together with a strong increase in jobs motivated by growth in domestic demand, due especially to public policies of increased spending and borrowing, directed particularly toward investment.

In contrast, the Venezuelan economy is the one that will contract most this year, although a 2% expansion is expected for 2011.

Venezuela was affected by a severe energy crisis, to which was added a fall in investment and private consumption, in a context of high inflation and an increase in unemployment.

The restriction of electricity consumption particularly affected sectors such as the manufacturing industry, retail, and services. In addition, exports, private consumption, and gross fixed capital formation contracted, ECLAC explained.