Maintitle

Copyright

Alicia Bárcena

Executive Secretary

Antonio Prado

Deputy Executive Secretary

Daniel Titelman

Chief, Economic Development Division

Ricardo Pérez

Chief, Publications and Web Services Division

www.cepal.org/de

The Economic Survey of Latin America and the Caribbean is issued annually by the Economic Development Division of the Economic Commission for Latin America and the Caribbean (ECLAC). The 2015 edition was prepared under the supervision of Daniel Titelman, Chief of the Division, and coordinated by Jürgen Weller.

In the preparation of this edition, the Economic Development Division was assisted by the Statistics Division, the Natural Resources and Infrastructure Division, the Sustainable Development and Human Settlements Division, the ECLAC subregional headquarters in Mexico City and Port of Spain, and the Commission’s country offices in Bogota, Brasilia, Buenos Aires, Montevideo and Washington, D.C.

Part I, entitled “The economic situation in Latin America and the Caribbean in 2014 and 2015”, was prepared by Daniel Titelman and Ramón Pineda, with input from the following experts: Cecilia Vera (international context and external sector), Ramón Pineda, Claudio Aravena, Rodrigo Cárcamo and Yusuke Tateno (economic activity), Seung-jin Baek and Alda Díaz (prices), Jürgen Weller (employment and wages), Ramón Pineda, Rodrigo Cárcamo and Alejandra Acevedo (monetary, exchange-rate and macroprudential policies) and Ricardo Martner, Juan Pablo Jiménez, Michael Hanni, Ivonne González and Ignacio Ruelas (fiscal policy).

Part II, entitled “Challenges in boosting the investment cycle to reinvigorate growth”, was prepared by Daniel Titelman and Ricardo Martner, with input from Esteban Pérez and with assistance from Pablo Carvallo, Manuel Cruz and Alejandro González (chapters II and V), Ricardo Martner, Juan Pablo Jiménez, Michael Hanni, Ivonne González and Andrea Podestá (chapter III), Ricardo J. Sánchez, Azhar Jaimurzina, Jeannette Lardé and Antonin Menegaux (chapter IV), and Joseluis Samaniego, Luis Miguel Galindo, José Eduardo Alatorre, Jimy Ferrer and Orlando Reyes (box IV.2).

The country notes are based on studies conducted by the following experts: Olga Lucía Acosta, Luis Javier Uribe and Juan Carlos Ramírez (Colombia), Dillon Alleyne (Jamaica), Anahí Amar and Daniel Vega (Argentina), Verónica Amarante and Álvaro Lalanne (Uruguay), Rodrigo Cárcamo (Peru), Pablo Carvallo (Chile), Cameron Daneshvar (Honduras and Dominican Republic), Stefanie Garry (Guatemala and Nicaragua), Randolph Gilbert (Haiti), Sonia Gontero (Paraguay), Michael Hanni (Plurinational State of Bolivia), Michael Hendrickson (Bahamas and Belize), Cornelia Kaldewei (Ecuador), Sheldon McLean (Barbados and Eastern Caribbean Currency Union), Michael Milligan (Guyana), Rodolfo Minzer (Costa Rica and Panama), Carlos Mussi (Brazil), Machel Pantin (Suriname and Trinidad and Tobago), Juan Carlos Rivas (Mexico), Indira Romero (Cuba) and Francisco Villarreal (El Salvador).

Alda Díaz, José Luis Germán, Alexander Loschky and Sonia Albornoz contributed to the processing and graphical presentation of the statistical data.

Explanatory notes:

– Three dots (...) indicate that data are not available or are not separately reported.

– A dash (-) indicates that the amount is nil or negligible.

– A full stop (.) is used to indicate decimals.

– The word “dollars” refers to United States dollars, unless otherwise specified.

– A slash (/) between years e.g. 2003/2005 indicates a 12-month period falling between the two years.

– Individual figures and percentages in tables may not always add up to the corresponding total because of rounding.

United Nations publication

ISBN: 978-92-1-121895-4 (print)

ISBN: 978-92-1-057223-1 (pdf)

ISBN: 978-92-1-358010-3 (ePub)

Sales No.: E.15.II.G.3

LC/G.2645-P

Copyright © United Nations, 2015

All rights reserved

Printed at United Nations, Santiago

S.15-00732

This publication should be cited as: Economic Commission for Latin America and the Caribbean (ECLAC), Economic Survey of Latin America and the Caribbean, 2015 (LC/G.2645-P), Santiago, 2015.

Applications for the right to reproduce this work, either in whole or in part, are welcomed and should be sent to the Secretary of the Publications Board, United Nations Headquarters, New York, N.Y. 10017, United States. Member States and their governmental institutions may reproduce this work without prior authorization, but are requested to mention the source and inform the United Nations of such reproduction.

Contents

Maintitle

Copyright

Foreword and executive summary

Part I

The economic situation in Latin America and the Caribbean in 2014 and 2015

Chapter I

Regional overview

Part II

Challenges in boosting the investment cycle to reinvigorate growth

Chapter II

Gross fixed capital formation in Latin America and the Caribbean: stylized facts and long-term growth implications

Chapter III

A bridge to the future: boosting investment in the public sphere

Chapter IV

Economic infrastructure in Latin America: a persistent challenge for progress towards sustainable development

Chapter V

Financing investment in Latin America and the Caribbean: the issues and main challenges

Statistical annex

Foreword and executive summary

Foreword

Executive summary

Foreword

This, the sixty-seventh edition of the Economic Survey of Latin America and the Caribbean, which corresponds to the year 2015, consists of three parts. Part I outlines the region’s economic performance in 2014 and analyses trends in the first half of 2015, as well as the outlook for the rest of the year. It examines the external and internal factors influencing the economic slowdown and highlights some of the challenges facing macroeconomic policymakers, particularly the need to boost investment as both a central pillar of the economic recovery and as an engine of growth in the medium and long term.

Part II analyses the dynamics of investment in Latin America and the Caribbean, the relationship between investment and the business cycle, the role of public investment, infrastructure gaps and the challenges in financing private investment. The issues considered include the structural weaknesses of investment in the region, its performance relative to other regions and challenges in public policymaking, especially in achieving high rates of well-managed, countercyclical public investment and developing financial markets that support private investment, particularly by small and medium-sized enterprises.

Part III of this publication may be accessed on the web page of the Economic Commission for Latin America and the Caribbean (www.eclac.org). It contains the notes relating to the economic performance of the countries of Latin America and the Caribbean in 2014 and the first half of 2015, together with their respective statistical annexes, which present the main economic indicators of the countries of the region.

The cut-off date for updating the statistical information in this publication was 30 June 2015.

Executive summary

A. Economic situation and outlook for 2015

On the basis of the economic activity of Latin American and Caribbean countries in the first quarter of 2015, the region’s annual growth rate is projected to be significantly lower than the 1.1% posted in 2014. Notwithstanding this overall picture of regional deceleration, growth patterns differed greatly between countries and subregions, so that while the region’s weighted-average growth rate is expected to be 0.5%, South America is set to contract by 0.4%, but Central America and Mexico are likely to expand by 2.7% and the Caribbean will grow by 1.7%.

These trends originate in a combination of external and domestic factors. On the external front, global economic growth will remain sluggish in 2015, albeit speeding up slightly compared with 2014. Developed countries are projected to see average growth of 2.2%, while emerging economies will continue their slowdown, with expected growth of 4.4%.

This pattern of slower GDP growth coincided with stagnant growth in the volume of world trade, with rates still lower than those that preceded the global financial crisis and which have not topped 5% since 2011. During the first four months of 2015, the year-on-year variation in trade volume averaged just 2%, showing signs of slowing even more sharply than in 2014.

Weaker external demand has been accompanied by a downturn in commodity prices. Specifically, metal and agricultural-product prices began to fall in the first quarter of 2011 and, though the trend has stabilized, these categories posted respective losses of 41% and 29% between the first quarter of 2011 and April 2015. After a period of stagnation and gradual decline since 2011, energy prices (comprising crude oil, natural gas and coal) tumbled 52% in the seven months between July 2014 and January 2015. The crude oil price —the largest component in the energy price index— dropped by almost 60% in that period.

The commodity price trend has been mirrored by the evolution in the terms of trade of the region’s countries. Hydrocarbon-exporting countries are likely to experience the greatest deterioration over 2015, followed by countries that export agro-industrial goods and mining products. Central American and Caribbean countries that are net importers of raw materials should improve their terms of trade in 2015. Raw material prices also had an impact on trade balances. The Economic Commission for Latin America and the Caribbean (ECLAC) calculates that, for the region as a whole, falling export prices will cause export earnings to diminish more rapidly than spending on imports owing to lower import prices. Consequently, between 2014 and 2015, these price changes led trade deficits to widen by about 1.2% of GDP. The estimated loss of the group of energy-exporting countries could be around 3.3% of GDP. For the member countries of the Southern Common Market (MERCOSUR), whose exports are dominated by agro-industrial products, trade balance losses would stand at 0.9% of GDP, while exporters of mining products stand to lose 0.5% of GDP. For the Central American countries plus the Dominican Republic and Haiti, the gains derived from lower import prices comfortably outweigh the expected losses due to lower export prices, and would yield a net gain of about 1.6% of GDP for the subregion. Against this backdrop, the current account deficit is forecast to widen slightly, on average, to 3.0% in 2015.

Financial markets are increasingly volatile in an ongoing context of severe economic and geopolitical risks. Following years of abundant liquidity in international financial markets and access to credit at low interest rates, concerns have arisen once again over the date of a possible increase in the benchmark interest rate by the United States Federal Reserve, as well as the timing and size of subsequent increases. It is unclear what impact a hike would have on financial markets. On the one hand, it may become more costly to tap resources in international markets, since liquidity would be less available as major providers such as the European Central Bank and the Bank of Japan would be unable to offset the liquidity squeeze caused by the hike. On the other hand, much will depend on how higher international rates affect the relative attractiveness of investments in non-dollar currencies, along with the impact on financial inflows to emerging markets, their financial asset prices and currencies.

Recent events in Greece surrounding its continued euro membership (or exit) have placed a question mark over the future of the single currency and possible repercussions in financial markets. Despite the above concerns, the region’s countries are expected to maintain their access to international financial markets, albeit in a more complex scenario of tighter global liquidity.

In terms of domestic factors, one significant aspect was the slackening of demand, led by falling investment. The contribution of gross capital formation to growth, which had been in gradual decline since 2011, fell even more sharply from the second quarter of 2013. In 2014, gross fixed capital formation contracted by 2.0% for the region. In the first quarter of 2015, investment continued to slide, which had a negative impact of about 0.3 percentage points of GDP on growth in domestic demand. This investment pattern is alarming because of its adverse impacts on the dynamics of the business cycle and on the capacity for medium- and long-term growth.

Since the second quarter of 2013 (and especially in 2014), consumption expenditure also saw significantly slower growth, falling from 3.0% in 2013 to 1.4% in 2014. Specifically, private sector consumption slowed even more sharply, from 2.9% to 1.2% in the same period. This means that despite remaining the most important driver of GDP growth, the contribution of private consumption fell from 1.9 percentage points to 0.8 percentage points in 2014. Public and private consumption were also the main drivers of aggregate demand in the first quarter of 2015, although private consumption continued to falter and its contribution to economic growth once again diminished.

One notable aspect of 2014 and the first quarter of 2015 was that net exports made a positive contribution to GDP growth for the first time since the international crisis of 2009.

The economic slowdown has had little impact on unemployment. At the regional level, the drop in the employment rate in 2014 was not mirrored by a rise in the unemployment rate, which in fact edged down from 6.2% to 6.0%. However, preliminary data for the first half of 2015 indicate that persistently weak job creation is set to push up the region’s open unemployment rate from 6.0% to 6.5% on average for the year.

Real wages are continuing to rise modestly in most countries, but sagging job creation is weighing on households’ purchasing power, as reflected in lower private consumption growth.

The capacity of the region’s countries to accelerate economic growth is contingent on the space available for the adoption of countercyclical policies, especially with a view to stimulating investment, which will be critically important for softening the impacts of the current external shock and preventing severe consequences for economies in the medium and long term.

In 2014 and the first quarter of 2015, the region’s countries faced different situations in terms of the amount of fiscal space available. With a few exceptions, the public-debt-to-GDP ratio of Latin American countries generally remained stable at about 30% of GDP, largely thanks to the prevailing low interest rates, although borrowing by State-owned enterprises accelerated in some cases.

Preliminary figures suggest that, on average, revenue growth was outpaced by that of expenditure during the first quarter of 2015. Fiscal revenues are expected to fall in several Latin America countries in 2015 amid declining income from non-renewable natural resources. However, tax revenues are showing signs of a revival thanks to the recent reforms implemented in some countries.

The Caribbean has seen a marked improvement in its fiscal position, although the high level of public debt continues to weigh heavily on growth and investment. Caribbean countries are taking large strides to boost tax revenues, which will help them to close their fiscal gaps.

In terms of monetary policy, in 2014 and the first quarter of 2015, the countries generally adopted a countercyclical approach in an attempt to revitalize economic activity. In the first five months of 2015, the authorities of Colombia, Chile and Mexico kept their benchmark rates unchanged, while Brazil continued to raise rates, with hikes in January, March and April. In Peru, the interest rate was cut by 25 basis points in January 2015 and has remained unchanged since then.

The countries that used monetary aggregates as their main monetary policy instrument experienced quickening growth in the second half of 2014. During the first quarter of 2015, the monetary base in Caribbean economies followed a similar growth trend to that of 2014, while in Central and South American economies the monetary base expanded at a faster rate.

As in 2014, during 2015 the region’s currencies tended to weaken against the dollar, a trend which coincided with a recovery in the level of international reserves. However, in the first five months of 2015, the build-up of international reserves slowed, posting an increase of 0.4% between December 2014 and May 2015.

The countercyclical monetary policy stance has been made possible by relatively low inflation rates. Since 2014, inflation patterns have differed in the countries and subregions of Latin America and the Caribbean: they have trended downward in the economies of the Caribbean, Central America and Mexico, and upward in the South American economies. Exchange rates have been an important factor in pushing up inflation.

B. The investment dynamic and future challenges

As stated above, one of the main factors behind the region’s economic slowdown is the performance of investment. The falling investment rate and the reduced contribution of gross capital formation to growth are worrying, since they are detrimental not only to the business cycle, but also to the capacity and quality of medium- and long-term growth. For that reason, one of the main challenges for the resumption of vigorous growth is to revitalize the process of gross capital formation. In that context, the thematic chapters in this edition of the Economic Survey of Latin America and the Caribbean analyse the dynamics of investment in Latin America and the Caribbean, the relationship between investment and the business cycle, the role of public investment, infrastructure gaps and the challenges in financing private investment.

Chapter II examines the dynamics of the investment process in the region, the linkages between investment and the business cycle and the long-term effects of investment. Historically, gross fixed capital formation in Latin America and the Caribbean has been lower than in other developing regions. However, between 1990 and 2014, the countries of the region narrowed their investment gap with the developed economies and other developing countries, largely through higher private investment, which constitutes about 74% of gross fixed capital formation. Public investment (including that by State-owned enterprises) has strengthened since 2003, recovering from the large declines of the 1980s and 1990s and returning to levels of about 5% of GDP, but this figure is still low by comparison with Asia and Africa, where public investment is about 8% of GDP.

Investment in the region is more volatile than elsewhere in the world, essentially because of the dynamic of the machinery and equipment component, which tends to be associated with productivity. When this component is very volatile, so too are productivity gains, which consequently cannot be sustained over time. This is one reason for the productivity gap between Latin America and the Caribbean and other regions.

Investment volatility reflects specific characteristics of the region’s business cycle. As this edition of Economic Survey of Latin America and the Caribbean shows, the data suggest that the dynamic of the region’s investment cycle has been unfavourable to sustained, inclusive medium- and long-term growth. Analysis of business cycles between 1990 and 2014 shows investment contracting by substantially more and for much longer than GDP during cyclical downturns. Public investment has contracted particularly sharply, and by more on average, than in other regions of the world. Lastly, during cyclical upswings investment growth has not been enough to make up for the large and protracted declines during the downturns.

Investment behaviour not only affects the speed and rate of capital accumulation, but also has a direct bearing on productivity. The causal relationship between capital accumulation and productivity makes the cyclical characteristics of investment an important determinant of long-run growth capacity.

Chapter III, which focuses on public investment, discusses the need to move towards an inclusive fiscal framework to promote public and private investment. Starting from a narrow base, public investment began to rise in the region from 2003. The simple average of public capital spending in 19 Latin American countries (including State-owned enterprises in countries where these have significant presence) jumped from 4.7% to 6.5% of GDP between 2000 and 2014.

One of the lessons that the chapter draws is that to boost growth, fiscal rules should protect capital spending. To address macroeconomic volatility in the region, it is extremely important to design efficient countercyclical schemes that protect investment. For minimizing adjustment costs and brightening expectations of potential growth and future stability, schemes to complement countercyclical policies by protecting (and stimulating) investments during troughs in the business cycle could be much more effective than fiscal rules based solely on spending or deficit targets.

Fiscal space is typically defined as the resources that are available for a specific purpose without affecting the sustainability of the government’s financial position (public debt) or of the economy as a whole (ECLAC, 2014).[1] But that static definition does not take into account the dynamic effects that occur in the investment process: it is perfectly possible to safeguard the fiscal space (or maintain solvency) if public capital spending favours growth and thus generates future tax benefits. In other words, well managed public spending can help generate a virtuous circle of sustainable growth. Public investment can thus broaden the fiscal space, since it stimulates growth and thus secures future tax revenues. For that reason, it is important to put in place fiscal rules that stimulate investment.

One topic currently under discussion, and which is reviewed in this chapter, refers to the use of tax incentives to boost investment. Tax incentives or subsidies seem to have little effect in terms of bringing investment to fruition, but have had an adverse and immediate impact on fiscal space and the provision of public goods. Partly owing to institutional weaknesses and partly for ideological reasons, the overuse of these instruments has caused the fragmentation of tax systems and undermined income tax in particular. These incentives cannot be easily dismantled, since in most cases eliminating tax competition requires concerted action by countries that share similar economic spaces or activities.

Lastly, the chapter examines the experiences of the region in the area of public-private partnerships. One of the main benefits of such partnerships is that they use private resources to finance infrastructure investment without putting pressure on fiscal space. However, the commitments undertaken regarding the private partner, and the explicit or implicit guarantees given in certain contracts, may endanger future fiscal sustainability and the space for future public investments. A fundamental lesson to emerge from the region’s experience is that this kind of legal and financial instrument has complemented public investment in some areas when an appropriate regulatory authority is in place; however, most capital spending on public goods remains directly funded by the State.

Chapter IV discusses the infrastructure needs and investment gaps of the region’s countries, and underscores the importance of good-quality, reliable, sustainable and resilient infrastructure as a central aspect of sustainable development.

Latin American countries continue to have a severe infrastructure shortfall in all the economic infrastructure sectors analysed, although the situation is not homogeneous across countries or specific sectors. The shortcomings on display are especially striking when the region is compared not only with developed countries, but also with certain developing countries that had a similar infrastructure endowment level to Latin America in the 1980s. Furthermore, when the criterion of infrastructure quality is included in addition to that of availability, the current situation in the Latin American countries looks even more alarming, and the profound need for substantial investment efforts in the sector becomes apparent.

The chapter also shows that there has as yet been no adequate response to the demand for infrastructure investment. The highest investment ratios of the past 30 years were in the 1980s, while in the 1990s there was a sharp contraction in most of the region’s countries. Only in the period between 2002 and 2012 was there a small recovery, though infrastructure investment in general and by sector did not reach the levels estimated by ECLAC and other multilateral organizations as necessary to meet the requirements of firms and final consumers.

Against this background, the issue of investment in economic infrastructure in Latin America must be a central concern for sustainable development-oriented public policymaking. Although many of the region’s countries have adopted ambitious infrastructure plans, greater efforts are needed in terms not only of the quantity of investment but also of its quality, and thus the quality of the public policies on infrastructure planning and management.

Finally, chapter V looks at the issues surrounding investment financing in Latin America and the Caribbean. Financial inclusion and productive financing constitute two of the region’s main challenges in this regard. At present, just 40% of small firms and 70% of large firms have access to funding from the formal financial system. The financial inclusion gaps between larger and smaller firms are partly explained by asymmetries in information and financing costs, and by the characteristics of the financial system in Latin America and the Caribbean.

The financial systems of the region’s countries are generally shallow, short-termist and essentially reliant on commercial banks. There are few long-term financing instruments. Furthermore, one consequence of the information asymmetries that prevail in the region is credit rationing, especially for small and medium-sized enterprises (SMEs) and innovation activities. These features have resulted in high and segmented costs and low levels of banking coverage.

Another important factor that hinders firms from accessing financing is the still incipient and limited development of the capital market in Latin America and the Caribbean, with low capitalization levels and share trading volumes. Moreover, the number of firms listed on the region’s stock exchanges has declined in the past decade, and trading is largely confined to a handful of shares.

When firms’ access to financing is limited, their production capacity and the ability to grow and prosper are also constrained, since they are forced to finance their operations solely out of their own funds. The evidence for SMEs is that they use the financial system mostly for deposits and as a medium of payment, and far less for credit products, and this can constrain their capacity for future expansion and growth.

This state of affairs limits investment, innovation, productivity and growth. It also creates a vicious circle that keeps smaller production units in a constant state of vulnerability and low growth, with serious consequences for poverty and social inequality.

In a context of shallow financial markets and underdeveloped capital markets, boosting domestic resource mobilization for productive investment requires a set of economic and financial policies oriented towards developing financial markets and encouraging saving for long-term financing. The capacity and effectiveness of the financial system when it comes to channelling resources into production activities depend on the provision of low-cost intermediation services and the development of financial instruments and institutions that can adapt to different risk profiles, liquidity needs and maturities in the production sector.

[1] Economic Commission for Latin America and the Caribbean (ECLAC), Panorama Fiscal de América Latina y el Caribe 2014: hacia una mayor calidad de las finanzas públicas (LC/L.3766), Santiago, 2014.

Part I

The economic situation in Latin America and the Caribbean in 2014 and 2015

Chapter I

Regional overview

A. The external context

B. The external sector

C. Domestic performance

D. Macroeconomic policy

Bibliography

A. The external context

Projections for global economic growth have been revised downward. The world economy was affected during 2014 and the first half of 2015 by a sharp drop in commodity prices, while international financial variables have been somewhat volatile in a context where major risks remain in a number of areas, not just economic and financial, but geopolitical as well. The main features that have been observed in recent times in the international context, and that are naturally affecting the region’s economic performance in 2015, will now be described.

1. World economic growth was 2.6% in 2014 and is expected to be slightly higher in 2015, although projections have been revised downward

The world economy grew by 2.6% in 2014, a tenth of a percentage point more than in 2013, so that a slight accelerating trend was maintained. As can be seen in table I.1, growth in the developed countries, while still much lower than in the developing world, has been picking up in recent years. In particular, the developed countries grew by 1.6% in 2014, four tenths of a percentage point more than in 2013. Within this group, particular mention should be made of the United States, whose economy grew by 2.4% in 2014, a faster rate than in earlier years, and the eurozone, where growth of 0.9% followed a contraction of 0.4% in 2013.

Conversely, growth rates in developing countries have been on a downward trend in the last few years, and their 4.4% expansion in 2014 was a decline on the previous year’s 4.7%. The position of China within this group is particularly significant, as growth rates there have been declining steadily, and in 2014 the Chinese economy grew by less than 7.5% for the first time since 1990 (see table I.1).

Table I.1

Selected regions and countries: GDP growth, 2008-2015

(Percentages)

2008-2011

2012

2013

2014

2015 a

Revision from January 2015 projection

World

1.9

2.4

2.5

2.6

2.8

-0.3

Developed countries

0.1

1.1

1.2

1.6

2.2

0.1

United States

0.2

2.3

2.2

2.4

2.8

0

Japan

-0.7

1.5

1.6

0

1.2

0

Eurozone

-0.2

-0.8

-0.4

0.9

1.6

0.3

Russian Federation

1.4

3.4

1.3

0.4

-3.0

-3.2

Developing countries

5.6

4.8

4.7

4.4

4.4

-0.4

India

7.3

4.7

6.4

7.2

7.6

1.7

China

9.6

7.7

7.7

7.4

7.0

0

Southern Africa

3.3

3.4

3.2

2.5

2.9

-0.7

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of United Nations, World Economic Situation and Prospects, 2015. Update as of mid-2015, New York, 2015; World Economic Situation and Prospects, 2014, New York, 2014.

a Projections as of May 2015.

Although the world economy is expected to grow by 2.8% in 2015, slightly faster than in 2014, this is less than was being projected a few months ago. The January 2015 forecast was for world economic growth of 3.1%, three tenths of a percentage point above the current projection. Developing countries (among them those of Latin America and the Caribbean, as will be discussed further on) are part of the reason for this downward revision, as are transition economies like the Russian Federation, since the projection for the developed countries has been revised slightly upward.

The developed countries are expected to grow by 2.2% in 2015, a higher rate than in 2014 and one that is in line with the accelerating trend of previous years.

Within this group, projections for the United States over the whole of 2015 are positive, even though economic growth in the first quarter of the year was negative (a drop of 0.2% on the previous quarter in annualized terms). Activity in the first quarter was affected by climatic factors and by a port strike on the west coast, which negatively affected the dynamism of the economy, but these factors will drop out for the rest of the year.

In the case of Japan, after a year of virtual economic stagnation in 2014, things look more positive for 2015 because of the Bank of Japan’s ultra-loose monetary policy, which has contributed to a considerable depreciation of the yen, as will be analysed further on. The drop in the oil price has also had a substantial effect.

An expansion of 1.6% is forecast for the eurozone in 2015, well above the 0.9% growth of 2014. In line with this projection, that region grew by 1.1% in the first quarter of 2015 over the same quarter the year before. The consolidation of higher growth in the eurozone is basically explained by the effects of a large monetary expansion (see point 4) and consequent depreciation of the euro against the dollar (almost 30% in the period comprising 2014 and the first four months of 2015) in conjunction with falling energy costs, which will be discussed later. Projections remain subject, of course, to the uncertainty surrounding the eurozone in a number of areas, with Greece being the main factor. In addition, there are underlying structural issues that have persisted unresolved in the eurozone since the end of the global financial crisis. For example, the International Monetary Fund (IMF) recently warned that the eurozone needed to unclog the bank lending channel by dealing once and for all with the non-performing loans that remain on banks’ balance sheets.

For developing countries, consistent with the slowing trend mentioned at the outset, a growth rate of 4.4% is expected for 2015, the same as in 2014. Within this group, the Chinese economy is expected to grow by 7% in 2015, and annualized growth in the first quarter of this year was exactly in line with that forecast. By contrast, growth in the Indian economy has been speeding up since 2013 and is expected to surpass China’s in 2015.

2. World trade remains slack

World trade volume growth rates still languish at levels lower than before the global financial crisis. Indeed, trade growth has not exceeded 5% since 2011 (see figure I.1). This is the longest period of persistently low trade growth since the data series began.

Figure I.1

World: trade volume growth, 1992-2014

(Percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of figures from the Netherlands Bureau of Economic Policy Analysis (CPB).

Year-on-year world trade volume growth averaged just 2% in the first four months of 2015, which is indicative of even greater sluggishness than in 2014, when growth averaged 3%. This was due mainly to weakness in the volumes exported from the emerging countries of Asia, and also from Japan and the United States, with dollar appreciation in the latter combining with the west coast dock strike to affect export volumes in early 2015.

At the same time, stronger export volumes have accompanied the eurozone’s large currency depreciation, and export volumes from Latin America and the Caribbean have also been rising, as will be discussed in the section on the external sector (see figure I.2).

Figure I.2

Selected countries and regions: seasonally adjusted year-on-year export volume growth,

three-month moving average, March 2009-April 2015

(Percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of figures from the Netherlands Bureau of Economic Policy Analysis (CPB).

3. Commodity prices have fallen by more than expected

The downward trend in metal and agricultural commodity prices that began in early 2011 continued during 2014 and the early months of 2015 (see figure I.3), with cumulative falls of 39% and 29%, respectively, between

January 2011 and May 2015.

Figure I.3

International commodity prices, January 2011-April 2015

(Index: January 2011=100)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of World Bank Commodity Price Data (Pink Sheet).

Prices for energy commodities (a category comprising oil, natural gas and coal), after holding fairly steady and then gradually sinking between early 2011 and the first half of 2014, fell dramatically from July that year. They bottomed out in January 2015 after falling by 52% in just seven months, mainly because of the drop in the price of crude oil (the largest component in the reference index), which was almost 60% over the period.[1]

There are a number of factors behind commodity price falls. As discussed in earlier publications, global demand for these products has dipped, mainly because of slowing growth in the Chinese economy, while worldwide supply has risen as a result of increased investment in natural resource sectors during the price boom of the last decade. Additionally, however, there can be no doubt that there are possible speculative factors behind commodity price movements. In recent years, commodities have become financial assets with price changes driven by shifts in expectations about future market conditions as well as the actual state of the market and the balance of supply and demand. The growing role of commodities as financial assets is manifested, among other things, in the fact that their prices are becoming more closely associated (correlated) with more traditional financial assets such as shares (Pérez-Caldentey, 2015).

In the particular case of the oil price, its dynamic is also accounted for by factors specific to the oil market, given the appearance of the United States as a large-scale producer of crude via the exploitation of unconventional deposits (namely, oil shales) and technologies. United States crude production grew very strongly from late 2011 to the first half of 2014, almost offsetting the declines in production that resulted from the successive geopolitical conflicts affecting traditional sources in North Africa and the Middle East. Thus, a rough balance was maintained in the global crude market during those years and the price held steady, averaging US$ 110 per barrel.[2]

From the second half of 2014, the supply of crude went into surplus because increased output in the United States more than offset declines in conflict-stricken oil-producing areas. Possible speculative factors aside, this supply surplus has undeniably been a major cause of the price drop since the second half of 2014.

On the question of what to expect from commodity prices over the second half of 2015, projections from different sources suggest that some kind of floor has been reached and prices will either remain at levels similar to today’s or recover some of the ground lost, depending on the commodity. In the case of crude oil, the downward trend actually reversed in February, mainly because of a decline in the number of active wells in the United States. This factor should continue to affect prices until the end of the year, but is not expected to drive them above US$ 65 or US$ 70 a barrel, since United States output would be increased if they went higher than this. It has even been hypothesized that the oil price might stabilize at these levels for an extended period. The consequences this could have for the countries are manifold and naturally depend on how much their economies depend on oil exports or imports. Worldwide, though, it has been estimated that the net effect should be positive, insofar as lower oil prices translate into higher global consumption and, ultimately, higher output.[3] There are still a number of major risk factors that could drive the price up (including the conflicts in the Middle East, the tension between the Russian Federation and the West and the stronger dollar) or down (a further rise in the crude supply, for example, if sanctions on the Islamic Republic of Iran are lifted).

Where metal prices are concerned, the boost to demand from low energy prices could result in a stable or even upward trend. In the case of agricultural commodity prices, lastly, two opposing forces are at work. First, the weakness of some producer countries’ currencies (the Brazilian real, for example) against the dollar has driven up production and exports of some of these commodities (coffee, sugar and soybean, among others, in the case of Brazil), giving a downward bias to prices. However, the El Niño climate phenomenon is creating risk factors in the other direction, as it could result in smaller harvests, although estimates of its intensity this year are divergent.

4. Financial markets will be subject to volatility because of uncertainties on several fronts

During 2014, there were marked trends in the evolution of some of the main reserve currencies and the performance of sovereign bonds and stock market prices. In particular, the exchange rates of the Japanese yen and the euro against the United States dollar were mainly influenced by differences in the respective monetary authorities’ policies (see box I.1). Thus, the euro depreciated by almost 30% against the dollar in the period comprising 2014 and the first four months of 2015, while the yen depreciated by 13% in just the eight months from the time its monetary programme was extended, in October 2014, until May 2015 (see figure I.4).

Box I.1

Major recent developments in the monetary policy of the United States, Japan and the European Central Bank

In early 2014, improving employment and economic activity indicators in the United States led the Federal Reserve to implement a policy of gradual withdrawal of the monetary stimulus it had introduced under its quantitative easing (QE) programmes. It did this by successively scaling back its monthly asset purchases from a peak of US$ 85 billion a month to zero in October 2014.

The Bank of Japan launched a massive monetary stimulus in 2013, promising to double the country’s monetary base. Later, in October 2014, it extended its quantitative and qualitative easing (QQE) programme to prevent the falling oil price and a subsequent slackening of price rises from undermining inflationary expectations in the country. Lastly, the bank announced in June 2015 that it was maintaining its expansion programme unaltered, and this will probably continue into 2016.

In January 2015, the European Central Bank announced a quantitative easing (QE) programme, the Expanded Asset Purchase Programme, with a view to addressing deflation risks and increasing inflation in the eurozone. The plan consists in an extension of existing securities purchase programmes, taking total purchases of public and private securities by the European Central Bank to 60 billion euros a month. The programme began in March 2015 and will continue until September 2016 and if necessary beyond, until such time as the inflation rate is consistently back up at the target level, which is below but close to 2%.

Source: Economic Commission for Latin America and the Caribbean (ECLAC).

Figure I.4

Nominal euro and yen exchange rates against the United States dollar, January 2013-May 2015

(Euros per dollar and yen per dollar)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of Bloomberg.

a Quantitative and qualitative easing.

The expansionary monetary policy of the European Central Bank, combined with good news about economic activity, not just in 2014 but in the first quarter of 2015 as well (see point 1), drove down yields on eurozone bonds, including those of the periphery (Greece, Ireland, Italy, Portugal and Spain) and boosted share markets during 2014 and early 2015. However, in the past two months (May and June 2015), market movements have been influenced by the evolving situation in Greece (see figures I.5 and I.6).

Figure I.5

Eurozone (selected countries): 10-year sovereign bond yields, January 2009-June 2015

(Percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of Bloomberg.

Figure I.6

Eurozone: selected share market indices, January 2014-June 2015

(Index: January 2014=100)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of Bloomberg.

Lastly, there has been continuing uncertainty about the level of economic growth in China, compounded by the impact of developments on the Shanghai Stock Exchange during the first half of 2015, with a large run-up in share prices having been followed by a sharp drop.

5. United States Federal Reserve interest rates are rapidly approaching “lift-off”, and there could be prolonged financial volatility

Following years of plentiful liquidity in international financial markets and low-interest credit, signs of recovery in the United States economy after the decline in activity in the first quarter of this year have given a fresh immediacy to the question of when the Federal Reserve might raise interest rates. What has been called “lift-off” will be the first interest-rate increase by that institution since 2006, ending a period of near-zero rates that has now lasted six years.

It is unclear what impact higher rates might have on financial markets. One consequence will be an increase in financing costs in international markets owing to a decline in global liquidity. The reason is that, while two major liquidity providers, the European Central Bank and the Bank of Japan, will keep their ultra-loose monetary policy plans in effect until 2016, the increase in global liquidity brought about by these two banks is not expected to offset the constraint resulting from higher rates in the United States (IIF, 2015a).

At the same time, the possible impact depends on the consequences for the relative attractiveness of investments in currencies other than the dollar, and thence for financial flows to emerging markets, the prices of their financial assets and their currencies. In April 2015, IMF mentioned the risk of a possible “super taper tantrum” when the United States Federal Reserve finally starts to lift interest rates. The term “taper tantrum” was coined in mid-2013 for the period of financial turmoil that occurred because markets were taken by surprise when the Federal Reserve announced that it was going to start tapering its asset purchases under the quantitative easing programme earlier than planned and overreacted with large sell-offs of financial assets and currencies, particularly those of emerging countries.

However, there seems to be some consensus among analysts that, in contrast to the run-up to the 2013 “taper tantrum”, markets have now taken in the fact that the Federal Reserve will be raising rates this year —more specifically, it is believed, towards the year’s end. In view of this, it is assumed that uncertainty on this occasion might arise from the possibility that increases could be quicker or larger than expected.[4]

In any event, given that the Federal Reserve’s decision about when and by how much to raise rates depends mainly on the country’s economic activity and employment data, it is certainly possible that as new information about the evolution of these variables becomes available, expectations may alter and financial market volatility may be prolonged over time.

It is also a fact that some emerging economies are more vulnerable now than they were at the time of the 2013 taper tantrum because of their dependence on external financing, reflected in larger current account deficits. These economies could thus be more exposed to volatility in current circumstances than they were in 2013.

B. The external sector

1. International commodity prices fell during 2014 and early 2015, and with them prices for the region’s commodity exports

As discussed earlier (see point 3 of section A), the downward trend in metal and agricultural product prices that had begun in the first quarter of 2011 continued during 2014 and the early months of 2015. Prices for energy commodities (a category comprising oil, natural gas and coal) began to drop sharply in July 2014, losing 52% in just seven months up to January 2015. The price of crude oil, the largest component in the energy commodities index, dropped by almost 60% in the period.

These falls in global commodity prices have naturally been reflected in the average prices at which the countries of Latin America and the Caribbean export these products. ECLAC constructs a commodity export price index for the region where the weighting of commodity groups is calculated by their share of its export basket.

Figure I.7 shows the trend that the different components of the index have followed. It can be seen that the region’s commodity export prices have dropped substantially, in line with the evolution of these prices in global markets. In the case of the food category, there had been no price recovery by May 2015. In the energy commodities category, conversely, there had been a substantial recovery, with the index having risen by 29% from its lows of January 2015. There had also been a recovery, albeit a very minor one, in metal prices.

As for what might be expected of commodity export prices over the rest of 2015, they will move in line with global commodity prices. As already mentioned, projections from different sources suggest that prices can be expected either to remain at around their current levels or to recover some of the ground lost. This would imply a price recovery between June and December 2015 of 5% for food, tropical beverages and oilseeds, 6% for minerals and metals and 3% for energy commodities (these projections are shown by dotted lines in figure I.7).

Figure I.7

Latin America: export commodity price indices, January 2011-May 2015

(Index: 2010=100)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

2. The region’s terms of trade deteriorated in 2014 for almost all subregions, but the largest decline is expected in 2015

Logically enough, the impact of these price trends on the terms of trade in the region’s countries has been unequal, depending as it does on the share that the products concerned represent in the export and import baskets of each country.[5]

While it is the case, as already mentioned, that most commodity prices seem to have more or less bottomed out and be recovering, the average levels at which they are expected to end 2015 are still well below the averages for 2014 (see table I.2). As an example, a price of US$ 70 for a barrel of Brent oil at the end of 2015, which is what a number of analysts predict, would still leave the average price for the year more than 30% below that for 2014. Thus, according to ECLAC estimates, the terms of trade at the end of 2015 will have deteriorated considerably in most cases, with the group of countries that mainly export hydrocarbons being the worst affected.

Table I.2

Latin America: annual changes in export commodity prices, 2014 and projections for 2015

(Percentages)

2014

2015

Agricultural commodities

-2

-13

Food, tropical beverages and oilseeds

-2

-14

Food

-2

-12

Tropical beverages

34

-16

Oilseeds

-9

-17

Agricultural and forestry-related raw materials

-2

-5

Minerals and metals

-14

-13

Energy commodities

-6

-33

Crude oil

-8

-34

Derivatives

-5

-30

Coal

-17

-15

Natural gas

17

-24

Total commodities

-7

-22

Total commodities excluding energy

-8

-13

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures and projections by Bloomberg, the Economist Intelligence Unit, World Bank and International Monetary Fund (IMF), World Economic Outlook.

Figure I.8 shows how the terms of trade have evolved for different subregions of Latin America and the Caribbean in recent years, and projections for 2015. For Latin America as a whole, 2014 was the third year running in which the terms of trade deteriorated, a trend that began in 2012, while in the Caribbean (excluding Trinidad and Tobago), the terms of trade improved in 2013 and 2014. In 2014, the group of countries whose exports consist mainly of hydrocarbons (the Bolivarian Republic of Venezuela, Colombia, Ecuador, the Plurinational State of Bolivia and Trinidad and Tobago) were the most affected, with their terms of trade falling by 3.5%, followed by countries whose exports consist mainly of minerals and metals and of agro-industrial commodities, whose terms of trade declined by 2.8% and 1.2%, respectively. In the case of Brazil, the terms of trade fell by 3.4%, as a number of products whose prices have fallen considerably are heavily represented in the country’s export structure. Its export basket is dominated by metals (one of its main export products is iron, whose price has dropped sharply), food (soybean and, to a lesser extent, sugar and coffee) and energy commodities (although this item has a similar weight in the import mix, so the effect on the terms of trade has not been substantial). In the case of Mexico, while most exports are of manufactured products going to the United States market, the country is a net exporter of energy commodities (mainly crude oil) and was affected in 2014 by the decline in prices for these and for some metals it exports, particularly gold and silver. Lastly, the group comprising the countries of Central America, the Dominican Republic and Haiti benefited from the evolution of commodity prices during 2014, as did the Caribbean countries. These subregions’ terms of trade rose by 1.3% and 2.0%, respectively, that year, since they are net importers of food and also (with the exception of Trinidad and Tobago) of energy commodities, and thus benefited from the global decline in prices for these products.

Figure I.8

Latin America and the Caribbean (selected country groupings): changes in the terms of trade, 2013-2015 a

(Percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a The figures for 2015 are projections.

b Chile and Peru.

c Bolivarian Republic of Venezuela, Colombia, Ecuador, Plurinational State of Bolivia and Trinidad and Tobago.

d Argentina, Paraguay and Uruguay.

e Excluding Trinidad and Tobago.

3. Latin American goods exports and imports dropped in 2014 and are expected to do so again in 2015

In 2014, Latin America’s goods exports and imports fell by 2.9% and 1.0%, respectively, from their 2013 levels by value.

At the country level, exports from Mexico and some Central American countries benefited from the sustained recovery in the United States, the main export destination for several of them. In the countries of South America, with some exceptions, what predominated were instead the effects of faltering European and Chinese demand for goods and lower export prices, so that the value of exports shrank.

On the import side, a pattern of differentiation between countries was also observed. Those where private sector consumption and investment increased usually saw higher imports too, examples being Colombia, Ecuador, the Plurinational State of Bolivia and a number of economies in Central America. Conversely, in some countries where both consumption and investment fell (Argentina and the Bolivarian Republic of Venezuela) or investment alone did so (Brazil and Chile), goods imports declined too.

Two factors combine to form the background to projections for goods exports in 2015. The first is recovery (albeit with recent downward revisions) in the growth rates of some of the region’s main trading partners, which should drive export volumes higher for most of the countries. The second is considerably lower international commodity prices, as already discussed. Thus, the value of goods exports from the region as a whole is projected to fall by almost 7% from the 2014 figure, with a 4% rise in export volumes being outweighed by a price drop of almost 11% (see figure I.10).

Year-on-year falls in the first four months of 2015 were much larger than those being projected for the year as a whole (figure I.11).

However, these declines were essentially due to lower export prices relative to the same period in 2014, since the volume exported by the region actually grew at a year-on-year rate of 9% in the first four months of 2015 (CPB, 2015). Thus, projections for the full year rely on the assumption that there will be some recovery in commodity prices over the rest of the year.

Figure I.9

Latin America (19 countries): changes on the previous year in goods exports and imports by value, 2014

(Percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Estimates.

Figure I.10

Latin America (selected country groupings): projected changes in goods export volumes and prices, 2015

(Percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC).

a Chile and Peru.

b Bolivarian Republic of Venezuela, Colombia, Ecuador, Plurinational State of Bolivia and Trinidad and Tobago.

Figure I.11

Latin America (selected country groupings): year-on-year changes in exports by value, three-month moving averages, January 2013-April 2015

(Percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Argentina, Brazil, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Paraguay, Peru, the Plurinational State of Bolivia and Uruguay.

b Chile, Colombia, Ecuador, Peru and the Plurinational State of Bolivia.

As regards goods imports by value, the projected decline of 4.2% in import prices and the small projected increase in import volumes net out to an estimated drop of almost 4% in 2015 relative to 2014, once again with differences between the various country groupings (see figure I.12).

Figure I.12

Latin America (selected country groupings): projected changes in goods import volumes and prices, 2015

(Percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC).

a Chile and Peru.

b Bolivarian Republic of Venezuela, Colombia, Ecuador, Plurinational State of Bolivia and Trinidad and Tobago.

4. Movements in external trade prices meant that the trade balance deteriorated by the equivalent of 1% of the region’s gross domestic product between 2014 and 2015

Besides the expected percentage changes in countries’ and subregions’ terms of trade, it is interesting to quantify the monetary losses or gains that can be expected to result from the differing trajectories anticipated for the countries’ import and export prices between 2014 and 2015.

To this end, a simple exercise was carried out, consisting in calculating the difference between the trade balance projected for 2015 (arrived at by combining the expected evolution of export and import volumes and prices for the year) and what the trade balance would be if the projections for export and import volumes were correct but prices remained unchanged from a year taken as a basis for comparison (constant prices), in this case 2014. This isolates the result of the 2015 trade balance from effects deriving solely from the evolution of external trade prices between 2014 and 2015.

Accordingly, the projected trade balance for 2015 was first calculated using estimates of export and import volumes and prices expected for the year (equation 1). Next, it was recalculated by applying 2014 prices to the export and import volumes projected for 2015 (equation 2). Lastly, the gains (+) or losses (-) resulting from prices changes were calculated as the difference between the results of equations 1 and 2 (equation 3).

(1)

(2)

(3) Gain (+) or loss (–) from change in prices = TB-TB’

where

TB:trade balance

Xi:value of exports in year i

Mi:value of imports in year i

XPIi:export price index in year i

MPIi:import price index in year i

The results in current dollars and as percentages of GDP are presented in table I.3. For the region as a whole, the drop in export prices reduces export revenues by more than the drop in import prices reduces import outgoings. The result is a net loss from external trade price changes of some US$ 68 billion, the equivalent of 1.2% of regional GDP. For the group of countries that are reliant in some degree on energy commodity exports, losses from trade price changes come to over US$ 39 billion, which represents a very large proportion of the group’s GDP (3.3%). For the group of Southern Common Market (MERCOSUR) member countries, where agro-industrial commodities make up a large share of exports, the losses come to 0.9% of GDP, while for mining commodity exporters they come to 0.5% of GDP. Lastly, for the group of countries comprising Central America, the Dominican Republic and Haiti, the gains from lower import prices more than offset the losses expected from lower export prices, giving rise to a net gain equivalent to 1.6% of GDP in the subregion.

Table I.3

Latin America and the Caribbean (selected country groupings): losses or gains from external trade price changes between 2014 and 2015

(Millions of dollars and percentages of GDP)

Country groupings

Losses (-) or gains (+) from import and export price changes

TB_2015 - TB’2015 a

(millions of dollars)

(percentages of GDP)

Latin America

-67 561

-1.2

Countries exporting hydrocarbons b

-39 486

-3.3

Countries exporting mining commodities c

-2 188

-0.5

Southern Common Market (MERCOSUR)

-23 104

-0.9

Central America, Dominican Republic and Haiti

4 534

1.6

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Difference between the trade balance projected for 2015 using estimates of export and import volumes and prices for the year (TB2015) and the trade balance calculated by applying 2014 prices to the export and import volumes projected for 2015 (TB’2015).

b The Bolivarian Republic of Venezuela, Colombia, Ecuador, the Plurinational State of Bolivia and Trinidad and Tobago.

c Chile and Peru.

5. The balance-of-payments current account deficit remained stable in 2014, but is expected to worsen in 2015

In 2014, the balance-of-payments current account of the Latin American countries was in deficit by the equivalent of 2.7% of GDP, the same as in 2013 (see figure I.13). A deficit of 3% of GDP is expected for 2015, representing a deterioration of 0.3 percentage points of GDP, owing to the evolution of the different components of the current account, as analysed below.

Figure I.13

Latin America (19 countries): balance-of-payments current account by component, 2005-2015

(Percentages of GDP)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a The 2014 figures for the Bolivarian Republic of Venezuela are estimates.

b The 2015 figures are projections.

The goods balance of the Latin American countries turned negative in 2014 as a result of a drop in goods exports (-2.7%) that was greater than the decline in goods imports (-1.0%). Thus, in late 2014 the goods balance registered a small deficit of 0.1% of GDP, as compared to a surplus of 0.3% of GDP the year before. A further deterioration in the goods balance is projected for 2015, yielding a deficit of 0.6% of GDP, since, as mentioned earlier, goods exports are once again expected to fall by more than imports.

As for the services balance, this was in deficit by 1.3% of GDP in 2014. For 2015, inbound tourism in the region is expected to evolve positively, while a small rise is forecast for the costs of freight, insurance and other services linked to goods imports (whose volume is expected to grow slightly this year, as mentioned earlier). The outcome is projected to be a small improvement in the services balance, with a deficit of 1.1% of GDP in 2015.

The transfer balance held steady as a share of GDP in 2014, registering a surplus of 1%, as in 2013. A slight improvement is expected for 2015, taking the surplus to 1.1% of regional GDP, mainly as a result of the positive evolution projected for migrants’ remittances, the main component of the current transfers category. Remittances are a very important source of financing for several countries in the region, including El Salvador, Guatemala, Haiti, Honduras and Nicaragua.[6] Migrants’ remittances rose by an average of about 5% in 2014 and 4% in the first four months of 2015 relative to the same period the year before. The countries where they rose most were Honduras (16%) and Guatemala (9%), both of whose remittances come mainly from the United States (see figure I.14).[7]

Figure I.14

Latin America and the Caribbean (selected countries): changes in income from emigrants’ remittances, 2013-2015 a

(Percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a The 2015 data cover January to May in Guatemala; January to April in Brazil, Colombia, Ecuador, El Salvador, Mexico, Nicaragua and the Plurinational State of Bolivia; January to March in Honduras, Paraguay and Peru; and January in Jamaica.

As figure I.13 shows, the income account has been the most negative category within the current account and the one entailing the greatest net outflows of funds for the region as a whole. The balance of the account improved in 2014 from a deficit of 2.7% of GDP to one of 2.4%. In 2015, an improvement in absolute terms is expected in this account, whose main component is outflows of funds in the form of profit remittances by foreign direct investment (FDI) firms to their parents abroad, but which also includes the external debt interest account, among others. This is because the negative evolution expected for the region’s export prices will weaken the earnings of transnational firms operating there, potentially reducing the proportion of firms remitting to their parents. Even so, this category is expected to move from a deficit of 2.4% of GDP in 2014 to one of 2.5% in 2015.

6. The region’s access to external financing held up well during 2014

During 2014, the region’s access to external financing generally held up well. The region had a surplus on its capital and financial account (that is, it received net capital inflows) amounting to 3.6% of GDP, more than enough to cover the balance-of-payments current account deficit of 2.7% of GDP, so that the international reserves of the region as a whole expanded by the equivalent of more than half a point of GDP (see figure I.15). T he share of net FDI in total capital flows declined, since such investment fell by about 16% in absolute terms relative to 2014, while the share of portfolio capital flows increased (ECLAC, 2015a).

However, the annual figure for 2014 masks substantial differences in the behaviour of the financial account in the first and second halves of the year. Net capital inflows into the region dropped in the second half and their composition changed, with FDI holding steady while portfolio investment flows dropped sharply.

This drop in portfolio investment flows was paralleled by two other developments. The first was a relative rise in the average sovereign risk of the region’s countries: spread on external bonds (EMBI Global) in the region, after dropping to 355 basis points in the second quarter, rose again in the third and fourth quarters, averaging 462 basis points in the latter. The second development was a slowdown in the build-up of international reserves in the third quarter, followed by a decline equivalent to about 0.3% of regional GDP in the fourth (see figure I.16).

Sovereign bond spreads widened just slightly in 2014 for almost all the region’s countries. The exceptions were the Bolivarian Republic of Venezuela and Ecuador, which depend heavily on hydrocarbon exports and are thus heavily exposed to the adverse effects of the sudden large drop in the oil price that took place in the second half of the year (see figure I.17). Sovereign risk increased by 353 basis points for Ecuador and 1,316 for the Bolivarian Republic of Venezuela to 883 and 2,457 basis points, respectively, at the end of 2014. In the first five months of 2015, with the exception of the Bolivarian Republic of Venezuela, spreads held steady or, as in Argentina and Ecuador, actually dropped. For the region as a whole, the spread remained basically unchanged in the period.

Figure I.15

Latin America (18 countries) a: balance-of-payments capital and financial account by component, 2005-2014

(Percentages of GDP)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Does not include Haiti.

b The 2014 information does not include the last quarter for the Bolivarian Republic of Venezuela, as data for this are not available.

Figure I.16

Latin America (18 countries) a: net portfolio capital flows, changes in international reserves and average quarterly sovereign risk according to the Emerging Market Bond Index Global (EMBIG), 2010-2014

(Percentages of GDP and basis points)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Haiti is not included.

Figure I.17

Latin America (13 countries): changes in sovereign risk according to the Emerging Market Bond Index Global (EMBIG), 2014 and January-May 2015

(Basis points)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of figures from JP Morgan.

Bond issuance abroad was a record US$ 133 billion in 2014. Issuance expanded substantially during the first half of the year, mainly because of the large rise in issues of sovereign and quasi-sovereign bonds, for example by State banks and enterprises. The region’s two largest economies accounted for 74% of total issuance in the first half of 2014: Brazil was the leading issuer, with 42% of the total, followed by Mexico, with 32%. As mentioned in the previous edition of this survey, the largest issuer in the first quarter of 2014 was PETROBRAS, the Brazilian State oil firm, whose total of over US$ 13 billion represented about 30% of all regional issuance in the period.

In the second half of 2014, however, issuance in external markets, at US$ 49 billion, was just over half what it had been in the first six months of the year (US$ 84 billion). Much of this drop was explained by the absence of PETROBRAS, since after its March 2014 issue it did not return to the market until June 2015.

The level of issuance in the first five months of 2015 seems to indicate a continuing downward trend, as the total of US$ 51.7 billion was 25% below the figure for the same period the previous year. Indeed, cumulative issuance data over 12 months reveal a striking decline in bond issuance in all sectors other than sovereign bonds, issuance of which increased, and supranational bonds, which held steady, albeit at comparatively low levels (see figure I.18).

Figure I.18

Latin America: external bond issuance by institutional sector, 12-month running totals, January 2013-June 2015 a

(Millions of dollars)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of figures from the Latin Finance Bonds Database, JP Morgan and Merrill Lynch.

a The June 2015 data run up to the 17th of that month.

This downward trend in access to external financing could be maintained over the rest of 2015, since, besides the negative effect of the drop in commodity prices on most of the region’s economies, external financing will be affected by increased risk aversion and the prospect of lower growth or in some cases even an economic contraction in the region’s countries. The United States policy of interest rate increases (which are expected to begin in the second half of the year) is likewise expected to reduce global liquidity by more than expansionary monetary policies in Japan and the European Union increase it. The conjunction of these factors is quite likely to result in capital flows to the region being lower in 2015 than in 2014, although the sketchiness of the information available so far (data for the first quarter of 2015 covering just four countries) means that this trend cannot yet be discerned.[8]

C. Domestic performance

1. The slowdown in the region’s economic growth worsened in 2014

Latin America and the Caribbean’s GDP grew by 1.1% in 2014, meaning that per capita GDP stagnated. This is the lowest rate of expansion since 2009 and represents a continuation of the economic slowdown the region has been mired in since 2011 (see figure I.19).[9]

Figure I.19

Latin America and the Caribbean: changes in GDP, 2005-2014

(Percentages based on constant 2010 dollars)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

This slackening in the region’s economic activity was caused by low growth in the economies of South America as a group, where it dropped from 3.2% in 2013 to 0.6% in 2014. The economies of Central America (4.1%) and the English- and Dutch-speaking Caribbean (1.2%) maintained their 2013 growth rates, while Mexico’s accelerated from 1.4% in 2013 to 2.1% in 2014. At the country level, 2014 GDP growth rates were highest in the Dominican Republic (7.3%), Saint Kitts and Nevis (6.3%), Panama (6.2%) and the Plurinational State of Bolivia (5.4%), while output contracted in the Bolivarian Republic of Venezuela, Saint Lucia and Saint Vincent and the Grenadines.

Although the slowdown extended throughout 2014, it worsened in the second quarter of the year, when year-on-year growth (relative to the same quarter the year before) was 0.5%. This was the first time since 2009 that year-on-year quarterly GDP growth in Latin America and the Caribbean had dropped below 1%. Preliminary figures indicate that the slowdown in economic activity was maintained in the first quarter of 2015, with year-on-year growth in the region (relative to the same quarter in 2014) estimated at 0.5%. This would be the fourth quarter running with a year-on-year GDP growth rate of less than 1%.

2. Lower GDP growth went along with a sharp slowdown in consumption and contracting investment

In line with slower growth in regional GDP, growth in total consumption spending dropped sharply to 1.4% in 2014 from 3.0% in 2013. The slowdown in private sector consumption was most pronounced, with growth declining from 2.9% in 2013 to 1.2% in 2014. The slower rate of expansion in private consumption reflects a lessening of the impetus from the labour market, owing to lower growth in total wages (see figure I.20).

Figure I.20

Latin America and the Caribbean: year-on-year changes in GDP, private consumption and gross fixed capital formation, first quarter of 2010-first quarter of 2015

(Percentages based on constant 2010 dollars)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

Gross fixed capital formation, meanwhile, contracted by 2.0% regionwide during 2014, reflecting the adverse performance of this variable in nine of the region’s economies. Similarly, it should be noted that the weighted average for investment in the economies of Latin America and the Caribbean contracted at annualized rates of over 2.0% in the last three quarters of 2014.

At the subregional level, gross fixed capital formation became more dynamic in Mexico and Central America during 2014, in contrast to what was seen in the economies of South America, where investment contracted in all four quarters of the year. This marked subregional difference was due, in the case of the South American economies, to the fact that new projects (and plans to expand existing ones) were put on hold in sectors such as hydrocarbons, gas, metals and mining, in response to a potential decline in external demand and a sharp correction in commodity prices in the second half of 2014 (see figure I.21).

Figure I.21

Latin America: changes in gross fixed capital formation on the same quarter the previous year, weighted averages, first quarter of 2008-first quarter of 2015

(Percentages based on constant 2010 dollars)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

3. Consumption remains the main driver of growth, but its share has been declining

The evolution of private consumption, as described above, meant that this continued to decline in importance as a driver of GDP growth, and while it remained the main contributor to economic expansion, its share dropped from 1.9% in 2013 to 0.8% in 2014. Figure I.22 shows how the contribution of private consumption spending to economic growth diminished from the first quarter of 2013. The drop in gross fixed capital formation in 2014, meanwhile, meant that its contribution to growth was negative for the first time since 2009.

Figure I.22

Latin America: changes in GDP and the contribution of aggregate demand components relative to the same quarter the previous year, first quarter of 2008-first quarter of 2015

(Percentages and percentage points based on constant 2010 dollars)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

In 2014, the fall in imports on the back of weaker aggregate demand meant that net exports made a positive contribution to GDP growth for the first time since the 2009 global crisis despite slowing growth in goods and services exports.

The trend described continued through the first quarter of 2015, with the information available once again revealing a drop in the growth contribution of private consumption and a negative contribution from investment. The contribution of net exports, while still positive, has been declining considerably.

One thing to highlight is that GDP growth slowed across the board in 2014, with mining and quarrying being the only production sector where growth accelerated in the region, rising from 1.5% in 2013 to 2.3% in 2014. By contrast, the manufacturing sector was the worst performer, contracting in at least 11 economies of the region. The result was that manufacturing GDP in Latin America and the Caribbean dropped by 0.5% in 2014.

4. The GDP growth slowdown in the region is expected to continue in 2015

Preliminary figures for the first quarter of 2015 suggest that the slowdown in activity is ongoing, and even that some of the region’s larger economies could experience a contraction. The slowdown in private consumption, the reduced dynamism of aggregate external demand, the contraction of gross fixed capital formation in 2014 and the possibility that external financing costs will rise are some of the factors supporting these expectations.

As is traditional in the region, the performance of the different economies will once again be heterogeneous in 2015. The degree and characteristics of specialization in the export mix, trade links, domestic conditions and the scope the authorities have to conduct countercyclical policy will all make a difference. Thus, the economies of South America, with production structures that are heavily weighted towards commodities and with China as a leading export destination, will have low and in some cases even negative growth rates. The economies of the Caribbean, Central America and Mexico, which have stronger trade links to the United States and whose exports are more reliant on manufactures (and which, in the case of the Caribbean and Central America, are net importers of hydrocarbons), will perform better than their counterparts further south.

The ability of the authorities to adopt countercyclical policies and, in particular, to stimulate investment will be vital in the effort to reduce the effects of the external shock and forestall a substantial impact on the medium- and long-term performance of the region’s economies.

The GDP of the Latin American and Caribbean economies is expected to grow by 0.5% in 2015. This projection is considerably lower than the one presented in the 2014 Preliminary Overview (ECLAC, 2014), but is in line with the continuing revisions to growth in the world economy and the region’s main trading partners since then. Similarly, the scale of the drop in demand for some commodities caused forecasts to be revisited, particularly for the South American economies.

At the subregional level, the English- and Dutch-speaking Caribbean is expected to grow more quickly in 2015, achieving a rate of about 1.7%, its highest since 2008. A similar dynamic is expected for the subregion constituted by Mexico and Central America, whose growth rate ought to pick up slightly to 2.7%. Despite an improved performance by Chile and Peru thanks to recovering domestic demand, South American GDP is expected to contract (by 0.4%) in 2015. This drop in economic activity is expected to be even greater than that experienced by the subregion during the 2009 global crisis (see figure I.23).

5. Inflation in Latin America and the Caribbean increased in 2014, while in the first five months of 2015 it fluctuated around a level just below that of the year’s end [10]

From 7.6% in 2013, inflation in Latin America and the Caribbean rose by 1.9 percentage points to 9.5% in 2014. These figures change significantly if the Bolivarian Republic of Venezuela is excluded from the regional average, becoming 4.9% in 2013 and 6.3% in 2014, a rise of 1.5 percentage points.

Figure I.23

Latin America and the Caribbean: projected changes in GDP, 2015

(Percentages based on constant 2010 dollars)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

Note: Unless otherwise indicated, the data for country groupings are weighted averages.

While low by historical standards in the region, these figures are the highest since the 2009 global financial crisis. When levels at the end of 2014 are compared with those in the first five months of 2015, the cumulative 12-month inflation rate is found to have fallen slightly to about 6.0%.

The region’s traditional heterogeneity on many macroeconomic variables can also be seen in the dynamic of inflation, with general patterns emerging from the analysis by subregion. In the economies of the north of the region (Mexico and the countries of Central America and the English- and Dutch-speaking Caribbean), inflation rates were stable or trended downward between 2013 and 2014, while inflation in the South American economies picked up. This subregional divide deepened in the first five months of 2015, and while average cumulative 12-month inflation has been negative in some economies of the Caribbean (Belize, Dominica, Grenada and Saint Vincent and the Grenadines) and Central America (El Salvador), the pace of price rises has quickened in the economies of South America (see table I.4).

Table I.4

Latin America and the Caribbean: 12-month changes in the consumer price index (CPI), December 2013, December 2014 and May 2015

(Percentages)

To December 2013

To December 2014

To May 2015

Latin America and the Caribbean a

4.9

6.3

6.0

South America a

5.4

7.5

7.7

Central America and Mexico

3.9

4.0

2.8

The Caribbean

5.4

4.7

2.8

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Excluding the Bolivarian Republic of Venezuela.

Two economies, Argentina and the Bolivarian Republic of Venezuela, had double-digit inflation in 2014, while prices rose by over 5% in Trinidad and Tobago, Uruguay, Brazil, Haiti, Nicaragua, Jamaica, Honduras, the Plurinational State of Bolivia and Costa Rica (in descending order of inflation rates).

Although annual inflation held steady during 2014 in the economies of the region’s north (Mexico and the countries of the Caribbean and Central America), its behaviour varied considerably over the year. Prices fell slightly in the first two quarters before rising again in the third. Inflation eased again in the fourth quarter and resumed the trend of the early months of the year (see figure I.24).

A breakdown of the evolution of prices into core and non-core components (energy and food), shows that core inflation became a weightier determinant of overall inflation, accounting for over 50% of the region’s 12-month cumulative inflation rate from July 2013 onward (see figure I.25).

Figure I.24

Latin America and the Caribbean: 12-month changes in the consumer price index (CPI), weighted averages, January 2007-May 2015

(Percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

Figure I.25

Latin America and the Caribbean: 12-month changes in the consumer price index (CPI) and contributions to inflation, weighted averages, January 2007-May 2015

(Percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

Figure I.25 also shows that goods prices rose by more than those of services during the second half of 2014, and that this tendency continued in the first five months of 2015, bringing to an end the convergence between the inflation rates of these two categories seen during 2013 and the first quarter of 2014.

Just as the evolution of prices in the region has been very heterogeneous, so a whole variety of factors have contributed to the outcomes seen. In countries with more flexible exchange rates, such as Brazil, Chile, Colombia and Peru, currency depreciation against the dollar and the related transfer effect have contributed to higher inflation. In other countries, such as Argentina and the Bolivarian Republic of Venezuela, rapid expansion of monetary aggregates and fiscal deficits in a context of low growth or recession has also been a factor in sustained price rises.

The path of inflation over the rest of 2015 will be conditioned by different factors, particularly:

i)The evolution of commodity prices in international markets, especially energy, as these could rise back up to average levels that, while significantly lower than in 2014, are higher than in the first quarter of 2015. This effect will be preponderant in determining inflation in the economies of the region’s north, which have clearly benefited from the drop in oil and food prices, since they are net importers of these and many of their currencies have been quite stable;

ii)The slowdown in aggregate domestic demand, particularly in the economies of South America, as this should weaken the recent upward pressure on prices;

iii)The exchange-rate volatility prevailing in international financial markets, the greater cost of external financing and the fall-off in FDI resources, which have created a tendency towards currency depreciation in many of the region’s economies. This in turn has driven up the local-currency cost of goods purchased abroad, with the end result, via the transfer effect, being higher domestic prices.

Which of these factors predominates will depend on country-specific circumstances, but the presence of one or more of them will undoubtedly influence the actions of policymakers, and particularly of the authorities responsible for monetary and exchange-rate policy, as they seek to stimulate domestic economic activity, particularly investment, in a context of slow-growing aggregate external demand.

6. The unemployment rate fell in 2014 despite low economic growth

The performance of the region’s labour market was unusual in 2014, as the unemployment rate fell once again despite very modest economic growth. As was to be expected, the weak demand for labour resulting from this low growth was manifested in a drop in the urban employment rate, which fell from 56.8% in 2013 to 56.5% in 2014.[11] However, an even larger fall in the urban participation rate from 60.6% to 60.1% between these two years meant that the region’s urban unemployment rate dropped from 6.2% to 6.0%.

The drop in the employment rate was mainly due to weakness in the creation of wage-paying jobs, which expanded by just 0.75%, reflecting an elasticity of wage employment to output of about 0.7. There was a moderately countercyclical 2.3% increase in own-account work, while employment in other occupational categories (domestic service and unpaid family work) contracted. The weakness of the demand for labour was also manifested in a slowdown in the growth of registered wage employment, which represents higher-quality jobs. Although this type of employment is still generally growing at higher rates than wage employment overall as existing informal jobs become formalized, there has been a clear slowdown in almost all the countries for which information is available. In some cases, this higher-quality employment grew by less than overall employment, a reversal of the trend of recent years, when employment quality indicators improved (see table A.25 in the statistical annex).

Looking beyond the drop in the unemployment rate, there are indicators that reveal a degree of stability in the labour market. They include, in particular, stability in the rate of underemployment by hours worked and in average real wages, which generally carried on rising at moderate rates (see tables A.26 and A.27 in the statistical annex).

A possible explanation for the partly atypical behaviour of the labour market in 2014 is that the impact of low growth that year was offset by greater resilience in many households because of dynamic job creation and rising real wages over the previous period.[12] Whereas many households were forced to send their secondary workforce (young people especially) into the labour market on earlier occasions when low growth negatively affected wages and the demand for labour, there was less pressure this time, perhaps because of the higher employment and income levels attained in earlier years. Accordingly, the usual procyclical drop in the region’s labour force participation rate was sharper and informal employment grew by less this time than on similar occasions, with the atypical consequence of a drop in the open unemployment rate.[13] Lastly, it should be stressed that the patterns which thus shaped the evolution of the main labour market variables in the region chiefly reflected developments in the three largest economies (Brazil, Mexico and Argentina), while the performance of the labour market in the other countries during 2014 was very heterogeneous.

7. Weak job creation in the first quarter of 2015 pushed up the regional unemployment rate slightly

The region’s urban employment rate carried on declining on a year-on-year basis in the first quarter of 2015, dropping by 0.4 percentage points as a result of weak labour demand in the limited group of countries for which information is available.[14] In this group of countries, however, the drop was less marked than in the second half of 2014, when it was 0.5 percentage points (see figure I.26).

Figure I.26

Latin America and the Caribbean: a year-on-year changes in employment and unemployment rates, first quarter of 2008-first quarter of 2015

(Percentage points)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Includes 10 countries: Argentina, Bolivarian Republic of Venezuela, Brazil, Chile, Colombia, Ecuador, Jamaica, Mexico, Peru and Uruguay.

b Preliminary figures.

Something similar can be observed with the region’s urban participation rate. While this was 0.6 percentage points lower on average in 2014 than in 2013, in the first quarter of 2015 it dropped by 0.3 percentage points in this group of countries. As a result of this development, the region’s urban unemployment rate stopped falling and actually rose very slightly to 6.35%, the result being the first year-on-year increase in the unemployment rate since the fourth quarter of 2009.

As with other indicators, the regional data representing weighted averages of national results mask a great deal of heterogeneity between countries. In fact, the aggregate data are heavily influenced by the marked change in the employment performance of Brazil, where the urban unemployment rate was an average of 0.6 percentage points lower in 2014 than in 2013 but 0.8 percentage points higher in the first quarter of 2015 than in the same period the year before. Besides Brazil, of the countries with employment information available for the first quarter of 2015, the unemployment rate only increased in Costa Rica, Jamaica and Uruguay. In Argentina, Chile, Mexico and Peru, the pattern that had prevailed across the region in 2014 continued, with large falls in the participation rate meaning that the unemployment rate held steady or even declined. In the Bolivarian Republic of Venezuela, Colombia, Ecuador and Paraguay, lastly, the unemployment rate was brought down by the combination of a rising employment rate and a smaller increase or a decline in the participation rate.

As regards job creation by employment category, the patterns observed in 2014 were further entrenched. Reflecting low demand for labour, wage employment expanded by just 0.2% in the first quarter of 2015. At the same time, own-account work (whose dynamic might be taken as a proxy for the informal sector) grew at a rate of 2.9% in the same period. The acceleration that began in 2014, when this type of work is estimated to have expanded by 2.3%, might indicate that weak demand for labour from firms in some countries is beginning to feed through more strongly into the expansion of informal activities. This type of informal job creation (own-account working) would explain the fact, mentioned earlier, that the employment rate fell by less in the first quarter of 2015 than in 2014.

The weakness of the demand for labour is clearly shown by the evolution of registered employment. By comparison with the situation in the first quarter of 2014, there was a striking slowdown in the generation of this type of employment in Brazil, Costa Rica and Uruguay, with the number of registered employees stabilizing or even falling slightly in all three countries. Year-on-year growth in Peru was also lower than in early 2014, while the rate of registered job creation held steady in Chile. Only in Argentina, Mexico and Nicaragua did growth in this type of employment accelerate in the first quarter of 2015, this being due in the latter two countries mainly to programmes promoting formalization, with Nicaragua’s being of long standing and Mexico’s more recent (see figure I.27).

Figure I.27

Latin America and the Caribbean (selected countries): year-on-year changes in registered employment, first quarters of 2013, 2014 and 2015

(Percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

Note: The figures are for jobs involving contributions into some social security system, except in Brazil, where they are for private sector wage earners with employment registration documents (CTPS), and Peru, where they are for wage workers in firms with 10 or more employees.

In most of the countries, however, weak demand for labour has not yet been manifested in major labour-market imbalances. As indicated, the unemployment rate did not rise during the first quarter of 2015 in most of the countries; furthermore, underemployment by hours worked declined in four of the nine countries for which information is available (Argentina, Chile, Mexico and Peru), while it held steady in Uruguay and increased in Brazil, Colombia, Costa Rica and Ecuador.

When a simple average of 12 countries is taken, the performance of the main labour market variables in the first quarter of 2015 was similar to that of the region as a whole (weighted average) in 2014 (but not the first quarter of 2015), that is to say, the participation rate fell by more than the employment rate, so that unemployment declined slightly. These falls were more marked for men than for women, with the employment rate for the latter actually rising slightly. Consequently, the unemployment rate fell by more for women than for men (see figure I.28).

Figure I.28

Latin America and the Caribbean: a year-on-year changes in participation, employment and unemployment rates, by sex, first quarter of 2015

(Percentage points)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Simple average for 12 countries (Argentina, Bolivarian Republic of Venezuela, Brazil, Chile, Colombia, Costa Rica, Ecuador, Jamaica, Mexico, Paraguay, Peru and Uruguay).

8. Real wages are still growing in most of the countries

Real wages in the formal sector have tended to maintain their growth, with modest year-on-year increases. The main exception is Brazil, where, after nine consecutive years of increases, the average real wage fell back slightly during the first quarter of 2015, against a backdrop of falling output and rising unemployment (see figure I.29).

Figure I.29

Latin America (selected countries): year-on-year changes in real wages for registered jobs, first quarters of 2013, 2014 and 2015

(Percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Average wage of private sector workers covered by social and employment legislation.

b Average hourly pay in non-agricultural activities.

c Average manufacturing wage.

d Average declared wage of social security contributors.

e Average wage of employees in metropolitan Lima.

f Average wage of permanent workers in the public and private sectors.

The predominant pattern of real-term wage increases is due to the fact that low unemployment is usually conducive to increases in nominal pay. This has been contributed to by moderate rises in minimum wages. If the median is taken for 12 countries where nominal minimum wages rose in early 2015, the average real-term increase there was 2.0% in the first quarter relative to the same period the year before.[15] Generally stable inflation helped nominal increases translate into real-term rises.

9. The weakness of economic activity will have a growing impact on the labour market in 2015

The modest economic growth projected for the region as a whole in 2015 will continue to constrain the demand for labour, with wage employment expanding only weakly as a result.[16] This situation is expected to lead to a further decline in the regional employment rate. Something already observed in the early part of the year is that informal-sector employment is growing in a number of countries, if own-account work is taken as a proxy, and this is tending to cushion the fall in the employment rate.

Rising informal-sector employment appears to have been underpinned by the countercyclical behaviour of the labour supply from low-income households, which was unusually weak in 2014 and continued so in a number of countries in early 2015, but is expected to be stronger in 2015 than in 2014 in the region as a whole. The overall labour supply is expected to grow at close to its long-term trend during 2015, with the participation rate being little changed from 2014 as the predominantly procyclical behaviour of the aggregate labour supply is counteracted more strongly than in that year by the essentially countercyclical behaviour of the labour supply from many low-income households. This increased supply of labour, especially from low-income households, is expected to drive informal-sector employment higher.

Preliminary data for the second quarter are already pointing to a worsening in the regional employment situation, and it is estimated that the average regional unemployment rate will rise by 0.5 percentage points in 2015 to 6.5% as a result of a further drop in the employment rate (albeit cushioned by rising informal-sector employment), with little change in the participation rate.

At the same time, the weakness of waged job creation is expected to affect growth in higher-quality employment (registered employment), and this, in conjunction with rising informal-sector employment, is likely to hinder further progress with employment quality. At the same time, unemployment that is fairly low by historical standards and a context of generally stable and moderate inflation should mean that the recent trend of modest real wage increases continues in most of the countries, although rates of pay growth may be curtailed in some cases as the year goes on.

With the number of people in work expanding slowly (and by less than the working-age population) and a countervailing deterioration in the composition of employment and moderate real wage growth, total earnings are expected to expand at modest rates, supporting a weak increase in household consumption.[17]

D. Macroeconomic policy

1. Monetary and exchange-rate policy has been used countercyclically to mitigate the effects of a less favourable external environment

Two things shaped monetary and exchange-rate policy in the region in 2014 and early 2015. First, an external environment that was less favourable to capital flows into the region. The gradual withdrawal of extraordinary monetary stimulus (quantitative easing) by the United States Federal Reserve, in particular, and the volatility of international financial markets, which was the result of monetary policy in the developed economies, created expectations that there would be less credit available for emerging economies and that financing might become more expensive. Second, there was a decline in the prices of the commodities exported by the region’s countries, especially those of South America. Faced with this situation, policymakers in countries with greater room for manoeuvre in the conduct of monetary and exchange-rate policy increased their efforts to boost economic activity.

Nonetheless, the responses of the authorities to these external shocks were conditioned by domestic factors, most particularly rising prices and the trend of indicators reflecting differences between domestic aggregate demand growth and growth in the production capacity of the economy.

This meant that in economies with inflation targeting schemes where there was leeway to do so, monetary policy rates were cut with a view to reducing lending interest rates and thus stimulating credit. This was done in Chile, Mexico and Peru, where rates were cut by 150, 50 and 50 basis points, respectively, between December 2013 and December 2014. Meanwhile, concern about rising prices led the Brazilian and Colombian authorities to move in a different direction during 2014, raising monetary policy rates by 175 and 125 basis points, respectively, from their levels at the end of 2013 (see figure I.30).

Figure I.30

Latin America (countries with inflation targeting): monetary policy rates, January 2013-May 2015

(Percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

In the first five months of 2015, the authorities of Chile, Colombia and Mexico kept interest rates unchanged. Rates in Brazil kept rising, with increases in January, March and April 2015. In Peru, interest rates were cut by 25 basis points in January 2015 but then kept unchanged for the next four months.

Countries using monetary aggregates as their main monetary policy instrument saw growth in these accelerate in the second half of 2014, to judge by the dynamic of the monetary base in the South American countries (other than the Bolivarian Republic of Venezuela) that do not operate inflation targeting schemes and in the countries of Central America and the English- and Dutch-speaking Caribbean. It should be pointed out that while the monetary base in the Bolivarian Republic of Venezuela grew at annualized rates of over 70%, this was a slower rate of expansion than in the recent past. The dynamic of the monetary base in the Caribbean economies in the first quarter of 2015 was similar to that of 2014, while in the economies of South and Central America, especially Panama, growth in the monetary base accelerated (see figure I.31).

Figure I.31

Latin America and the Caribbean: monetary base, first quarter of 2013-first quarter of 2015 a

(Percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Annualized average quarterly growth rates.

b Costa Rica, Dominican Republic, El Salvador, Guatemala, Haiti, Honduras, Nicaragua and Panama.

c Argentina, Ecuador, Paraguay, Plurinational State of Bolivia and Uruguay. The Bolivarian Republic of Venezuela is not included.

In 2014, the efforts of the monetary authorities led to a reduction in lending interest rates in economies with inflation targeting (except Brazil) and, to a lesser extent, in the economies of the English- and Dutch-speaking Caribbean and Central America. Despite higher growth in the monetary base, lending rates increased on average in the economies of South America that do not have inflation targets, driven by considerable rises in Argentina and Uruguay.

During 2014 and as much of 2015 as has been observed so far, the actions of the monetary authorities allowed domestic lending to the private sector to grow at rates that, while lower than in 2013, were still generally above 10%. The exception were the economies of the English-speaking Caribbean, where such lending generally grew at rates of below 2%. Consumer credit was one of the most dynamic categories, while growth in lending to the commerce sector accelerated. This is particularly noteworthy given the very marked slowdown in investment in many of the region’s economies during 2014 (see figure I.32).

Figure I.32

Latin America and the Caribbean: domestic lending to the private sector, annualized average rates, first quarter of 2013-first quarter of 2015

(Percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Brazil, Chile, Colombia, Dominican Republic, Guatemala, Mexico and Peru.

b Costa Rica, Haiti, Honduras and Nicaragua.

a Argentina, Paraguay, Plurinational State of Bolivia and Uruguay.

2. The region’s currencies tended to weaken against the dollar

The different monetary policy announcements in the developed economies (withdrawal of monetary stimulus by the United States and stimulus programmes in Japan and Europe), the considerable drop in commodity prices, decreased availability of funding on international markets, a lessened appetite for emerging countries’ assets, slower growth among the region’s countries and lower interest rates as monetary conditions were eased all contributed to the depreciation, on average, of the currencies of 15 countries in the region against the United States dollar. This movement was most pronounced in the countries that are more integrated into international capital markets, as well as in Argentina and the Bolivarian Republic of Venezuela (see figure I.33).

Figure I.33

Latin America (selected countries): nominal exchange rates against the dollar, January 2013-April 2015

(Index: January 2008=100)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

This trend continued, and in some cases even accelerated, during the first four months of 2015. In fact, between December 2014 and April 2015 six countries experienced depreciations of over 5%, most notably Brazil (14.9%), Uruguay (9.1%), and Paraguay (7%). Conversely, the depreciation of the Argentine peso (34.7% between December 2013 and December 2014) slowed during 2015 (a cumulative 3.7% between December 2014 and April 2015), in a context of low economic growth.

In the Bolivarian Republic of Venezuela, the government modified the exchange-rate system in 2015, abolishing the Alternative Foreign Currency System (SICAD II) that had been set up in March 2014 and introducing a new exchange-rate mechanism called the Marginal Foreign Currency System (SIMADI). Unlike SICAD and the arrangement involving a fixed exchange rate of 6.3 bolívares to the dollar, SIMADI is a system whereby the price of the dollar is set by the market; in late May 2015, the exchange rate of this system was 200 bolívares to the dollar. The exchange rate of 6.3 bolívares to the dollar was maintained for official imports of food, medicine and inputs.

The real effective extraregional exchange rate of 18 countries of Latin America and the Caribbean depreciated by an average of 1% between 2013 and 2014. South America registered an effective depreciation against the rest of the world of 2.3%, while the other subregions (Central America, Mexico and the Caribbean) experienced only small changes in the aggregate (an appreciation of 0.1%), although this evolution masks differences between countries, with depreciations in Costa Rica, the Dominican Republic, Jamaica and Mexico, for example, balancing out appreciations in other countries (see figure I.34).

Where the total effective exchange rate is concerned,[18] note should be taken of developments during 2014 in countries such as Ecuador, the Plurinational State of Bolivia and Trinidad and Tobago, where there was little movement in the exchange rates of the local currencies and inflation exceeded nominal depreciation, even as the countries they were trading with experienced large depreciations. The overall effective exchange rate appreciated by 6.5% in the Plurinational State of Bolivia, 5.0% in Trinidad and Tobago and 3.2% in Ecuador, a situation that was not reversed in the early months of 2015. Again, according to this indicator, the effective exchange rates of Trinidad and Tobago and Guatemala[19] currently stand at less than 70% of their historical averages, suggesting they have fallen below their long-term levels (see figure I.35), especially in the case of the former.

Figure I.34

Latin America and the Caribbean: effective extraregional exchange rates by subregion, January 2013-March 2015

(Index: 2005=100)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

Figure I.35

Latin America (18 countries): overall real effective exchange rates, April 2015

(Index: 1990-2009 average=100)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

3. Reserves recovered in 2014, but the rate of increase has slowed in 2015

International reserves in Latin America and the Caribbean recovered by 3.3% in 2014, resuming the upward path that was interrupted by the 0.7% contraction of 2013. International reserves increased in 25 of the region’s economies, with the largest rises being in Panama (43.9%), Jamaica (36.1%), Belize (19.8%), Paraguay (17.3%), Honduras (14.7%) and Nicaragua (14.6%). Also worth highlighting is the case of Argentina, where reserves increased by 2.8% after contracting for three years. The largest declines were in Haiti (-33.4%), Suriname (-19.7%), Guyana (-14.3%), Barbados (-9.4%) and Ecuador (-9.4%). As for the five countries with the highest levels of international reserves, they increased these as a group by 2.9%, with rises in Brazil (1.3%), Colombia (8.5%) and Mexico (8.6%) offsetting declines in Chile (-1.6%) and Peru (-5.1%).

The pace of accumulation slowed in the first five months of 2015, and between December 2014 and May 2015 the region’s reserves remained practically unaltered, rising by just 0.4%. The largest increases over the period were in Panama (19.3%), the Bahamas (16.9%), Costa Rica (15.2%) and Jamaica (13.0%), while the largest contractions were in the Bolivarian Republic of Venezuela (-20.2%) and Haiti (-9.9%) (see figure I.36).

Figure I.36

Latin America and the Caribbean: international reserves, 2000-2015 a

(Billions of dollars and percentages of GDP)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a The 2014 figures are ECLAC estimates. The 2015 figures are for April and contain preliminary data.

In view of the exchange-rate dynamic in a number of the region’s countries as described above, which has intensified since December 2014, central banks have employed their international reserves to alleviate the strong pressure for currency depreciation. These include the central banks of Brazil, Costa Rica, the Dominican Republic, Mexico, Peru and Trinidad and Tobago, which have been intervening actively in currency markets since early 2015. Thus, the Mexican central bank started injecting dollars into the currency market in December 2014 for the first time in over two years, although the scale of intervention has been small so far, given its stock of reserves and the size of its currency market.

Following years of strong and sustained pressure for appreciation, Colombia scaled back its currency purchase programme in late 2014 and discontinued it in January 2015. The Brazilian authorities, for their part, brought their daily currency swap programme to an end in March 2015, allowing the currency to depreciate to facilitate macroeconomic adjustment. This programme was brought in for the first time in August 2013 to provide liquidity to currency markets and reduce the volatility of the currency. The authorities are no longer offering new currency swaps, though existing contracts continue to be renewed. As of late April 2015, the net short swap position was worth a notional US$ 114 billion, equivalent to more than a quarter of the country’s gross international reserves.

4. The region is still applying macroprudential measures to limit its systemic vulnerabilities

The region’s countries are carrying on with their financial-sector reforms and continuing to supplement monetary and exchange-rate policies with macroprudential measures to mitigate systemic risks and adapt their management of international reserves and capital flows to an external context of growing uncertainty and scarcer resources.

General reforms to the regulatory framework of the financial system are taking place in very diverse areas, including, for example, efforts to improve banking-sector regulation (Barbados and Jamaica), greater independence for monetary authorities (Jamaica and Paraguay), the development of corporate bond markets (Brazil), the establishment of new rules for derivatives operations (Mexico and Peru), changes to the legal reserve requirement for bank deposits (Brazil, the Dominican Republic and Peru), changes in currency allocation regulations (Argentina and the Bolivarian Republic of Venezuela), the deepening of the ongoing de-dollarization process (Peru and the Plurinational State of Bolivia) and the proposed introduction of new methods of payment (Ecuador).

In a number of the region’s economies, furthermore, it has been possible to strengthen the international reserves position thanks to new instruments such as currency swaps between China and Argentina, Chile and Suriname, the possible renewal of the IMF flexible credit line for Colombia and Mexico, and resources secured through multilateral bodies (Honduras and Jamaica).

5. Fiscal deficits increased in 2014, but public debt held steady on average

As noted in the Preliminary Overview (ECLAC, 2014), public accounts in Latin America deteriorated slightly on average in 2014. At the central government level, the fiscal outcome was a primary deficit of 1.1% of GDP (simple average), as compared to a deficit of 0.7% in 2013, while the overall balance (including public debt interest payments) moved from a deficit of 2.4% of GDP in 2013 to one of 2.8% in 2014 (see figure I.37). In the Caribbean, the public sector deficit improved significantly in 2014 thanks to a small increase in fiscal revenues and a larger drop in public spending.

Figure I.37

Latin America and the Caribbean: central government fiscal indicators, simple averages, 2005-2014

(Percentages of GDP)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

The fiscal result worsened in 2014 in 13 of 19 countries in Latin America. In Argentina, Brazil, Chile and the Plurinational State of Bolivia, the deterioration exceeded 1% of GDP (see table A.33 in the statistical annex). At the other extreme, the overall balance improved substantially in Honduras because of the reforms approved in late 2013. In the other countries, the shift in the public sector balance was less marked.

These higher deficits have not led to an increase in the average central government debt burden in Latin America, which was 33% in 2014, essentially because current interest rates are so low (see figure I.38 and table A.37 in the statistical annex). Debt levels continue to differ greatly between countries. The public debt of Brazil is the highest in Latin America; in 2014 it was 59% of GDP, and it has been rising because of an unfortunate combination of high interest rates and low growth that has made it necessary to generate larger primary surpluses to keep this debt load under control. Other countries of South America (Colombia and Uruguay) and some in Central America (Costa Rica, El Salvador, Honduras and Panama) have debt levels somewhat above the average (between 37% and 45% of GDP). At the other extreme, with debt levels of less than 20% of GDP, are Chile, Paraguay and Peru. It is important to note, however, that public debt in the non-financial public sector has increased strongly in some countries over recent years, especially among public sector firms (see figure I.39 and table A.36 in the statistical annex).

Figure I.38

Latin America and the Caribbean: gross central government debt, 2000-2015

(Percentages of GDP)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Preliminary figures.

Figure I.39

Latin America (selected countries): changes in gross non-financial public sector debt between 2013 and 2015

(Percentage points of GDP)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

Both the evolution and the level of public debt in the Caribbean countries are different from those in the Latin American countries. Generally speaking, debt in the Caribbean countries moved upward after the global financial crisis, rising to an average of about 80% of GDP in 2014. If these countries are grouped by economic specialization, distinguishing between those that depend on exports of services (mainly tourism and financial services) and those whose economies are based on raw material exports (mining and oil), it can be seen that the ratio of public debt to GDP is higher in the former than the latter (some 88% of GDP as against 62%, respectively, in 2014). A large portion of public debt in the Caribbean is external, and this is reflected in interest payments, which are in excess of 3% of GDP.

6. In the early months of 2015, a drop in fiscal revenue from commodities was partially offset by relatively stable growth in tax revenue

According to preliminary figures for the first quarter of 2015, the overall result in Latin America worsened slightly (-0.2% of GDP) because spending (0.3%) rose by more than revenue (0.1%) (see table I.5). This result was mainly due to weakening non-tax revenues accompanied by highly variable rates of public spending growth. In the Caribbean, the improvement in the fiscal deficit seen in 2014 continued in the first quarter of 2015, as fiscal revenues rose by 0.3% and spending fell by 0.1%.

Table I.5

Latin America and the Caribbean (24 countries): changes in central government fiscal indicators between the first quarters of 2014 and 2015

(Percentages of annual GDP)

Revenue

Spending

Overall result

Total

Tax revenue

Other revenue a

Total

Current primary spending

Interest

Capital spending

Latin America

0.1

0.1

0.0

0.3

0.2

0.1

-0.1

-0.2

Argentina b

0.4

0.2

0.2

1.2

0.9

0.2

0.2

-0.8

Bolivia (Plurinational State of) c

0.1

-0.1

0.2

0.4

0.5

0.1

-0.2

-0.4

Brazil

-0.3

0.0

-0.3

1.4

0.0

1.5

-0.1

-1.6

Chile

0.2

0.2

0.0

0.5

0.4

0.1

0.1

-0.3

Costa Rica

0.1

0.0

0.1

0.1

0.0

0.1

0.0

0.0

Dominican Republic d

0.1

0.1

0.0

-0.2

-0.2

0.0

-0.1

0.3

Ecuador

-0.2

0.4

-0.6

-0.2

0.0

0.1

-0.3

0.0

El Salvador

0.1

0.1

0.0

0.0

0.0

0.0

0.0

0.1

Guatemala

-0.1

-0.1

0.0

0.3

0.2

0.0

0.1

-0.4

Honduras

0.4

0.4

0.0

0.1

-0.2

0.0

0.3

0.3

Mexico

0.5

0.8

-0.4

0.4

0.3

0.0

0.1

0.1

Nicaragua

0.1

0.1

0.0

0.6

0.6

0.0

0.0

-0.5

Panama

-0.3

-0.3

-0.1

-1.0

0.2

0.1

-1.2

0.6

Peru

-0.5

-0.4

-0.1

0.1

0.0

0.0

0.1

-0.6

Uruguay e

0.2

0.0

0.2

0.4

0.6

-0.1

0.0

-0.3

The Caribbean

0.3

0.4

-0.1

-0.1

0.0

0.0

-0.1

0.4

Antigua and Barbuda

0.6

0.0

0.6

-0.1

-0.2

0.1

-0.1

0.7

Dominica

-1.7

0.0

-1.8

-0.1

-0.1

-0.2

0.1

-1.6

Grenada

0.9

0.6

0.4

0.1

-0.4

0.0

0.4

0.9

Jamaica

-0.4

0.2

-0.6

-0.2

0.3

0.1

-0.5

-0.3

Saint Kitts and Nevis

2.6

0.7

1.9

0.2

-0.3

0.0

0.5

2.4

Saint Vincent and the Grenadines

0.0

0.6

-0.6

-0.3

-0.2

0.0

-0.2

0.3

Saint Lucia

-0.3

0.2

-0.5

-0.9

-0.4

-0.1

-0.5

0.6

Suriname

-0.6

-0.4

-0.2

1.2

1.3

0.0

-0.1

-1.8

Trinidad and Tobago

1.7

1.3

0.3

-0.5

-0.3

0.1

-0.2

2.2

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Social contributions, income from capital and external donations.

b National non-financial public sector.

c General government.

d For the purposes of analysis, the extraordinary donation received by the country in January 2015 is not included.

e Non-financial public sector.

Figure I.40 shows that growth in Latin American tax revenues during recent quarters was fairly stable (albeit well below that seen after the 2009 global economic crisis), despite slowing output. It should be stressed that there have been substantial rises in a number of countries. There has been a pick-up in the Caribbean, with growth averaging 10% in the first quarter of 2015 in the eight countries for which information is available.

Figure I.40

Latin America and the Caribbean: change in real central government tax revenues, without social security contributions, relative to the same quarter the year before and as moving averages, first quarter of 2008-first quarter of 2015

(Percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

Latin American countries with above-average revenue growth include, in particular, Chile, Costa Rica, the Dominican Republic, El Salvador, Honduras and Mexico, in all of which the rise in public revenues is essentially accounted for by higher tax receipts because of reforms carried out in this area since 2012 (see ECLAC, 2015). In the case of Argentina, the rise in fiscal revenues in the early months of 2015 was driven essentially by the take from the profits tax, fuel taxes and social security-related imposts.

In Brazil, public revenues in the first quarter of 2015 were down by 4.4% in real terms on the same period the year before. One reason was that non-tax revenues dropped by 8.1%, mainly because of a 70.2% decline in dividend income. In Peru, revenue was down by 7.5% on the same quarter the year before, a figure accounted for mainly by the drop in the income tax take, the chief cause of which was the fall in the copper price. The drop in overall revenue in Colombia was also substantial (-9.6%).

Where tax and non-tax fiscal revenue from non-renewable natural resources is concerned, projections for 2015 indicate a considerable decline, which will hit hydrocarbon-producing countries particularly hard because this revenue makes up such a large share of the total (see figure I.41). Revenue was at least 50% lower in the first quarter of 2015 than in the first quarter of 2012 in Chile, Ecuador, Mexico, Peru and Trinidad and Tobago. Nonetheless, lower crude oil prices could be an opportunity to reduce the fiscal cost of energy subsidies, which would partly offset the drop in fiscal revenues in producer countries (see box I.2).

Figure I.41

Latin America and the Caribbean (selected countries): revenue from non-renewable natural resources, first quarter of 2012-first quarter of 2015 a

(Index: first quarter of 2012=100)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Based on local-currency figures expressed in real terms. The data are for the following. Plurinational State of Bolivia: hydrocarbon taxes (general government); Chile: taxes on private mining companies and raw copper (central government); Ecuador: oil revenues (central government); Mexico: oil revenues (public sector); Peru: special mining tax, mining royalties, special mining levy and mining revenue tax; Trinidad and Tobago: oil revenue (central government).

Box I.2

Energy subsidies in Latin America

Subsidies for energy consumption are found in most developing countries, especially those that are producers of hydrocarbons, and Latin America is no exception (IMF, 2015). Fuel subsidies averaged 1.4% of GDP a year between 2011 and 2013 and electricity subsidies 0.8% (see figure).

Latin America (19 countries): pre-tax energy subsidies, 2011-2013

(Percentages of GDP)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of International Monetary Fund (IMF), “Energy subsidies in Latin America and the Caribbean: Stocktaking and policy challenges”, IMF Working Paper, No. WP/15/30, Washington, D.C., 2015.

The main trends observed are that fuel subsidies tend to be higher in oil-producing countries (Argentina, the Bolivarian Republic of Venezuela, Ecuador and the Plurinational State of Bolivia). The Bolivarian Republic of Venezuela is the Latin American country that subsidizes petrol and diesel most heavily in absolute terms, followed by Mexico, Ecuador, Argentina, to a lesser extent, and, lastly, Colombia, which has been implementing a policy of reducing subsidies, mainly those going to higher-income strata.

The distribution of electricity subsidies is less concentrated, and lower-income countries such as Haiti, Nicaragua and to a lesser extent Honduras are the ones spending the largest shares of GDP on these. Subsidies of this type are usually created as part of social or industrial policies with the aim of giving particular groups (low-income consumers or producers in strategic sectors) lower-cost access to energy.

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of International Monetary Fund (IMF), “Energy subsidies in Latin America and the Caribbean: Stocktaking and policy challenges”, IMF Working Paper, No. WP/15/30, Washington, D.C., 2015.

7. The economic slowdown and deteriorating public accounts have resulted in more active fiscal policies

Faced with the economic slowdown, falling prices for export commodities, lower revenues and thus higher deficits, some countries of the region have taken fiscal measures to address this reversal of the macroeconomic cycle. Plans and budgets for 2015-2016 have been revised downward, especially when it comes to public investment and, most particularly, public sector enterprises (see table I.6). A number of countries in Latin America have passed or announced measures to adjust public spending, particularly in hydrocarbon-producing countries. By contrast, the Governments of Chile and Peru have announced fiscal stimulus measures, with an emphasis on investment.

It should be noted that many countries have not had to make major changes to the policies outlined in their 2015 budgets, since the public finances have benefited in the last few months from a positive twofold fiscal shock, especially in the Caribbean and Central America, with positive growth rates and lower expenditure on oil.

Table I.6

Latin America (selected countries): fiscal cuts and stimuli announced for 2015

Country

Adjustment

Stimulus

Source

Brazil

Cut of between 1.2% and 1.3% of GDP in discretionary public spending for the consolidated public sector.

Brazilian Ministry of Finance

Chile

Fiscal stimulus of 1% of GDP, with an emphasis on investment. The planned increase in public spending is 9.8%, with capital spending up by 27.5%, bringing it to 4.5% of GDP in 2015.

Chilean Ministry of Finance, Budgetary Affairs Bureau (DIPRES)

Colombia

Deferral of public spending worth 0.73% of GDP. Of this amount, 0.58% of GDP relates to investment spending and 0.15% to operating expenditure.

Colombian Ministry of Finance and Public Credit

Costa Rica

Public spending cut by 1.4% of GDP.

Costa Rican Ministry of Finance

Ecuador

Public spending reduction worth 1.3% of GDP, including a cut in investment spending of 0.77% of GDP and a cut in current spending of 0.53% of GDP.

Ecuadorian Ministry of Finance

Mexico

Reduction of 0.7% of GDP in spending by the federal public sector, including 0.35% of GDP from the PEMEX budget and 0.056% of GDP from the Federal Electricity Commission (CFE) budget. The federal public administration will cut its budget by 0.3% of GDP, including 0.1% of GDP in capital spending.

Mexican Ministry of Finance and Public Credit

A further public spending cut worth 0.7% of GDP, or 135 billion pesos, has been announced for 2016.

Peru

Fiscal stimulus of 1.8% of GDP, with emphasis on social spending, which translates into a 12% increase in public sector spending. Some 30% of the budget will be investment spending, the equivalent of 5.7% of GDP in 2015.

Peruvian Ministry of Economy and Finance

A raising of the fiscal spending cap between 2016 and 2017, doubling the maximum allowable structural fiscal deficit to 2% of GDP, was approved as a temporary amendment to the fiscal rule.

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official information from the countries concerned.

Nonetheless, the figures for the first four months of 2015 give cause for some concern about public spending trends in Latin America. In the first place, there has been a substantial rise in public debt service costs in a number of countries (see table I.5). In Brazil, for example, about 80% of the rise in public spending in the first quarter of 2015 was due to higher interest payments. Debt service has also been growing substantially in Argentina (since 2014) and the Plurinational State of Bolivia (since 2015).

Second, capital spending was cut in several Latin American countries in the first quarter of 2015 after substantial rises in the same period of 2014, with declines in Ecuador and the Plurinational State of Bolivia (both countries where public investment has been very high in recent years) and in Brazil, the Dominican Republic and Panama.

For its part, current primary spending growth has moderated in the last year, particularly in Brazil, Costa Rica, the Dominican Republic and Peru.

8. Despite the current economic context in the region, no major imbalances are expected in the fiscal accounts by the end of 2015

The region’s fiscal situation in 2015 reflects the heterogeneity of economic performance in its individual countries. According to preliminary figures, the average fiscal deficit in the countries of Latin America widened in the first quarter. Public debt has held steady as a proportion of GDP, mainly because interest rates are currently low, although a more rapid increase in debt levels among public enterprises in some countries has been detected. There has been a substantial improvement in the Caribbean, but the high level of public debt remains a heavy drag on growth and investment.

Fiscal revenue is expected to fall in several Latin American countries in 2015, owing to the drop in income from non-renewable natural resources. Meanwhile, tax revenues in Latin America are showing signs of recovery in the wake of the reforms implemented by some countries in the last few years. There has been substantial growth in tax revenues in the Caribbean countries, which will help to close their fiscal gaps.

Where public spending is concerned, a number of the region’s countries have announced measures to respond to the volatility of the external environment. Accordingly, capital spending has been cut and current spending growth moderated in the early months of the year, trends that are especially visible in hydrocarbon-producing countries. The heterogeneity of the region’s macroeconomic performance is also reflected in the fiscal position of the different countries, the fiscal space available to them and the variety of measures adopted.

Bibliography

Capital Economics (2015), “World to benefit from long period of ‘just right’ oil prices”, Global Economics Update, 3 June.

CPB (Netherlands Bureau of Economic Policy Analysis) (2015), CPB World Trade Monitor, June.

ECLAC (Economic Commission for Latin America and the Caribbean) (2015a), Foreign Direct Investment in Latin America and the Caribbean, 2015 (LC/G.2641-P), Santiago, June. United Nations publication, Sales No. E.15.II.G.4

____(2015b), Panorama Fiscal de América Latina, 2015 (LC/L.3961), Santiago.

____(2014), Preliminary Overview of the Economies of Latin America and the Caribbean, 2014 (LC/G.2619-P), Santiago, December. United Nations publication, Sales No. E..14.II.G.3.

ECLAC/ILO (Economic Commission for Latin America and the Caribbean/International Labour Organization) (2015), “Universal social protection in labour markets with high levels of informality”, The Employment Situation in Latin America and the Caribbean, No. 12 (LC/L.3998), Santiago, May.

IMF (International Monetary Fund) (2015), “Energy subsidies in Latin America and the Caribbean: Stocktaking and policy challenges”, IMF Working Paper, No. WP/15/30, Washington, D.C.

IFI (Institute of International Finance) (2015a), “Capital Flows to Emerging Markets”, 14 January [online] https://www.iif.com/publication/capital-flows/january-2015-capital-flows-emerging-markets.

____(2015b), “EM Capital Flows Projected to Fall to Post-Crisis Low in 2015”, 28 May [online] https://www.iif.com/publication/capital-flows/em-capital-flows-projected-fall-post-crisis-low-2015.

Pérez Caldentey, E. (2015), “Restructuración de la producción global, la transformación de las finanzas y el desempeño de América Latina en la década de los 2000”, América Latina: los nuevos rumbos de las economías y políticas para estimular la producción y el desarrollo, Mexico City, Latin American Faculty of Social Sciences (FLACSO).

World Bank (2015), Migration and Remittances: Recent Developments and Outlook, Washington, D.C., April.

[1] World Bank, “Overview of Commodity Markets” [online] http://econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTDECPROSPECTS/0,,contentMDK:21574907~menuPK:7859231~pagePK:64165401~piPK:64165026~theSitePK:476883,00.html. Brent and Dubai crude prices fell by the same amount (57%) between June 2014 and January 2015, while West Texas Intermediate (WTI) fell by 55%.

[2] The price of a barrel of Brent crude.

[3] For example, Capital Economics (2015) estimates that global GDP could rise by 1% if the oil price held steady at US$ 60 a barrel.

[4] The consensus is that there will be an initial rate rise in the second half of 2015, followed by four increases of 25 basis points apiece during 2016 (IIF, 2015b).

[5] The terms of trade are defined as the ratio between the export price index and the import price index.

[6] In the last decade, for example, remittances have averaged over 21% of GDP in Haiti, over 18% in Honduras, about 17% in El Salvador, about 11% in Guatemala and 10% in Nicaragua. In countries such as Argentina, Brazil, Chile and Uruguay, conversely, they have represented less than 0.5% of GDP in the last decade.

[7] In some countries, the period taken is the first three months of 2015. The World Bank (2015) projects a 2.3% rise in remittances in the region over 2015 as a whole relative to their 2014 level.

[8] At the time this publication went to press, only a few countries had released balance-of-payments data for the first quarter of the year. The information is available for Brazil, Chile, Mexico and Peru, and the evidence to date is that net inflows are not declining but stagnating. In addition, methodological changes implemented by Brazil mean that its 2015 figures are not comparable with those of 2014, making it difficult to draw conclusions for the time being.

[9] The average GDP growth rate in Latin America and the Caribbean for the period from 2005 to 2008 (before the crisis) was 4.9%. This compares with 2.9% between 2011 and 2014 (after the crisis).

[10] Because no recent information is available on prices in the Bolivarian Republic of Venezuela (the last time a figure was published was in December 2014), the regional calculations shown in this section exclude that country’s data.

[11] Urban employment and participation rates in the region are slightly higher than reported previously (see, for example, ECLAC, 2014), owing to the incorporation of adjustments to the data from Mexico, where the age at which people were counted as part of the working-age population was increased from 14 and over to 15 and over.

[12] See ECLAC/ILO (2015) for a detailed review and interpretation of developments in the regional labour market in 2014.

[13] Only jobless people actively seeking paid work are counted in the open unemployment figures.

[14] Namely Argentina, the Bolivarian Republic of Venezuela, Brazil, Chile, Colombia, Ecuador, Jamaica, Mexico, Peru and Uruguay, these being the countries for which extensive quarterly data series are available.

[15] If the year-on-year change in five countries where there was no increase in the minimum wage in early 2015 is included, the median real-term increase in minimum wages in the first quarter was 1.7%.

[16] According to the quarterly surveys of the Manpower agency, firms will be looking to take on fewer staff in 2015 than in 2014. See [online] http://www.manpowergroup.com/wps/wcm/connect/manpowergroup-en/home/thought-leadership/meos/manpower-employment-outlook-survey.

[17] The negative impact of this deterioration in the composition of employment on overall earnings growth is twofold. First, there is a negative composition effect, with the proportion of employed people in lower-earnings groups increasing. Second, in situations where the demand for labour is low, supply pressure tends to depress average earnings, specifically in those employment categories that expand as a result of this pressure. Thus, for example, formal private sector employees’ real wages dropped by 0.3% in Brazil in the first quarter of 2015, while the real average earnings of own-account workers contracted by 2.4%.

[18] Unlike the effective extraregional exchange rate, where the weighting excludes trade with Latin American and Caribbean countries, the total effective exchange rate includes trade with all the trading partners of each country.

[19] Mention is made only of countries with a single exchange rate.

Part II

Challenges in boosting the investment cycle to reinvigorate growth

Chapter II

Gross fixed capital formation in Latin America and the Caribbean: stylized facts and long-term growth implications

Introduction

A. The main stylized facts of gross fixed capital formation in Latin America and the Caribbean and their implications

B. Stylized facts for the behaviour of GDP and investment over the business cycle

C. The characteristics of the investment cycle are linked to productivity gaps

D. Conclusion

Bibliography

Annex II.A1

Introduction

Although the countries of Latin America and the Caribbean narrowed their investment gap with the developed economies and other developing countries (except China and India) between 1990 and 2014, gross fixed capital formation remains lower in the region than in other regions of the developing world.

The narrowing of Latin America and the Caribbean’s investment gap is largely due to higher private investment, which constitutes about 74% of gross fixed capital formation. Public investment (including that by State enterprises) has strengthened since 2003, recovering from the large declines of the 1980s and 1990s and returning to levels of about 6% of gross domestic product (GDP), but this is still low by comparison with Asia, where public investment is about 8% of GDP.

Investment is usually the most volatile component of aggregate demand, and Latin America and the Caribbean is no exception. However, investment is more volatile in the region than elsewhere in the world, essentially because of the dynamics of the machinery and equipment component, which tends to be associated with productivity. When this component is very volatile, so too are productivity gains, which consequently cannot be sustained over time. This is one reason for the productivity gap between Latin America and the Caribbean and other regions.

Investment volatility reflects specific characteristics of the region’s business cycle. The data suggest that the dynamic of the investment cycle has been unfavourable to sustained, inclusive medium- and long-term growth.

Analysis of the dynamics of business cycles in the region over the period from 1990 to 2014 shows investment contracting by substantially more and for much longer than GDP during cyclical downturns. Public investment has contracted particularly sharply, and by more on average than in other regions of the world. During cyclical upturns, investment growth has not been enough to make up for the large and protracted declines during the downturns.

Investment behaviour not only affects the speed and rate of capital accumulation but also has a direct bearing on productivity. As discussed below, the causal relationship between capital accumulation and productivity makes the cyclical characteristics of investment an important determinant of long-run growth capacity.

In what follows, investment behaviour and its dynamics in Latin America and the Caribbean will be analysed in connection with the region’s long-term growth potential. The second section presents the stylized facts of investment. The third section focuses on the GDP and investment cycle in Latin America and the Caribbean as compared with other regions. The fourth section analyses the relationship between investment and productivity growth. The conclusion examines the implications of investment characteristics, cycles and productivity effects for the development of a countercyclical framework and the implementation of macroeconomic policy.

A. The main stylized facts of gross fixed capital formation in Latin America and the Caribbean and their implications

1. Latin America and the Caribbean invests less than other regions but has succeeded in narrowing the investment gap

Traditionally, gross fixed capital formation has tended to be lower in Latin America and the Caribbean than in other regions of the developed and developing world. A comparative analysis of the evolution of gross fixed capital formation over a period of more than two decades (between 1990 and 2013) shows that the region invested 16.7% and 21.9% of GDP in 1990 and 2013, respectively, while the figures were 30.2% and 26.5% for East Asia and the Pacific, 21.8% and 23.3% for South Asia and 26.7% and 23.7% for Europe and Central Asia in those same years (see figure II.1).[1]

Figure II.1

Selected regions: gross fixed capital formation, 1990-2013 a

(Percentages of GDP measured in constant 2005 dollars)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of World Bank, World Development Indicators, 2015.

a The estimates exclude China and India.

Nonetheless, Latin America and the Caribbean has been closing its investment gap with other regions and countries, with the exception of certain economies that have grown particularly quickly in the last decade, such as China and India. The data available show that Latin America and the Caribbean’s investment gap with East Asia and the Pacific and with Europe and Central Asia fell by about 8 percentage points of GDP between 1990 and 2013, while the gap with South Asia fell by about 4 percentage points (see figure II.1). On the other hand, Latin America and the Caribbean’s investment gap with China doubled, while that with India widened by 4 percentage points of GDP.

In line with the regional average, all but a few of the region’s countries raised investment in the period considered. The countries with the highest growth included the Plurinational State of Bolivia (whose investment rate rose from 12.2% of GDP to 21.2% of GDP between 1990 and 2014), Colombia (where it rose from 16.8% to 26.3%), Ecuador (from 19.3% to 29.0%), Haiti (from 12.5% to 27.5%), Nicaragua (from 17.4% to 26.4%), Panama (from 6.4% to 29.8%) and Peru (from 13.5% to 24.7%).

Countries where investment grew less strongly included Mexico and most of Central America (Costa Rica, El Salvador, Guatemala and Honduras). Investment growth in these countries has been hindered by the repercussions from the international financial crisis of 2007-2009.[2]

Lastly, the group of countries where investment declined included the Bolivarian Republic of Venezuela, Brazil, Cuba (which never recovered from a large drop in investment during the 1990s), Paraguay and some of the Caribbean economies. Indeed, gross fixed capital formation in the Caribbean has fallen off sharply since peaking in 2005. Dominica and Barbados have the lowest levels of investment, with rates of 12% and 15% of GDP in 2013, respectively, while the highest values are found in the Bahamas (27.7%) and Saint Kitts and Nevis (29.0%).

Figure II.2

Latin America and the Caribbean: gross fixed capital formation by country

(Percentages of GDP measured in constant 2010 dollars)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

2. The investment gap with other regions of the world has narrowed because of higher growth in private investment

Rising private investment in the region has largely been responsible for the narrowing of its investment gap with most other regions of the world.

Private investment, which averages 74% of the total, rose from 13.2% to 14.9% of GDP between 1990 and 2013. This increase, which began in the early 1990s, was especially remarkable during the boom years from 2003 to 2008. During this time, private investment expanded by almost 4 percentage points of GDP, from 13.3% of GDP in 2003 to 15.4% in 2008 —its highest level in three decades.

Compared with private investment, public investment represents a minor share of the total (averaging 5% of GDP and a quarter of overall gross fixed capital formation between 1990 and 2013).

The small share of public investment is due partly to adjustment policies implemented in the 1990s as a result of the application of the Washington Consensus in Latin America and the Caribbean, which resulted in a large wave of privatizations and emphasis on cutting fiscal spending, with nominal stability becoming the focus of macroeconomic policy. In consequence, investment spending came to be used as an adjustment lever in the effort to attain fiscal balance, and public investment showed a clear downward trend during the 1990s, falling from 5% of GDP in 1993 to 4.4% of GDP in 2003.

Figure II.3

Latin America: public a and private gross fixed capital formation, simple averages, 1990-2013

(Percentages of GDP measured in current dollars)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Public investment means that by the general government only and excludes investment by State enterprises, which is categorized as private investment.

Public investment bottomed out in 2003 and began to grow again thanks to the greater fiscal leeway created in a number of countries by the economic boom, before stabilizing at levels of around 6%.

Despite this increase and the countercyclical measures applied in some countries of the region in response to the effects of the international financial crisis, which hit the region hard in 2009, public investment is considerably lower in Latin America and the Caribbean than in other regions of the developing world.

Table II.1 shows the evolution of public investment spending as a proportion of GDP for regions of the developing world and the industrialized countries between 1990 and 2014, using five-year averages. On the one hand, Latin America and the other developing-world regions have a higher rate of public investment than the industrialized countries. On the other, public investment is much lower in Latin America than in regions such as Asia. In the period from 2007 to 2013, public investment as a share of GDP was 5.3% in Latin America and 8% in Asia.

Table II.1

Selected regions and countries: public investment, 1990-2013

(Percentages of GDP)

Region

1990-1994

1995-1999

2000-2004

2005-2006

2007-2014

Developing countries

Latin America

5.1

1.9

4.5

4.5

5.6

Asia

9.1

8.7

8.1

8.4

...

Industrialized countries

Eurozone a

...

...

...

...

3.1

Eurozone (core countries)

...

3.1

2.9

2.9

3.1

Eurozone (peripheral countries)

...

3.6

3.8

3.6

3.3

United States

4.1

3.7

3.7

3.7

3.8

Canada

5.5

5.8

4.6

3.4

3.3

Japan

2.8

2.3

2.4

2.7

3.4

Source: Benedict Clements, Christopher Faircloth and Marijn Verhoeven, “Public expenditure in Latin America: Trends and key policy issues”, IMF Working Paper, No. WP/07/21, International Monetary Fund, 2007; European Commission, Annual Macroeconomic Database (AMECO), 2015 [online] http://ec.europa.eu/economy_finance/db_indicators/ameco/index_en.htm; and Economic Commission for Latin America and the Caribbean (ECLAC), CEPALSTAT database.

a The core eurozone countries are Austria, Belgium, France, Germany and the Netherlands. The peripheral eurozone countries are Greece, Ireland, Italy, Portugal and Spain.

One reflection of this stylized fact, as will be discussed in chapter III, is that the region’s infrastructure spending is too low to boost economic, social and environmental development, expand access to services for the most vulnerable and reduce inequality. The data available show that infrastructure spending in Latin America averaged 2.2% of GDP between 1992 and 2011, whereas ECLAC calculates that the region needs average annual spending of some 6.2% of GDP to provide infrastructure investment flows sufficient to meet the needs of firms and end consumers between 2012 and 2020. In other words, if the region carried on investing 2.2% of GDP, there would be an unfunded shortfall of some 4% of GDP.

The regional averages mask differences from country to country. Rates of public investment by the general government have increased most over the last 25 years in the Bolivarian Republic of Venezuela, Ecuador, Panama, Peru and the Plurinational State of Bolivia, where they have risen by at least 3 percentage points of GDP.

Conversely, the countries where general government investment has fallen most were Colombia, Costa Rica and Honduras, with reductions of some 3% of GDP between 1990 and 2013. Other countries that have also cut back public investment, but to a lesser extent, are the Dominican Republic, El Salvador, Guatemala, Mexico and Paraguay.

A more detailed analysis of public investment and its composition by institutional sector shows the heterogeneity of the investment carried out by the general government and State enterprises in the different countries. At one extreme are the Bolivarian Republic of Venezuela, Brazil, Colombia, Costa Rica, Ecuador, Mexico and the Plurinational State of Bolivia, where investment by State enterprises represents over 40% of the total. At the other extreme, State enterprises account for the smallest shares of the total in Argentina, Panama and Peru (13.5%, 6.3% and 6.1%, respectively) (see figure II.4).

Figure II.4

Latin America (12 countries): proportion of gross fixed capital formation constituted by public a and private investment, 2013

(Percentages based on constant local-currency prices)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Public investment includes State enterprises. For Colombia, State enterprises form part of the decentralized sector, which includes public establishments, industrial and commercial enterprises, mixed public-private firms, and autonomous universities.

The performance of private investment also varies between countries. Among those where this type of investment increased most in 1990-2013 were Colombia, Nicaragua, Panama and Uruguay. In some countries (the Bolivarian Republic of Venezuela, Cuba, Guatemala and the Plurinational State of Bolivia), the private investment rate in 2013 was still well below the average for the other countries. At the other extreme, the share of private investment is very high in Chile, Costa Rica, Colombia, Nicaragua, Peru and Uruguay, where it represents 80% or more of overall investment.

3. Investment volatility in Latin America and the Caribbean is high in itself and in comparison with other regions of the developing world

Investment is traditionally the most volatile component of aggregate demand, and Latin America and the Caribbean is no exception. As shown by figure II.5, which breaks down the GDP growth rate into the different aggregate demand components, whereas changes in both public and private consumption have contributed to GDP growth to a greater or lesser degree over recent decades, contracting investment was responsible for most of the episodes of falling GDP over the period covered. When the investment growth rate has been positive, however, it has usually more than made up for negative contributions from other components, especially net exports. This shows how important investment is as a determinant not only of the economic growth rate, but of its variability (ECLAC, 2012).

Figure II.5

Latin America: GDP variation and contribution of the aggregate demand components to growth, 1991-2014

(Percentages and percentage points, on the basis of constant 2005 dollars)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

Furthermore, Latin America and the Caribbean has one of the highest levels of volatility (measured by the coefficient of variation of investment as a percentage of GDP) in a group of developing regions that also includes East Asia and the Pacific, Europe and Central Asia, the Middle East and North Africa, and South Asia (see table II.2). More precisely, analysis of the evolution of the coefficient of variation of investment as a percentage of GDP between 1990 and 2013 shows that investment was twice as volatile as GDP in all the periods considered (1990-2000, 2000-2007, 2003-2007, 2008-2009 and 2001-2013).

Table II.2

Selected regions: volatility of gross fixed capital formation relative to GDP, 1990-2013 a

(Percentages)

Region

1990-2000

2000-2007

2003-2007

2008-2009

2001-2013

Latin America and the Caribbean

2.12

2.07

2.07

2.05

2.04

East Asia and the Pacific

2.27

2.09

2.06

2.07

2.09

Europe and Central Asia

1.56

1.81

1.82

1.77

1.78

Middle East and North Africa

0.98

1.02

1.02

1.05

1.05

South Asia

1.44

1.68

1.76

1.95

1.85

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of figures provided by the World Bank.

a Volatility measured by 10-year moving averages of the coefficient of variation.

The volatility of investment over the sampling period from 1990 to 2013, and particularly over the period from 2003 to 2008, when growth was at its highest for three decades, is explained by the evolution of machinery and equipment investment, which is the most dynamic component, the one with the highest technology content, and the one that can contribute most to growth in the economy. Between 1990 and 2008, the size of the machinery and equipment gross capital formation component almost doubled from 6.8% to 12.0% of GDP.

Investment in construction (the other component of gross fixed capital formation) also increased, but much more slowly than machinery and equipment investment. It rose by just over 1 percentage point of GDP (from 9.6% to 11.0%) between 1990 and 2010, while during the region’s strongest growth period for three decades it evolved much as in other periods, without any particular dynamism.

The close relationship between the volatility of gross fixed capital formation overall and in its machinery and equipment component is problematic, since that component incorporates the latest technological advances and innovations. This means that newly added machinery and equipment tends to be more productive than the existing stock. Investment in machinery and equipment is also more productive than other types of investment, such as gross fixed capital formation in construction (Bella and Cerisola, 2009).

Figure II.6

Latin America and the Caribbean: gross fixed capital formation overall, in construction and in machinery and equipment, 1990-2013

(Percentages of GDP)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), CEPALSTAT database, 2015.

Just as investment in machinery and equipment is usually associated with higher productivity and thence faster growth, any contraction in this investment component has the opposite effect. In short, the great volatility of this component means that productivity gains likewise fluctuate and cannot be sustained over time, and this is a factor in the productivity gap between Latin America and the Caribbean and other regions of the world.

Investment volatility has translated into disparate growth rates over time, reflecting swings in economic activity. Thus, the data available for Argentina, Brazil, Chile, Colombia, Peru and the Plurinational State of Bolivia for the period from 1990 to 2014 show that on average the investment growth rate for this group of countries peaked at 13.7% between 2003 and 2008, only to decline sharply as the current economic slowdown made itself felt, with averages of 8.0%, -0.2% and -3.2% for 2010-2013, 2013-2014 and 2014, respectively (see figure II.7).

Figure II.7

Latin America (7 countries): a average annual rate of investment growth in real terms, 1990-2014 b

(Percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Argentina, Bolivarian Republic of Venezuela, Brazil, Chile, Colombia, Peru and Plurinational State of Bolivia.

b Based on quarterly figures.

B. Stylized facts for the behaviour of GDP and investment over the business cycle

1. The upturns of the GDP cycle are weaker and shorter in Latin America and the Caribbean than in other regions of the world, while downturns are similar

As can be gathered from the discussion above, the evolution and behaviour of investment are closely linked to the dynamic of GDP. Analysis of the GDP cycle in the region reveals two distinctive characteristics.

First, expansions are usually shorter-lived in the region than elsewhere in the world. The data show that expansion cycles in Latin America and the Caribbean last for an average of 14 quarters (three and a half years).[3] With the exception of the Middle East and North Africa, where they average one year, expansions are shorter in Latin America and the Caribbean than in the other regions examined, particularly East Asia and the Pacific, where they average about eight years, or almost five years longer than in Latin America and the Caribbean. Expansions are also longer-lasting in high-income countries at six years, or about two years longer than in Latin America and the Caribbean (see table II.3).

Table II.3

Selected regions: median duration and amplitude of business cycle expansions and contractions, 1990-2014

(Number of quarters and percentages)

Contractions

Expansions

Duration

(quarters)

Amplitude

(percentages)

Duration

(quarters)

Amplitude

(percentages)

East Asia and the Pacific

3.3

-10.6

32.5

39.0

Europe and Central Asia

3.8

-11.6

25.0

43.8

Latin America and the Caribbean

3.8

-4.6

13.6

26.3

Middle East and North Africa

7.3

-7.0

3.5

15.6

Sub-Saharan Africa

2.7

-7.1

37.5

40.9

High-income countries

4.0

-4.9

23.0

26.3

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

In keeping with the above findings, Latin America and the Caribbean is also among the regions with the weakest output growth during expansions. Output increases by an average of 26.3% in Latin America and the Caribbean, as compared with 39% (some 48% more) in the benchmark region, East Asia and the Pacific.

By contrast with the findings for expansions, the duration and severity of contractions tend to be much the same in the countries of Latin America and the Caribbean as in other regions. Contractions average less than a year everywhere except the Middle East and North Africa, ranging from 2.7 to 3.8 quarters (8 to 11 months). Contractions in Latin America and the Caribbean, Europe and Central Asia, and East Asia and the Pacific are very similar in duration, lasting for between 3.3 and 3.8 quarters (10 to 11 months).

These findings indicate that contractions are no more severe in Latin America and the Caribbean than in other regions. In fact, it has the shallowest contractions of any developing or developed region, with an average downturn of 4.6%. This is close to the figure for the group of high-income countries (4.9%) and below those for East Asia and the Pacific (10.6%), Europe and Central Asia (11.6%), the Middle East and North Africa (7.0%) and Sub-Saharan Africa (7.1%).

2. The region’s investment cycle is more contractionary and less expansionary than its GDP cycle

The investment cycle is highly synchronized with the GDP cycle. Nonetheless, its contractions are larger and its expansions weaker.

The data available show that gross fixed capital formation contracts for longer and by much more than GDP during cyclical downturns. The regionwide data for the period from 1990 to 2014 show investment contracting for almost six (5.8) quarters and GDP for four. In other words, investment downturns are 30% longer on average than GDP downturns.

Furthermore, investment contracts by an average of four times as much as GDP in downturns. Conversely, investment upturns are shorter than GDP upturns, with investment growth outstripping GDP growth by an average of only 60%.

National data show a similar performance, with investment downturns being far longer and sharper relative to GDP than upturns in all the cases considered (see table II.4).

Table II.4

Latin America and the Caribbean (13 countries): median duration and amplitude of expansions and contractions in the investment cycle relative to GDP, first quarter of 1990 to fourth quarter of 2014

(Quarters and percentages)

Expansions

Contractions

Duration

(quarters)

Amplitude

(percentages)

Duration

(quarters)

Amplitude

(percentages)

Argentina

0.77

1.81

1.00

3.36

Brazil

0.58

1.43

1.50

4.36

Belize

0.60

1.26

2.07

8.76

Chile

0.56

1.19

1.47

4.73

Costa Rica

0.50

0.90

0.78

4.42

Dominican Republic

1.00

2.08

1.28

6.13

Ecuador

0.29

0.71

1.31

2.48

Jamaica

1.46

4.73

1.27

6.47

Mexico

0.84

1.58

1.13

2.09

Paraguay

0.90

1.86

0.65

3.25

Peru

0.76

1.78

1.23

4.74

Uruguay

0.41

1.28

0.79

1.92

Venezuela (Bolivarian Republic of)

1.11

2.95

1.65

4.07

Median

0.8

1.6

1.3

4.4

Average

0.8

1.8

1.5

4.4

Source: Economic Commission for Latin America and the Caribbean (ECLAC), CEPALSTAT database, 2015.

The specific characteristics of the investment cycle come into particularly strong focus in the case of public investment. As can be seen in table II.5, data for six countries in the region[4] show public infrastructure investment falling by an average of 36% in the downturns of the business cycle.

Table II.5

Latin America (selected countries): duration and amplitude of expansions and contractions in the public infrastructure investment cycle, 1980-2010 a

(Years and percentages)

Expansions

Contractions

Duration

(years)

Amplitude

(percentages)

Duration

(years)

Amplitude

(percentages)

Total

2.7

25.6

2.2

-35.6

Energy

1.9

34.7

2.0

-51.5

Highways and railways

2.1

32.3

1.7

-33.1

Telecommunications

1.8

28.1

1.9

-58.0

Water and sanitation

1.6

24.2

1.7

-23.8

Source: Economic Commission for Latin America and the Caribbean (ECLAC), Economic Survey of Latin America and the Caribbean, 2012 (LC/G.2546-P), Santiago, 2012.

a Based on annual figures.

Declines in public infrastructure investment tend to be larger than any increase during the recovery phase. This means that the loss experienced in the downturn of the cycle is not made up for in the upturn, so that the stock of public infrastructure in the region’s countries is run down.

In the sectors analysed, contractions are 40% greater on average than the subsequent expansion. In the energy and telecommunications sectors, the difference between the drop in investment during contractions and the increase during expansions is much greater (a 52% drop and 35% increase in the energy sector, and a 58% drop and 28% increase in the telecommunications sector) (see table II.5).

Investment contracts by more in Latin America and the Caribbean than in other regions of the world. This difference between the region’s economies and those of other regions during the downturn of the cycle becomes even more apparent when the cumulative relative effect on investment as a share of GDP is considered. The cumulative contraction of investment (estimated as amplitude multiplied by the number of quarters) is greater in Latin America and the Caribbean than in any of the other regions considered (see figure II.8).

Figure II.8

Selected regions: average amplitude and cumulative loss in business cycle downturns, first quarter of 1990 to fourth quarter of 2014

(Percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), CEPALSTAT database, 2015.

a Organization for Economic Cooperation and Development (OECD).

3. The dynamic of investment in the main crisis episodes, the current slowdown and the latest boom period, 2003-2008

The characteristics of the investment cycle in Latin America and the Caribbean are reaffirmed even more starkly by developments in critical periods such as the Asian, Brazilian and Russian crisis (1997-1999), the international financial crisis and the region’s current slowdown, as well as in periods of particularly strong growth.

In line with the findings obtained earlier, table II.6 shows that investment downturns were longer and deeper than GDP downturns in all the episodes considered. Indeed, the data show that investment can contract by up to nine times as much as GDP, as happened in the Asian crisis.

The information presented also reveals that Latin America saw a deeper contraction than other regions of the world during certain crisis periods. Thus, during the Asian crisis, investment contracted by nine times as much as GDP in Latin America, compared with 4.7 times as much in the Asian countries. During the international financial crisis, similarly, investment contracted by more in Latin America than in other regions affected by the crisis, including North America, East Asia and the Pacific, the eurozone, and Europe and Central Asia.

Table II.6

Selected regions and countries: median duration and amplitude of investment downswings and cumulative loss of investment relative to GDP during selected crises

(Quarters and percentages of GDP)

Crisis

Region/country

Duration

(quarters)

Amplitude

(percentages)

Cumulative loss

(percentages)

Asian crisis

Latin America and the Caribbean a

1.5

9.4

25.7

Asian countries b

1.8

4.7

10.9

International financial crisis

Latin America and the Caribbean c

1.5

7.3

11.3

North America

1.1

4.7

5.0

Asian countries b

1.8

1.3

2.1

Europe other than eurozone

2.2

3.1

12.0

Europe and Central Asia

2.0

3.4

5.5

Eurozone

1.6

2.4

3.9

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Includes the Bolivarian Republic of Venezuela, Brazil, Ecuador, Paraguay, Peru and the Plurinational State of Bolivia.

b Includes Hong Kong Special Administrative Region of China, Malaysia, the Philippines, the Republic of Korea, Singapore and Thailand.

c Includes Argentina, the Bolivarian Republic of Venezuela, Brazil, Chile, Costa Rica, Ecuador, El Salvador, Guatemala, Jamaica, Mexico, Nicaragua, Paraguay, Peru and the Plurinational State of Bolivia.

The characteristics of the investment cycle are clearly a significant factor in the region’s present economic slowdown. Table II.7 shows that, regardless of their particular features, most Central and South American countries have experienced a recessionary phase in their investment cycle in the past two or three years.

Table II.7

Latin America (11 countries): beginning, end, duration and amplitude relative to GDP of investment cycle downswings, 2011-2014 a

(Quarters and percentages)

Country

Beginning of downswing

End of downswing

Duration

(quarters)

Amplitude

(percentages)

Argentina

2011 (Q4)

2012 (Q2)

3

-12.47

2014 (Q1)

2014 (Q4)

4

-8.1

Bolivia (Plurinational State of)

2012 (Q1)

2012 (Q3)

3

-5.7

Brazil

2012 (Q1)

2012 (Q3)

3

-2.2

2013 (Q3)

2014 (Q4)

6

-6.2

Chile

2013 (Q1)

2014 (Q4)

8

-6.2

Costa Rica

2014 (Q2)

2014 (Q4)

3

-3.9

Dominican Republic

2012 (Q4)

2013 (Q2)

3

-9.2

Guatemala

2013 (Q4)

2014 (Q4)

5

-7.7

Nicaragua

2013 (Q3)

2013 (Q4)

2

-15.4

Peru

2013 (Q3)

2014 (Q4)

6

-4.2

Uruguay

2014 (Q2)

2014 (Q4)

3

-5.5

Venezuela (Bolivarian Republic of)

2013 (Q1)

2014 (Q3)

7

-29.9

Source: Economic Commission for Latin America and the Caribbean (ECLAC), CEPALSTAT database, 2015.

a Latest available data are from the fourth quarter of 2014.

Just as the crisis episodes show unequivocally that the investment cycle is more contractionary than the GDP cycle, the most substantial growth episode of the last three decades (2003-2008) shows that the investment expansion cycle is weaker than the GDP expansion cycle. The data on the period from 2003 to 2008 show investment expanding by less than GDP. The information also indicates that the investment expansion was 40% shorter-lived than the GDP expansion.

Figure II.9

Latin America and the Caribbean: median duration and amplitude of the investment expansion cycle relative to GDP, 2003-2008

(Quarters and percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), CEPALSTAT database, 2015.

C. The characteristics of the investment cycle are linked to productivity gaps

Not only is the investment cycle firmly linked to the GDP cycle, but it is also closely tied to the productivity cycle. An analysis of the concordance of investment and GDP cycles found that on average they coincided 75.8% of the time, while the productivity cycle coincided with the investment cycle 77.3% of the time.

On the one hand, these findings imply that productivity is procyclical, and on the other, that investment dynamics and volatility are reflected in the productivity cycle. Like investment, productivity experiences stronger contractions than GDP. Productivity contractions are 60% deeper than GDP contractions on average, and also 40% longer. Conversely, productivity expansions are shorter and less intense than those of GDP (see table II.9).

Table II.8

Latin America (12 countries): concordance between productivity and investment, productivity and GDP, and GDP and investment, 1990-2012 a

(Percentages)

Country

Concordance of investment and productivity cycles

Concordance of GDP and productivity cycles

Concordance of GDP and investment cycles

Argentina

87.88

87.88

87.88

Bolivia (Plurinational State of)

75.76

75.76

63.64

Brazil

87.88

72.73

72.73

Chile

78.79

81.82

96.97

Costa Rica

69.70

63.64

81.82

Dominican Republic

69.70

75.76

63.64

Ecuador

72.73

54.55

69.70

Guatemala

60.61

54.55

69.70

Mexico

81.82

81.82

93.94

Peru

66.67

90.91

69.70

Uruguay

78.79

87.88

78.79

Venezuela (Bolivarian Republic of)

81.82

72.73

84.85

Median

77.27

75.76

75.76

Source: Economic Commission for Latin America and the Caribbean (ECLAC), CEPALSTAT database, 2015.

a Annual data.

Table II.9

Latin America (12 countries): median duration and amplitude of the productivity cycle relative to GDP, 1990-2012

(Years and percentages)

Expansion

Contraction

Duration

(years)

Amplitude

(percentages)

Duration

(years)

Amplitude

(percentages)

Argentina

0.72

0.49

0.97

0.88

Bolivia (Plurinational State of)

0.36

0.20

0.87

1.09

Brazil

0.41

0.28

1.71

1.89

Chile

0.48

0.30

1.25

1.03

Costa Rica

0.09

0.04

0.75

0.48

Dominican Republic

0.40

0.29

1.50

1.63

Ecuador

0.17

0.13

1.80

2.32

Guatemala

0.25

0.10

2.40

1.86

Mexico

0.97

0.46

2.50

2.15

Peru

0.88

0.69

1.43

1.82

Uruguay

0.50

0.45

0.90

0.96

Venezuela (Bolivarian Republic of)

0.65

0.52

1.42

1.63

Median

0.44

0.29

1.42

1.63

Source: Economic Commission for Latin America and the Caribbean (ECLAC), CEPALSTAT database, 2015.

Investment volatility, which is greater in Latin America and the Caribbean than in other regions of the world, is reflected in the productivity cycle, making it more difficult to sustain productivity gains over time. This in turn has an impact on productivity gaps between Latin America and the Caribbean and other regions.

All available ways of measuring productivity (trends in labour productivity, the capital-to-labour ratio and total factor productivity) reveal the enormous productivity gap between Latin America and the developed countries and the extent to which this gap has widened in recent decades (see ECLAC, 2013).

The data available show that GDP growth per worker has been low and falling, declining from 2.7% a year between 1950 and 1980 to 0.7% a year between 1990 and 2008. Total factor productivity growth (taking the simple average for 11 countries of the region with information available), after averaging 1.56% a year between 1950 and 1980, slowed to 0.08% between 1980 and 2008 (0.80% between 1990 and 2008). National data for the same period show a clear slowdown in total factor productivity in all the cases analysed except the Bolivarian Republic of Venezuela (see table II.10).

Table II.10

Latin America (11 countries): comparative performance of total factor productivity

(Log rates estimated between local peaks)

Country

Total factor productivity

Argentina

1951-1980

1987-2008

0.56

1.60

Bolivia (Plurinational State of)

1952-1975

1989-2009

1.05

1.05

Brazil

1952-1980

1987-2008

3.19

0.36

Chile

1953-1981

1992-2007

0.02

-0.06

Colombia

1954-1980

1989-2007

1.36

-0.09

Costa Rica

1955-1979

1986-2011

1.48

0.87

Ecuador

1954-1981

1988-2008

2.05

0.51

Guatemala

1950-1980

1991-2011

1.84

0.21

Mexico

1951-1981

1994-2011

2.06

-0.24

Peru

1954-1981

1987-2008

1.52

0.04

Venezuela (Bolivarian Republic of)

1952-1981

1992-2008

0.02

0.49

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of Penn World Table (version 8.0); and J. Ros, Productividad y crecimiento en América Latina: ¿por qué algunas economías crecen más que otras? (LC/MEX/L.1145), Mexico City, ECLAC subregional headquarters in Mexico, 2014.

The drop in total factor productivity is endogenous to the waning dynamism of overall economic growth, and most particularly physical capital accumulation (investment). Table II.11 shows three regressions, based on Kaldor’s laws, which attest to the endogeneity of labour productivity growth ()in relation to the growth of capital accumulation as reflected by growth in industrial and manufacturing GDP () and employment (). Moreover, it shows that labour productivity growth ()also depends on the rate of capital accumulation.

According to these estimates, labour productivity across the whole economy is a positive function of growth in industrial production (which positively influences labour productivity growth in the industrial sector and the absorption of labour from non-industrial sectors) and the rate of capital accumulation. The findings show that a 1% increase (decrease) in the industrial and manufacturing GDP growth rates and in the rate of capital accumulation leads to increases (decreases) of 62%, 55% and 57%, respectively, in the productivity growth rate. In turn, labour productivity is a negative function of total employment growth, which, given the absorption of labour in the industrial sector, negatively affects labour productivity in non-industrial sectors by raising the rate of non-industrial employment growth.

Table II.11

Latin America (selected countries): three regressions for labour productivity growth over growth in industrial and manufacturing GDP and employment a

Independent/dependent variable

Constant (C)

1.01

(4.12)

1.04

(3.82)

0.28

(0.52)

0.62

(13.12)

0.55

(11.31)

Employment ()

-0.93

(-9.83)

-0.85

(-8.25)

-0.54

(-3.7)

Rate of capital accumulation ()

0.57

(4.75)

R^2 (adjusted)

N=62

0.75

0.69

0.30

Source: J. Ros, Productividad y crecimiento en América Latina: ¿por qué algunas economías crecen más que otras? (LC/MEX/L.1145), Mexico City, ECLAC subregional headquarters in Mexico, 2014.

a t-statistics in brackets. Estimates were prepared for nine of the region’s countries (Argentina, Bolivarian Republic of Venezuela, Brazil, Chile, Colombia, Costa Rica, Mexico, Peru and the Plurinational State of Bolivia).

As analysed in box II.1, it can be shown that, given certain assumptions relevant to Latin America and the Caribbean, such as the existence of a large tradable goods sector, building up (running down) capital raises (cuts) the productivity growth rate in that sector, generates productivity gains (losses) because of reallocation between formal and informal employment and, lastly, tends to increase (reduce) productivity in the informal sector of the economy (see box II.1).

This analysis suggests that differences between countries in output and productivity growth are associated with different capital accumulation rates, and that the characteristics of the investment cycle are therefore factors in explaining accumulation rates and productivity.

The outlook for capital in Latin America and the Caribbean suggests that it will grow more slowly in the near future than it did formerly: by 4.5%, against the 5.8% that was the average for the last five years. This would mean the investment-to-GDP ratio remaining at levels similar to that of the past 10 years, which would negatively affect productivity growth in the region.

Box II.1

Channels through which capital accumulation feeds through to productivity: a model of a small, open economy with a high level of structural heterogeneity

Ros (2015) concentrates on analysing small, open economies that have to deal with exogenous terms of trade in the international market and are characterized by great productive and technological heterogeneity in their economic structure. The economy is assumed to have two sectors, a modern, capital-intensive tradable goods sector and a highly labour-intensive non-tradable goods sector with low productivity and a high level of informality. Production conditions and the potential for productivity gains are very different in these two sectors. The non-tradable goods sector is small-scale and informal, with flexible prices, no barriers to entry and non-increasing returns to scale. Increasing returns to scale are very much in evidence in the formal manufacturing sector, on the other hand (with many of the manufactures produced being tradable).

In a model of this kind, a higher capital accumulation rate (faster expansion of the capital stock in the tradable goods sector) tends to raise the growth rate of labour productivity and potentially of total factor productivity too, even in the absence of exogenous technical progress. A higher capital accumulation rate has three effects on labour productivity in the whole economy. The first is a faster rate of productivity growth in the tradable goods sector, both because this sector becomes more capital-intensive and because of the productivity gains associated with the presence of increasing returns to scale. The second source of productivity gains is the fact that labour productivity tends to be higher in the capital-intensive tradable goods sector than in the informal non-tradable goods sector, where labour is less productive because it is not assisted by capital. Thus, if the accumulation rate is high enough, there will be a higher rate of labour absorption in high-productivity segments of the tradable goods sector, helping to bring down the employment share of low-productivity informal sectors and thus generating productivity gains via the reallocation of labour. The third effect is that a higher capital accumulation rate tends to reduce the employment growth rate in informal non-tradable goods sectors, which are characterized by the absence of increasing returns to scale and the presence of surplus labour, and where the lower the employment growth rate is, the faster productivity will tend to grow. Thus, increasing the accumulation rate in tradable goods sectors by reducing informality in non-tradable goods sectors tends to raise productivity in these sectors.

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of J. Ros, “Inversión, productividad y crecimiento. Un análisis de las interrelaciones”, Santiago, ECLAC, 2015, unpublished.

In terms of policy, the causal relationship between capital accumulation and productivity is very important, as it further highlights the importance of aggregate demand and macroeconomic cycle composition management rather than supply side policies in accounting for the low long-run growth in GDP and productivity in Latin America.[5]

D. Conclusion

Broadly speaking, Latin America and the Caribbean has succeeded in narrowing its public and private investment gaps, although investment levels are still below the average for other developing regions. Investment has been highly volatile because of the dynamic of the machinery and equipment component, which remains an issue. This component incorporates the latest technological advances and innovation, so its volatility adversely affects the behaviour of productivity and thus the long-term growth evolution of the region’s economies.

Investment volatility is closely linked to the characteristics of the investment cycle. Overall, investment downturns have systematically been longer and deeper than GDP downturns, while expansions have been weaker. This partly reflects cycle management that is not conducive to stronger investment or sustained economic growth.

The policies traditionally applied to cope with the vagaries of the business cycle have tended to penalize investment (and particularly public investment) in both upturns and downturns. During upturns, economic policy has been unable to sustain investment growth. During downturns, public investment has been used in a short-termist fashion as a cyclical adjustment variable, to the detriment of both current investment and the ability to embark upon new investment projects. This, in turn, can result in slowdowns being more protracted and severe, making it harder for macroeconomic equilibria to be re-established.

The observed behaviour of investment over the cycle and the effects on long-run growth pose a number of challenges for macroeconomic development policymaking.

First, macroeconomic policies should not focus exclusively on nominal stability over the cycle but should take account of the effects on long-run growth, on the production structure and on structural heterogeneity. This means that one of the goals of macroeconomic policy must be an enhanced capacity to mitigate and palliate the effects of recessions on the production structure.

Macroeconomic policy also needs to concern itself with the duration and strength of the upswing of the cycle as a key factor in incentivizing investment and expanding the production frontier and long-term outlook. This means formulating countercyclical policies that can reconcile the aggregate demand management required in the different phases of the cycle with efforts to enhance medium- and long-run growth by stimulating and strengthening the production structure of economies.

To this end, it is vital to rethink the countercyclical architecture with a view to managing the business cycle flexibly and shielding public investment against the vagaries of economic activity. A public framework to promote investment is also needed, as discussed in chapter III of Economic Survey of Latin America and the Caribbean.

All these elements are essential, not only to reverse losses arising in the downturns of the cycle, but to stimulate and strengthen economies’ production structures and capacity so that growth rates can be permanently raised to a level commensurate with the development needs of the countries of Latin America and the Caribbean.

Bibliography

Bella G.D and M. Cerisola (2009), “Investment-specific productivity growth: Chile in a global perspective”, IMF Working Paper, No. WP/09/264 [online] https://www.imf.org/external/pubs/ft/wp/2009/wp09264.pdf.

Bry, G. and C. Boschan (1971), Cyclical Analysis of Time Series: Selected Procedures and Computer Programmes, New York, National Bureau of Economic Research (NBER).

Clements, B. and M. Verthoeven (2007), “Public expenditure in Latin America: Trends and key policy issues”, IMF Working Paper, No. WP/07/21, Washington, D.C., International Monetary Fund.

ECLAC (Economic Commission for Latin America and the Caribbean) (2015), CEPALSTAT database [online] http://estadisticas.cepal.org/cepalstat/WEB_CEPALSTAT/Portada.asp.

____(2013), Economic Survey of Latin America and the Caribbean, 2013 (LC/G.2574-P), Santiago.

____(2012), Economic Survey of Latin America and the Caribbean, 2012 (LC/G.2546-P), Santiago.

European Commission (2015), Annual Macroeconomic Database (AMECO) [online] http://ec.europa.eu/economy_finance/db_indicators/ameco/index_en.htm.

Harding, Don and Adrian Pagan (2002a), “A comparison of two business cycle dating methods”, Journal of Economic Dynamics and Control, No. 27.

____(2002b), “Dissecting the cycle: a methodological investigation”, Journal of Monetary Economics, No. 49.

Male, R. (2010), “Developing country business cycles: Revisiting the stylised facts”, Working Paper, No. 664, Queen Mary University of London [online] http://www.econ.qmul.ac.uk/papers/doc/wp664.pdf.

Ros, J. (2015), “Inversión, productividad y crecimiento. Un análisis de las interrelaciones”, Santiago, Economic Commission for Latin America and the Caribbean (ECLAC), unpublished.

____(2014), Productividad y crecimiento en América Latina: ¿por qué algunas economías crecen más que otras? (LC/MEX/L.1145), Mexico City, ECLAC subregional headquarters in Mexico.

World Bank (2015), “World Development Indicators” [online database].

Annex II.A1

Cycle analysis methodology

The methodology consists in identifying the turning points (peaks and troughs) of the real-term gross domestic product (GDP) series in levels, using quarterly data.

In particular, the turning points (tp) of the series in levels expressed with natural logarithms, yi,t, were determined using an algorithm able to identify local peaks and troughs, in windows of five quarters (see Bry and Boschan, 1971). In other words, there is a local peak at t: tp = 1 if yi,t > yi,t-k, ∀k = -1, -2, 1, 2, and a local trough at t: tp = -1 if yi,t < yi,t-k, ∀k = -1, -2, 1, 2 tp = 0 otherwise.

The conditions for identifying a tp include the following: there cannot be two consecutive peaks or troughs; the minimum duration of a phase is two quarters from peak to trough and six quarters from peak to peak, and tp are calculated using the computational algorithm for MATLAB developed by Male (2010). The tp are then used to define the dichotomous variable si,t in order to identify phases of expansion: si,t = 1 if the series yi,t is in an expansionary phase; si,t = 0 if the series yi,t is in a contractionary phase.

Similarly, the variable ci,t is defined for phases of contraction: ci,t = 1 - si,t. To calculate the variable si,t, only complete phases are considered, so that each series starts and ends with either a peak or a trough. This is done because there is no way of knowing the duration or amplitude of a phase that is incomplete.

The tp served in turn to identify GDP expansion and contraction phases. An expansion phase is a period when GDP growth is positive. A contraction phase is a period when GDP growth is negative. Once the expansion and contraction periods had been identified, estimates were produced for the countries, regions and subregions of the duration and amplitude of the economic activity expansion and contraction phases. Duration is a measure of the persistence of the contraction or recession phase, while amplitude is a measure of the change in economic activity during the phases of the cycle.

The average duration (D) of an expansion (or contraction) is defined as the ratio between the total number of quarters of expansion and the total number of peaks:

Where si,t is a dichotomous variable ysi,t = 1, if the series yi,t is in an expansion phase, and si,t = 0, if the series yi,t is in a contraction phase. The average amplitude (A) of an expansion is the sum of the changes in the variable in every quarter where si,t = 1, divided by the total number of peaks:

Where yi,t = natural logarithm of GDP.

When yi is expressed as a logarithm, ∆yi,t is the percentage change, so A is a percentage. If yi,t is expressed as a proportion of GDP, then A is read in percentage points.

[1] Latin America and the Caribbean has had a higher rate of gross fixed capital formation than the group of high-income countries in the Organization for Economic Cooperation and Development (OECD) since 2010, owing to the effects of the international financial crisis (2007-2009) and the euro crisis (2009-2015) on investment behaviour in some of the countries making up this group.

[2] A recurring issue for discussion is how the investment rate should be measured, whether at current prices or by taking constant prices in a given reference year. It should be pointed out that capital formation contributes to growth via real investment, measured in relation to real GDP, which reflects the evolution of the physical quantity of capital and output. If the price of an investment good falls, less nominal expenditure is required to achieve the same real investment. The difference is largely due to the decline in the relative price of capital goods, most of which are imported. Sometimes, however, as is the case with most Caribbean countries, this information is not available at constant values.

[3] The methodology used is described in the annex.

[4] Argentina, Brazil, Chile, Colombia, Mexico and Peru, which account for 85.5% of the region’s GDP.

[5] Since the 1970s, and in most of the periods studied (1981-1990, 1991-2000, 2001-2009 and 2001-2011), Latin America and the Caribbean has had one of the lowest per capita GDP growth rates of any developing region. In addition, the growth differential between Latin America and the Caribbean and other regions, such as East Asia and the Pacific, has widened over time. The latest period of expansion, between 2003 and 2008, is no exception. During that time, Latin America and the Caribbean experienced its highest average growth rates for over three decades. The average regional per capita growth rate was 3.7%, higher not only than in the lost decade of the 1980s and the era of free market structural reforms between 1991 and 2000 (1.4%), but also than in the 1970s (3.2%). In comparative terms, though, the performance of Latin America and the Caribbean was by no means exceptional. In fact, the region’s growth rate remained substantially lower than those of East Asia and the Pacific (9.3%), Europe and Central Asia (7.4%) and South Asia (6.6%).

Chapter III

A bridge to the future: boosting investment in the public sphere

Introduction

A. Starting from a narrow base, public investment has risen almost everywhere in the region

B. To boost growth, fiscal rules must protect capital spending

C. Greater regional and international cooperation is needed to avoid tax competition and to protect tax bases

D. Public-private partnerships may complement State investments in some areas

E. Concluding remarks: towards an inclusive fiscal framework to promote investment

Bibliography

Introduction

This chapter discusses, from diverse perspectives, the need to move towards an inclusive fiscal framework to promote investment, taking up the proposals put forward by ECLAC in recent documents.

Economic dynamics and fiscal space vary in the countries of the region. Accordingly, section A of this chapter examines trends in public investment spending, which increased in many countries between 2003 and 2013, although the trend is now under threat as fiscal space narrowed during the economic slowdown of 2014 and 2015. In some countries, resources are declining at the very time when fiscal stimulus is most needed to promote growth.

Section B looks at the significance of fiscal policy for achieving development goals. Managed well, public investment spending can create virtuous circles and expand the fiscal space, since it stimulates growth and thus secures future tax revenues. For that reason, it is important to put in place fiscal rules that stimulate investment.

Section C reviews the lessons drawn from recent studies on the use of tax incentives to boost investment. Tax incentives or subsidies seem to have little effect in terms of bringing investment to fruition, but have had an adverse and immediate impact on fiscal space and the provision of public goods. Partly owing to institutional weaknesses and partly for ideological reasons, the overuse of these instruments has caused the fragmentation of tax systems and undermined income tax, in particular. These incentives cannot be easily dismantled, since in most cases eliminating tax competition requires concerted action by countries that share similar economic spaces or activities.

Section D reviews the experiences of the region in the area of public-private partnerships. One of the main benefits of such partnerships is that they use private resources to finance infrastructure investment without putting pressure on fiscal space. However, the commitments undertaken, or the explicit or implicit guarantees given in certain contracts, may endanger future fiscal sustainability. A fundamental lesson to emerge from the region’s experience is that this kind of legal and financial instrument has complemented public investment in some areas when an appropriate regulatory authority is in place; however, most capital spending on public goods remains directly funded by the State.

A. Starting from a narrow base, public investment has risen almost everywhere in the region

Until the early 1980s, public investment was strongest in capital formation, and was as high as 10% of GDP in some countries. After the debt crisis, the need to adjust public accounts forced governments to bring down capital spending during the 1990s, as fiscal restraint coincided with the view, then at its zenith, that the State should withdraw from many sectors of the economy.

In addition to the crisis, the privatization of many State-owned enterprises meant that the 1990s were characterized by an unprecedented fall in public investment, to the detriment of well-being and economic growth. For example, infrastructure investment fell from 3.1% to 1.5% of GDP in the 1980s (see ECLAC, 2010) and it remained at around that level until 2008, when several countries responded to that year’s crisis by stepping up public investment.

The simple average of public capital spending in 19 Latin American countries (including State-owned enterprises in countries where these have a significant presence) jumped from 4.7% to 6.5% of GDP between 2000 and 2014 (see figure III.1), while the average for 13 Caribbean countries remained at about 5.8% of GDP during the same period. The weak starting point helps explain the relatively strong investment performance over the past 15 years; compared with 2000 levels, it has surged in Argentina, Cuba, Ecuador, Panama, Peru and the Plurinational State of Bolivia. Conversely, capital spending has fallen —sharply in some cases— in a number of countries that had a high public investment ratio in 2000, such as Belize, Grenada, Honduras, Colombia, Nicaragua and Guatemala.

Figure III.1

Latin America and the Caribbean: public investment rates, 2000 and 2014

(Percentages of GDP)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

Note: In figure III.1A, public investment is defined as capital expenditure net of intergovernmental transfers; in figure III.1B, it is defined as capital expenditure.

a Figures for 2013.

Examined by country (see figure III.2), public investment clearly experienced a surge starting in 2008 and 2009, which continued until 2013 and 2014. In Latin America, this is a reflection of significant growth in recent investment by State-owned enterprises. In several of the region’s countries (notably the Bolivarian Republic of Venezuela, Chile, Ecuador, Mexico and the Plurinational State of Bolivia), State-owned exporters of non-renewable raw materials undoubtedly contributed much of public investment, in keeping with their relative share of tax revenues.

Figure III.2

Latin America and the Caribbean: public investment rates by level of government, 2000-2014

(Percentages of GDP)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

In other countries, the preponderance of State-owned enterprises in investment reflects the fact that traditional infrastructure providers, notably in transportation, telecommunications, energy, and drinking water and sanitation, remain in public hands. This is the case mainly in Costa Rica, Panama, Paraguay and Uruguay. Subnational governments have played a prominent role in investment execution in Argentina, Colombia, Peru and the Plurinational State of Bolivia.

In one group of countries, the level of public investment has sharply increased as a percentage of GDP. In the Plurinational State of Bolivia, capital spending by the non-financial public sector peaked at 16.3% of GDP in 2013, a 9.3-percentage-point increase on the low recorded in 1998. Given that fiscal affairs are highly decentralized in the Plurinational State of Bolivia, most of this investment was executed by municipal (7.1% of GDP) and departmental governments (3.0% of GDP). Since the creation of the direct tax on hydrocarbons in 2005, some of the increase in public investment by these levels of government was funded through transfers of additional resources collected from the tax.

In 2007, the share of public investment executed by State-owned enterprises began to increase —driven by nationalizations and renationalizations— and reached 3.2% of GDP in 2013, with Yacimientos Petrolíferos Fiscales Bolivianos (YPFB) and Empresa Nacional de Electricidad (ENDE) accounting for about 80% of this total. Investment in production and infrastructure posted buoyant growth, while social investment climbed even more sharply, from 1% of GDP in 1990 to over 4% in 2014, chiefly in the health, education, urban development and housing sectors. Domestic resources made a key contribution, financing 85% of the total in 2014. The nationalization of the hydrocarbons industry in 2006 (and the implementation of a new fiscal framework for the sector) created a major source of public investment funding.

In Panama, non-financial public-sector investment stood at 13% of GDP in 2014, compared with 6% in 2000. Most of this investment is implemented by the central government (55% of the total), decentralized institutions (including transport authorities) and non-financial public enterprises, whose investment levels topped 1% of GDP and accounted for 8% of total public investment. During 2014 and 2015, non-financial public-sector investment continued to increase with the launch of the Strategic Government Plan 2015-2019, which envisions investments totalling US$ 19.5 billion in projects such as the Panama City metro, road network reorganization, the building of a “hospital city”, and the Colón Corridor highway.

In Ecuador, capital spending by the non-financial public sector rose from about 4% of GDP in 2000 to 15.1% of GDP in 2014. The central government was responsible for most fixed capital formation (8.2% of GDP), followed by non-financial public enterprises (4.1% of GDP) and regional and local governments (1.4% of GDP). Under the current fiscal rule, capital spending is funded with non-permanent sources of income, meaning that the sharp rise in investment is due fundamentally to the strong performance of oil revenues. Public investment figures showed large increases in the amounts earmarked for education (up 1.3 percentage points of GDP) and natural resources (1.5 percentage points of GDP).

In Colombia, non-financial public-sector investment stood at 6.1% of GDP in 2014, with the central government accounting for 48% of the total, equivalent to 2.9% of GDP. The decentralized sector (including social security, national and local enterprises and regional governments) was responsible for investment equivalent to 3.2% of GDP, or 52% of total public investment. The public investment rate was healthy throughout the period at about 6% of GDP, reaching a six-year high in 2014 as a result of the central government’s policy of investing in housing and public works. By contrast, the share of investment executed by the decentralized sector shrank somewhat, albeit remaining above 3% of GDP. Large investments were made 2014 in social inclusion and reconciliation projects (More Families in Action and the National Strategy for Comprehensive Early Childhood Care) along with strategic medium-term infrastructure projects such as the Ruta del Sol highway concession and the infrastructure maintenance and improvement programme; housing-sector projects aimed at providing subsidies for families (100,000 homes) and displaced populations, and the Integrated Mass Transit System, among others.

In Peru, public-sector investment amounted to 6% of GDP in 2014. Subnational governments made a major contribution to this strong performance, reflecting the country’s dynamic decentralization process, which in turn entailed the consolidation of the National System for Public Investment (SNIP) in view of the need to evaluate multiple investment projects in a context of fragmented decision-making.

The central government accounted for 50% of total investment, while investment by local governments (40% of the total) equated to 2.4% of GDP, and that of non-financial public enterprises (including Petróleos del Perú (PETROPERÚ)) 0.5% of GDP. An investment rate of 6.3% of GDP is expected for the non-financial public sector at year-end 2015. One interesting initiative in Peru is the Works for Taxes Law (Shack, 2015), whereby companies or private consortiums are allowed to fund and implement public infrastructure projects by reducing their previous year’s income tax by up to 50%. The law represents a management tool for national, regional and local authorities, which aims to encourage private investors to engage with the development process in their local area.

A second group of countries achieved investment rates in the region of 4% to 5% of GDP. In Brazil, ups and downs in public investment are historically related to the country’s development model (Afonso and Wulff, 2015), which generally entailed significant State involvement in the economy, especially through public investments (either direct or channelled into the formation and support of various State-owned enterprises). However, with the Real Plan, anti-inflation policies and the opening of the economy to external markets, the Brazilian economy entered a period of heavy fiscal adjustment, with a consequent reduction in capital spending.

Public investment took on renewed importance in the wake of the 2008-2009 crisis, rising from an annual average of 2.6% of GDP for the period between 2003 and 2008 to 4.3% of GDP between 2009 and 2014. While this growth was partly due to large infrastructure projects, investment was evidently concentrated in Petrobras (89% of the total in 2014). The Growth Acceleration Programme (PAC) funded 20% of public-sector investment, equivalent to 0.8% of GDP, which was not included in the fiscal targets. Moreover, PAC was expanded to include several programmes to encourage investment through public service concessions. For 2015, the cut of about 30% in non-compulsory spending is expected to translate into lower levels of public investment, including in Petrobras.

In Chile, the National Copper Corporation of Chile (CODELCO) continues to account for around a third of total investment. Public-sector investment stood at 5.2% of GDP in 2014; central government investment (about 44% of the total) was equivalent to 2.3% of GDP, while investment by non-financial public enterprises (including CODELCO) amounted to 1.2% of GDP, or 30% of the total.

Capital transfers stood at 1.4% of GDP (26% of the investment budget), and were largely allocated to social housing (0.6% of GDP and 45% of the total) and economic affairs, with transportation accounting for 0.2% of GDP and 16% of capital transfers. During 2014, several programmes were implemented to boost public investment. By 2020, total investment in infrastructure is expected to rise from 2.5% to 3.5% of GDP, through a public-private action plan.

In Mexico, public-sector investment amounted to 4.8% of GDP in 2014. Investment by the federal government represented 52% of the total, equivalent to 2.5% of GDP, while public enterprises were responsible for the remaining 48%, or 2.3% of GDP. Petróleos Mexicanos (PEMEX) accounted for more than 90% of total investment by public enterprises, equivalent to 2.1% of GDP.

During 2014, federal government investment grew by 7.5%, the fastest rate of expansion since 2010. Most resources were invested in energy (especially hydrocarbons), communications and transportation. In 2015, public-sector investment is expected to stand at 4.6% of GDP, down 4% on the 2014 figure. The medium-term plan envisages that public-sector investment will be raised to 5.2% of GDP by 2020.

In Argentina, the public investment rate dropped below 1% of GDP in 2002, which undoubtedly signified a net reduction of public capital (see Cetrángolo Gómez Sabaíni and Morán, 2015). Since then, a gradual recovery has taken place, with investment now at the levels of the early 1990s. More than 60% of investment is funded by the national government, although it only executes about 30%, while provincial governments implement 60% of total investment. Allocations are mainly financed by domestic resources and national transfers, as well as by trust funds and capital transfers for specific projects (for example, in the housing sector). Non-budgetary investment by national and provincial public enterprises stood at 0.5% of GDP, or 13% of total public investment.

In 2014, public-sector investment in Uruguay was equivalent to 3.4% of GDP. Central government investment amounted to 1.4% of GDP and that of non-financial public enterprises 1.9% of GDP (about 60% of the total). The largest investors among public-sector enterprises, the National Telecommunications Administration (ANTEL) and the Administración Nacional de Usinas y Transmisiones Eléctricas (UTE), have continued to invest at relatively constant rates since 2008, although in 2015 efforts will be made to target spending and seek new sources of funding through public-private partnerships.

Shrinking public investment has weakened gross capital formation in Central America (see Cabrera, 2015). In Costa Rica, El Salvador, Guatemala and Honduras, this is associated with reduced fiscal space after the international financial crisis of 2008, and has contributed to gradually pushing the fiscal deficit above 4% of GDP in these countries, with the exception of Guatemala, which cut spending in general and capital spending in particular. Falling tax revenues have also widened fiscal gaps.

A different situation prevails in Nicaragua and Panama, which have increased public investment. In Nicaragua, gross capital formation has remained constant thanks to road-building and social infrastructure projects. Fiscal deficits have held steady in both countries at about 1.5% of GDP.

Public investment in Costa Rica came to 4.5% of GDP in 2013. As a percentage of GDP, central government investment stood at 0.5%; that of local governments 0.2%; that of public enterprises 2.1%, and that of other public entities, such as decentralized institutions and agencies, 1.5%. Over half of public-sector investment was earmarked for the transportation sector, followed by housing (14%), education (12%) and health (9%). An adjustment in public spending of about 1.4% of GDP is expected for 2015, which should be offset by the resources released for investment projects in education, especially educational infrastructure.

One of the major challenges facing Central American countries is that of designing fiscally affordable sustainable investment promotion strategies. There is a question mark over the use of sector-specific tax exemptions which, though viewed as essential by the sectors concerned, carry significant fiscal costs and compete with resources earmarked for other areas such as education and infrastructure, which are also crucial for promoting growth and development and, of course, for increasing future investment profitability.

This brief but documented review shows that the revival of public investment has formed the centrepiece of countercyclical policies and of the economic recovery after the 2009 crisis, as governments took advantage of fiscal space to cover (at least partially) their infrastructure gaps. However, the economic slowdown and the falling commodity prices of recent years, with the consequent depletion of public resources, undoubtedly threaten the continuity of this process in many countries.

B. To boost growth, fiscal rules must protect capital spending

To address macroeconomic volatility in the region, it is extremely important to design efficient countercyclical schemes that protect investment. For minimizing adjustment costs and boosting expectations of potential growth and future stability, schemes to complement countercyclical policies by protecting (and stimulating) investments during troughs in the business cycle could be much more effective than fiscal rules based solely on spending or deficit targets.

A well structured policy regime that simultaneously defines the limits of fiscal space and the manner of coordinating instruments and resources can multiply the effect of fiscal incentives for investment. Credibility is fundamental where infrastructure projects aim to coordinate several private investments simultaneously: private agents should have the perception that public investment commitments will be fulfilled and not delayed as a result of financial constraints or discretionary decisions.

It has often been said that the end of the commodity supercycle in the region will bring about a structural reduction in growth, and that public accounts need to be adjusted this new reality. However, this argument has much of the self-fulfilling prophesy about it, since the drop in investment will itself reduce potential output in the medium term.

Fiscal space is typically defined as the resources that are available for a specific purpose without affecting the sustainability of the government’s financial position (public debt) or of the economy as a whole (ECLAC, 2014). But that static definition does not take into account the dynamic effects that occur in the investment process: it is perfectly possible to safeguard the fiscal space (or maintain solvency) if public capital spending favours growth and thus generates future tax benefits. In other words, well managed public spending can help generate a virtuous circle of sustainable growth.

It is worth assessing whether increased capital spending in some countries was associated with growth in the public-debt-to-GDP ratio. Most Latin American countries (12 of 19) have increased their capital spending since 2000, and of these only three (Bolivarian Republic of Venezuela, Colombia and Mexico) reported an increase in their public-debt-to-GDP ratio (see figure III.3); in addition, these increases were small in magnitude and based on low initial debt levels. Only four countries reported increased public debt that was not accompanied by higher capital spending (the Dominican Republic, El Salvador and Uruguay, where capital spending remained almost constant, and Guatemala, where it fell).

In the Caribbean, capital spending increased in seven countries, of which five also posted higher public-debt-to-GDP ratios (the Bahamas, Jamaica, Saint Lucia, Saint Vincent and the Grenadines, and Trinidad and Tobago). The other countries (Dominica and Suriname) managed to reduce their debt-to-GDP ratio.

This pattern is consistent with the observation that publicly funded investment projects can increase output, both in the short and the long terms, without driving up the debt-to-GDP ratio. This is especially true in periods of idle capacity in the economy, when monetary policy is accommodative, infrastructure needs are clearly identified, and investment efficiency is high (see IMF (2014a) and box III.1 of this chapter). Even when funded from borrowing, the multiplier effects on output mean that increased public investment can reduce the debt-to-GDP ratio in the long run.

Figure III.3

Change in public debt and capital spending, 2000-2001 and 2013-2014 average

(Percentages of GDP)

Source: Economic Commission for Latin America and the Caribbean (ECLAC).

Box III.1

Public investment, growth and fiscal space

DeLong and Summers (2012) aimed to assess the conditions under which an increase in public investment is self-financing. A short-term expansion in public investment boosts GDP through the fiscal multiplier effect. Depending on the value of that multiplier, and the income elasticity of taxes, the public-debt-to-GDP ratio may fall. In formal terms, an (annual) expansion of public investment as a percentage of GDP (∆i), funded by an increase in national debt, causes a change in the debt-to-GDP ratio (∆d):

∆d = (1 - ατ)∆i

where α is the fiscal multiplier and τ is the marginal tax-and-transfer rate or tax semi-elasticity. DeLong and Summers carried out a meta-evaluation of the fiscal multiplier estimated by Auerbach and Gorodnichenko (2012) for developed countries, which ranges from 0.5 during expansions to 2.5 in recessions (when the economy is performing below its potential).

Some authors argue that these values would be appreciably lower in developing countries;a however, in the (few) studies that refer to Latin American economies, the fiscal multiplier for public investment hovers at around 2. Taking this value and assuming a marginal tax-and-transfer rate of 0.25, then the public-debt-to-GDP ratio would increase by about 0.5 points.b In other words, in the first year, investment funded from debt would generate a deficit equivalent to 50% of the initial outlay. The turning point, at which investment would be self-financing in the first year alone, is obtained when the fiscal multiplier and tax semi-elasticity equate to values of 2.5 and 0.4, respectively.

Over time, increased public investment also expands potential output (not only actual output), which generates tax gains. As demonstrated by IMF (2014a), with high fiscal multipliers and public capital elasticity of potential output, an increase in public investment may be self-financing over the medium term. Clearly, then, a beneficial combination of parameters is feasible, and can lift growth potential and lower public debt as a percentage of GDP.

Source: Economic Commission for Latin America and the Caribbean (ECLAC).

a Intuitively it may be assumed that, in small and open economies, a considerable part of the higher demand would filter through to imports, giving rise to twin deficits and sapping the potential for recovery. However, the multiplier effect depends on the type of stimulus implemented; there is a degree of consensus that the greatest effects are obtained through public investment, since it provides an immediate boost to aggregate demand, has little import content, and favours direct and indirect job creation.

b See, for example, Sánchez and Galindo (2013) for the case of Peru, and González and Lozano (2012) for Colombia.

The underutilization of installed capacity is self-perpetuating for at least three reasons: weak activity in the present tends to feed expectations of weak activity in future; low investment in the present reduces potential supply in future; and weak activity in the present tends to worsen the financial situation in the future, since price rigidities can make it hard to increase profit margins.

In this context, the natural response to slowing growth is through sustainable demand-boosting policies focused on investments in areas that yield worthwhile social returns—such as social housing, urban renewal, transportation and energy. Promoting such investments during periods of weak private investment is an effective way of mitigating volatility and persistently weak global demand, with its devastating effects on aggregate supply. In the event of hysteresis, or persistent capacity underutilization, a fiscal stimulus in the form of capital goods can more than compensate for the initial outlay, if interest rates are reasonably low.

Of course, multiplier effects depend on financing conditions and, critically, on the gap between the real interest rate paid on government debt and the rate of economic growth. Since 2010, this gap has averaged less than two percentage points in 13 of 19 of the region’s countries, which, if maintained, would allow a broadly sustainable public-debt trajectory. Accordingly, governments should take advantage of favourable conditions of access to finance markets. In some countries, the gap is plainly unfavourable; in Brazil the average is 5.8 percentage points (see ECLAC, 2015 for the calculation of these indicators). And since 2009, the gap has also been very large in the Caribbean, averaging above 6 percentage points in Barbados and Jamaica. In conditions of low growth and high interest rates, the inherent dynamics of public debt give rise to a snowball effect, so that narrowing the gap becomes crucial.

In response the slowdown of 2014-2015, the countries of the region whose debt is low (and which therefore have access to cheap credit) have made active use of fiscal policies. Conversely, countries with high levels of public debt, or which face financing difficulties amid deteriorating public accounts, have announced budget cuts. Spending containment measures should take into account the need to protect investment and avoid vicious circles whereby fiscal overadjustments strangle growth and tax revenues, ultimately widening the deficit and increasing the public debt burden.

Governments have traditionally made fiscal adjustments by reducing assets (including public investment and maintenance costs), causing a drop in the net worth of the public sector. In several of the region’s countries, fiscal rules helped bring the deficit under control and reduce public debt, although the financial measures adopted were generally little concerned with capital spending.

One option is to adopt the golden rule for the management of public finances (see box III.2). This rule stipulates that governments should fund current spending from current income, and should only borrow to fund capital spending, since it represents future income. Accordingly, the golden rule prescribes that it may be necessary to run a balanced (or in surplus) current account in the medium term, with the possibility of a structural deficit on the capital account.

Box III.2

The golden rule of public investment

In formal terms, the arithmetic of the golden rule is as follows (see Blanchard and Giavazzi, 2004):

b = g - t + i + (δ - θ)k + (r - n)b

where b is the stock of public debt, g is current spending, t current income, i net investment and k the stock of public capital (all expressed as a percentage of GDP and assuming zero inflation). Furthermore, r is the real rate of interest, n the growth rate of GDP, δ the rate of depreciation of capital and θ the gross rate of return on public capital. The novelty of this definition of change in public debt is the inclusion of net income yielded by the stock of public capital. If the overall balance were in equilibrium, we would have:

g - t + i + (δ - θ)k + rb = 0

and the change in debt would depend solely on the GDP growth rate and its initial level:

b = - nb

This equation nicely illustrates the dynamics of public debt: in a recession (when n takes a negative value), debt as a percentage of GDP grows proportionally, despite the supposed fiscal balance. With growth (n is a positive value), the debt-to-GDP ratio converges on zero. But according to Blanchard and Giavazzi (2004), a rule that drives the stock of public debt to zero is a bad rule. Imposing the rule that current spending should be balanced (g - t + (δ - θ)k + rb = 0) leads to:

b - k = - n(b - k)

So that:

i = k + (n -δ)k

The stock of public debt is therefore backed up by the total stock of public capital. If the stock of public capital, as a proportion of GDP, is constant, then the government may run a deficit equal to nk. Public debt would converge towards the stock of public capital.

Source: Economic Commission for Latin America and the Caribbean (ECLAC).

The accrual basis of recording adopted in the Government Finance Statistics Manual 2014 (IMF, 2014b) would lead to the adoption of the golden rule. Under the concept of change in net worth, revenue is that which increases the government’s net worth, while expenditure is that which reduces it. Public investment is not considered to be an expenditure, since it increases the government’s net worth.

It is therefore possible, under the framework proposed in the Government Finance Statistics Manual 2014, to assess whether fiscal adjustments have been accompanied by a reduction in governments’ net worth. If fiscal adjustments have been carried out mainly by reducing assets (such as public investment and maintenance costs), then the reduction of government liabilities is not necessarily accompanied by an improvement in net worth and the fiscal position is not strengthened.

Most fiscal consolidation efforts implemented through privatizations and investment cuts do not achieve their ends because they do not improve net worth, but rather reduce the government’s assets.

Conversely, if public enterprises do not have quasi-fiscal operations, or if transfers by the central government are duly recorded in the budget, their results should not be included in the deficit and public debt targets, thereby removing artificial constraints on infrastructure investment. More accurately, and as recommended by the Government Finance Statistics Manual 2014, fiscal rules should apply to general government and not the non-financial public sector. Recent initiatives in several of the region’s countries (Brazil, Chile and Mexico) have excluded the balances and debts of public enterprises from budget discussions and fiscal targets. Of course, this presents no obstacle to monitoring their finances and undertaking broad transparency initiatives in respect of their operations.

Though the concept is clear, the widespread implementation of the golden rule has proven complex, since considerable problems of definition remain, especially with regard to the treatment of capital depreciation. On the other hand, since the public sector does not necessarily receive the full return on its investment, the analogy with the private sector loses consistency. Investments themselves often bring additional current operating expenses, so that accounting separation is by no means a trivial matter.

There are some other, partial alternatives, which offer greater fiscal flexibility, and which aim to incentivize or protect strategic investments. Ultimately, the right combination of rules adapted to the macroeconomic climate and a certain amount of discretionary authority may offer the best recipe for a good balance between current spending and investment, borrowing and the public fiscal balance.

C. Greater regional and international cooperation is needed to avoid tax competition and to protect tax bases

The investment climate is especially crucial for the success of private projects, and is largely determined by the quality of the institutional framework. Weak institutions, low credibility and significant uncertainty may present an insurmountable barrier to investment decisions. In that regard, companies seem to attach much more importance to the investment climate than to possible tax advantages or other benefits (James, 2009).[1] Recognizing this reality opens the way to systemic approaches to investment dynamics. Even if the main objective were to promote private capital spending, public-spending, citizen-security or social programmes, for example, would be preferable to exemptions or incentives.

Investment promotion does not mean the multiplication of tax incentives or subsidies. Taxation, as is well known, stems from the need to fund governments under a social contract whereby economic agents agree to surrender some of their income to provide resources for governance, social spending and the public goods that are needed for countries to function effectively. In that sense, public and private investment are complementary; one cannot replace the other. Attempting to stimulate private investment by reducing public investment is not a viable path towards development.

From a political standpoint, the fiscal compact is based on reciprocity between State and citizen, expressed in the willingness of most households to pay more taxes in exchange for better public services in terms of health, education and safety, less corruption and the punishment of tax evasion (ECLAC, 2013). Taxation is therefore inextricably bound up with public spending quality in democratic societies.

A key point in the discussion on taxes, growth and the distribution of disposable income relates to the conceptual design of taxation systems and whether taxes are levied on income or expenditure. Where the focus of taxation is on expenditure, indirect taxes will predominate and savings and investment instruments will be exempted. In Latin America and the Caribbean, more than 60% of tax revenues (not including social security) originate from indirect taxes, with far-reaching consequences for the vertical equity of tax systems.

If the aim is to boost economic growth by strengthening savings and investment, then the guiding principle of tax design should be neutrality. The taking of personal decisions on the basis of fiscal considerations, rather than cost or productivity, can lead to losses in social welfare that will ultimately result in weaker growth. The costs associated with taxation fall into four categories:

(i)Costs associated with the transfer of income from the private sector to the public sector (income effect).

(ii)Efficiency costs linked to the distortions generated in the choice of economic agents, owing to changes in the relative prices of goods or factors of production (substitution effect).

(iii)Administration costs incurred by tax authorities in ensuring that taxes are paid.

(iv)Compliance costs that taxpayers must incur in order to discharge their obligations.

Since the income effect is inevitable, efficiently designed tax systems must seek to minimize excess burdens and the administrative and compliance losses that they entail. However, absolute tax neutrality is impossible, and even undesirable, when established priorities include revenue sufficiency and distributive justice, for example. Where redistribution is a priority objective, income taxes will take precedence. The tax base has traditionally been taken to be individual income, defined as the change in net worth during a given period of time, plus the value of goods and services consumed during the same period (thus covering the entirety of income). However, in recent decades the architecture of income tax has been gradually dismantled owing to distinctions and special treatments accorded to different types of income, notably those that potentially stimulate savings and private investment.

In Latin America, income tax legislation has been subject to various amendments over the years, which aimed to burden expenditure rather than income, with the intention of exempting savings and investment. For this and other reasons, the region’s countries have typically encountered major difficulties in applying a comprehensive personal income tax that applies to all the taxpayer’s sources of income in accordance with a structure of progressive marginal rates. In most cases, there is a long list of exemptions and differential treatments depending on the source of income, which interferes with the horizontal and vertical equity of taxation and limits its potential as an instrument for revenue collection and redistribution (Gómez Sabaíni and Morán, 2014).

Tax authorities have repeatedly responded to financial crises by multiplying tax incentives and exemptions, in the (often vain) hope of stabilizing aggregate demand and curbing the impact of recessions on employment. However, it is well known that these instruments are supply-side responses to demand problems, and are therefore generally less efficient than monetary measures and the multipliers associated with the stimulus of public spending.

Tax incentives are therefore inefficient from the perspective of managing aggregate demand, and also in terms of their impact on the medium-term investment rate. Tax incentives for investment may be general (as with the reduction of VAT on capital goods, accelerated depreciation, exemptions from import duties for capital goods and the exemption of dividends), sectoral (applied to certain industries or specific activities) or geographical (as in the case of remote areas).

A study by Agostini and Jorratt (2013) on 10 of the region’s countries found that general investment incentives were little used except in Ecuador and Chile, while sectoral incentives have been applied intensively in Argentina, the Dominican Republic, Honduras and Nicaragua. Location incentives were provided notably in Argentina, Chile, the Dominican Republic and Peru. At the aggregate level, sectoral investment incentives were applied to the tourism, export and energy sectors (22%, 19% and 15% of the total, respectively). Seven of the 10 countries studied granted incentives for the energy sector (for example, incentives for the development of biofuels, tax credits for the installation of solar photovoltaic systems and income tax exemptions on the sale of energy generated from renewable resources). Six countries provided incentives in the mining and tourism industries.

Tax relief on investment was a prominent feature of the countries studied, and included the exemptions on capital goods import duty and on income taxes for certain business activities or enterprises. Most exemptions applied to income tax (40%), but also to duties (26%) and VAT (23%). Other instruments included tax deferrals (such as accelerated depreciation and early VAT reimbursement on capital goods purchases) and deductions (for example, on a proportion of investments in fixed assets). As table III.1 shows, tax expenditures associated with income tax exceeded 1% of GDP in Brazil, Chile, Costa Rica, Ecuador, Guatemala, Honduras, Mexico and Uruguay. It is, then, important to establish whether the actual benefits in terms of employment and economic activity compensate for the loss of revenue, and the consequent fall in investment in public goods.

Table III.1

Latin America: tax expenditures in selected countries, 2012

(Percentages of GDP)

Tax

Argentina

Brazil

Chile

Colombia

Costa Rica

Ecuador (2011)

Guatemala

Honduras (2011)

Mexico

Peru

Uruguay

VAT

1.17

0.48

0.83

2.51

3.54

2.40

1.96

3.44

1.53

1.32

2.95

Income tax

0.56

1.39

3.62

0.90

1.82

3.11

5.91

1.91

2.23

0.37

2.29

Personal income tax

n.a.

0.70

2.77

0.30

n.a.

0.71

n.a.

0.95

0.84

0.15

0.63

Corporate income tax

n.a.

0.69

0.85

0.60

n.a.

2.40

n.a.

0.96

1.39

0.22

1.66

Social security

0.33

0.91

-

-

-

-

-

-

-

-

-

Excise taxes

0.31

-

-

-

0.14

-

0.02

0.68

1.15

0.07

0.08

Foreign trade

0.12

0.07

-

-

0.07

-

0.15

0.10

-

0.17

-

Other

0.03

0.37

-

-

0.06

-

0.37

0.86

0.08

-

1.08

Total

(percentages of GDP)

2.52

3.22

4.45

3.41

5.62

5.50

8.40

6.99

4.99

1.94

6.40

Total

(percentages of tax collection)

6.76

8.88

21.36

17.40

26.79

27.18

68.25

39.91

25.45

10.70

24.40

Source: Juan Carlos Gómez Sabaíni and Dalmiro Morán, “Tax policy in Latin America: assessment and guidelines for a second generation of reforms”, Macroeconomics of Development series, No. 133 (LC/L.3632), Santiago, Chile, Economic Commission for Latin America and the Caribbean (ECLAC), 2014.

Although possibly justified in some specific cases, investment incentives can have a negative impact on the equity and efficiency of tax systems. In terms of efficiency, incentives have created problems of inter-jurisdictional tax competition (leading to a “race to the bottom” at both the national and regional levels) and other distortions in industrial production and location decisions. Consequently, instruments that aim to incentivize private investment —such as schedular taxes, low tax rates on reinvested earnings that do not take account of the size of the business, accelerated depreciation, tax agreements and specific sectoral regimes— in reality often present insurmountable obstacles to the objectives of revenue sufficiency and equity, and further complicate the task of tax administration.

In many of the region’s countries, the justification for tax incentives is that they attract foreign direct investment (FDI), which would itself have significant positive externalities for the recipient economies (such as the take-up of new technologies or increased productivity). The question is one of knowing the net impact of these special arrangements, which at first glance might be described as merely a transfer of resources from poor (recipient) countries to rich ones.

Though it is difficult to generalize, the reasons sometimes used to justify tax incentives, such as the potential benefits of FDI for growth and jobs, or the multiplier effects of special economic zones, cease to be valid in a context of globalization and trade and financial liberalization (Alfaro, 2015). In terms of mobilizing financial resources for development, it seems much more efficient to multiply initiatives to reduce tax evasion and avoidance than to subsidize investments that very probably would have materialized anyway, given the static and dynamic comparative advantages of countries and territories.

The question of tax incentives is also being raised in the international discussion on base erosion and profit shifting. One notable project within the United Nations aims to strengthen developing countries’ capacity to protect their tax bases by developing methods and practices to deal with tax incentives and the taxation of extractive industries. The countries participating in a number of Latin American and Caribbean forums have requested analytical frameworks and technical assistance to carry out cost-benefit studies and to consider the gradual dismantling of incentive systems. These initiatives show some promise, but they will need to harness a willingness to prevent tax competition among countries with similar economic activities.

As tax boundaries have expanded, so the need to obtain information on taxpayers reaches beyond national borders. This has led to the signing of regional and global agreements to avoid double taxation and to facilitate the exchange of information between countries.

As regards international taxation, in recent years specific regulations have been adopted to deal with transfer pricing, aimed at preventing evasive manoeuvres by transnational corporations. Brazil, Chile and Mexico pioneered this approach in the region by introducing new provisions in 1996 and 1997. Argentina, Colombia and Peru introduced similar instruments to their tax legislation in the late 1990s and early 2000s, and Ecuador, El Salvador, Panama and Uruguay have also followed this route since 2004, with different levels of practical implementation. Even so, the region stands out for its broad range of cases and methodologies in relation to the treatment of transfer pricing in corporate operations between related parties.

In the few years since its formation, the Committee of Experts on International Cooperation in Tax Matters, a subsidiary body of the United Nations, has achieved significant progress in its work to provide a framework for dialogue, aimed at improving and promoting international fiscal cooperation between national tax authorities, multilateral agencies and regional and subregional organizations.

In short, it is apparent from the current global context that international cooperation mechanisms between countries and regional blocs need to be deepened, for which purpose multilateral agencies may afford space for consensus-building efforts.[2] As a core objective, these efforts should not be limited to bilateral negotiations between countries, but should aim for a viable and gradual process of regional and international tax coordination and harmonization, especially among Latin American and Caribbean countries.

D. Public-private partnerships may complement State investments in some areas

The countries of Latin America, like those of other regions, are increasingly turning to public-private partnerships as a mechanism to increase infrastructure investment and provide public services. As the statistics below demonstrate, this strategy is not new to the region.

Today, public-private partnerships are an important instrument for mobilizing resources and generating new investment, although if not used properly they can put pressure on public finances and create future fiscal obligations. In the region they are applied in various sectors, such as transport, energy, telecommunications and water and sanitation, including in an array of projects such as the construction and operation of ports, bridges, canals, airports, railways and waste management facilities.

Although they have become widespread, public-private partnerships have no universally accepted definition and the significance of the term often varies from one country to the next.[3] Any definition of a public-private partnership should include the following elements: (i) it consists in a long-term contract between the public sector and the private sector; (ii) it is intended to provide a public service and associated infrastructure; and (iii) the private sector should take on part of the risk and responsibility for certain tasks.

Legal definitions also vary. In Argentina, public-private partnership contracts are a cooperation instrument between the public and private sectors, designed to establish a binding obligation between the parties so that they may enter into a partnership to carry out public works or other delegable activities, in which risks are shared and operations streamlined.[4]

In Brazil, article 2 of Law No. 11079 sets out that a public-private partnership is a contract that may take the form of a sponsored or administrative concession. Under a sponsored concession, user fees are complemented by public-sector payments, while administrative concessions are service contracts in which the public sector is the direct or indirect user (in other words, all payments received by the private partner come from the State). Concessions in which there are no payments by the public sector are not considered public-private partnerships in Brazil. The law prohibits public-private partnership contracts valued at less than 20 million reais, which have a term of less than five years, or whose sole object is to supply labour, to supply and install equipment, or to carry out public works.

In Chile, public-private partnerships may cover the execution, repair, maintenance or operation of public works and services; the use and enjoyment of national assets or State-owned properties destined for the development of agreed service areas, the supply of equipment or the provision of associated services. Concessions have a maximum duration of 50 years.[5]

In Mexico, public-private partnerships are projects carried out under any framework that establishes a long-term contractual relationship between public authorities and the private sector, for the purpose of rendering services to the public sector, wholesale providers, intermediaries or end users, in which the infrastructure utilized is wholly or partly provided by the private sector with a view to increasing social well-being and investment.[6]

1. Potential and risks of public-private partnerships

When used correctly, public-private partnerships can generate a number of benefits. One is that they provide funding for infrastructure investment without exerting pressure on the fiscal space, since they mobilize private financial resources. Moreover, in the event that the contract provides for payment obligations by the public sector, these will be distributed and met in future fiscal periods.

Public-private partnerships also harness the technical know-how of the private sector, since it is able to introduce technology and innovation to provide better, more efficient public services, thus benefiting end users. Delegating tasks and responsibilities to the private partner involves transferring certain risks, the aim being for each partner to take on those risks that they can manage most effectively.

Another potential benefit refers to the fact that private partners may have the capacity to implement larger projects, thereby taking advantage of possible economies of scale and, consequently, increasing profitability.

However, as stated in OECD (2011), the complex nature of public-private partnerships can also compromise fiscal sustainability in areas such as the distribution of risks, costs, contract negotiation, affordability of the service or product, and its budgetary and accounting treatment. In essence, there are two elements of public-private partnerships that can compromise future fiscal sustainability and reduce the potential for new investment: the spending obligations contracted by the government with its private partner, and the explicit or implicit guarantees set forth in the contract.

In the first case, governments may commit to making a series of annual payments in return for the investment by the private partner, and may also undertake to acquire some of the services offered by the private partner. In other words, these commitments imply future fiscal outlays. Guarantees offered by public authorities or agencies in order to reduce the risk assumed by the private sector may also affect government spending in future financial years. For example, these guarantees may relate to fluctuations in the demand for the service provided, or the private partner may seek to reduce financial, exchange-rate or operating risks related to the service.

Since these guarantees take the form of a contingent liability for the State, it is important that they are recorded in a transparent manner and taken into account in projections of fiscal expenditure and public debt. They should also be considered when deciding whether a project should be implemented through public-private partnership or traditional public funding.

The available literature describes some key factors or conditions that should be kept in mind so that public-private partnerships function properly and are useful in financing the infrastructure needed for development. According to Lucioni (2009), these mechanisms are an efficient option when the government can identify the quality of the services it wants, and can translate these into measurable output indicators. Once quality and quantity are established, governments enter into a contract with the private sector which links payments to service delivery. Public-private partnerships are well suited to cases where service requirements are not expected to vary substantially over time, offering efficiency gains and better value for money.

Ahmad and others (2014) stress that public-private partnerships are not desirable in all sectors. In particular, they are not particularly suitable for fast-changing sectors such as projects related to information and communications technologies (ICTs) given how rapidly these services, and consumer preferences, can evolve. On the other hand, Manuelito and Jiménez (2013) underline certain conditions under which public-private partnerships can make a real contribution to the provision of public services. Key aspects include the institutional capacity to carry out a selection and award process that prevents the emergence of monopolies, the formulation of projects with comprehensive yet flexible designs so as to prevent opportunist behaviours such as the subsequent extraction of additional public resources by concessionaires, guarantee arrangements that prevent moral hazard, and the capacity to monitor and ensure the coverage and quality of service provision.

Coordination and trust between the public and private sectors are crucial to the success of public-private partnerships. To this end, ECLAC (2010) suggests that the State needs to develop the necessary qualities to be a credible partner of the private sector: professionalism, honesty and technical know-how, combined with fiscal soundness to finance programmes and incentives. The State also has to find ways of interacting strategically with the private sector (broadly defined to include business, academia, workers and non-governmental organizations) to ensure that it is not captured by special interests and that the alliance preserves its character of public good. Third, the State must improve its capacity to manage and coordinate incentive and cooperation programmes with the private sector, implementing them transparently and with continuous performance-based accountability. As for the private sector, it must adopt a medium- and long-term vision, aiming to steadily scale up its activities by means of investment and innovation. It must also be prepared to proactively support the formation of an alliance with the public sector which would be in the nature of a public good.

OECD (2011) sets out the following guidance and principles for the efficient use of public-private partnerships: (i) ensure public awareness of the relative costs, benefits and risks of public-private partnerships and conventional procurement; (ii) set up a clear, predictable and well regulated legal framework for public-private partnerships; (iii) ensure that the necessary institutional roles and capacities are present in the public sector when procuring and maintaining a public-private partnership; (iv) the decision to invest should be based on a whole-of-government perspective and be separate from how to finance the project; (v) the project should be affordable and transparently treated in the budget process, considering current and future benefits and costs (regardless of which level of government it applies to); (vi) carefully investigate which investment method yields most value for money; (vii) transfer the risks to those that manage them best (in other words, the party for whom it costs the least to prevent the risk from materializing, or to deal with its fallout); (viii) involve the user in the design and monitoring of public-private partnerships; (ix) maintain value for money during operation, renegotiation or project failure; and (x) ensure competition and integrity in the procurement process.

Lastly, some key success factors of innovative public-private partnerships, based on different case studies in the region, are highlighted in WEF (2014). First, public-private partnerships should have strong acceptance by public and private sectors and other civil society actors who might be involved. It is also essential to take account of the interests of the social group targeted and the capacity of the government at different levels; to identify the appropriate economic incentives for the private sector; to understand the expectations that the parties have of the programme; and to reach a consensus on each party’s responsibilities in implementing the project. Another key aspect of a successful partnership is financial sustainability. The foundations of the financial framework must be laid at the inception of the programme, in order to reduce the burden on any single actor and to ensure the continuity of work. A long-term relationship of trust, the implementation of results-based tools, cost-effectiveness analysis, evaluation mechanisms and constant monitoring are also essential to ensure the continuous improvement of public-private partnership projects in Latin America.

2. Private participation in infrastructure projects in Latin American and Caribbean countries

In the past two decades, investment in private participation in infrastructure (PPI) projects has surged in low- and middle-income countries, as evidenced by the respective statistics issued by the World Bank (see figure III.4).[7] Since the early 1990s, the total number of PPI projects more than tripled from an annual average of 109 in 1990-1993 to 373 projects per year in 2010-2013. Latin America and the Caribbean was no exception to this growth trend, and by 2013 the region accounted for 38% of projects in low- and middle-income countries, totalling US$ 70 billion in investment commitments, or 45% of the global total; a greater share than any other region.

Figure III.4

Investment commitments in private participation in infrastructure projects in low- and middle-income countries, by region, 1990-2013

(Millions of dollars and number of projects)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of figures by World Bank, Private Participation in Infrastructure Projects Database [online] http://ppi.worldbank.org/.

During the 1990s, the Latin American and Caribbean region experienced a boom in PPI projects, both in terms of quantity and investment committed. However, as is analysed below, much of the increase in 1997 and 1998 was due to privatization processes in several of the region’s countries. Between 2000 and 2005, the trend in PPI projects went into decline, and only returned to a growth pattern after 2005, albeit with interruptions in certain years (see figure III.5).

Figure III.5

Latin America and the Caribbean: number of private participation in infrastructure projects and investment commitments, 1990-2013

(Millions of dollars and number of projects)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of figures by World Bank, Private Participation in Infrastructure Projects Database [online] http://ppi.worldbank.org/.

Between 1990 and the first half of 2014, the cumulative number of PPI projects stood at almost 1,900 for the region, with investment commitments worth US$ 882 billion. The distribution of projects was extremely uneven, since 6 of the 29 countries included in the database accounted for 83% of all projects in that period. Brazil had a 38% share, followed by Mexico (12%), Argentina (11%), Chile (9%), Colombia (8%) and Peru (6%).

Table III.2 shows a calculation of the investment commitments in PPI projects as a percentage of regional GDP. The table clearly shows the significance of privatizations in 1997 and 1998, when payments to governments amounted to 1.2% and 1.6% of GDP, respectively. Investments in physical assets stood at around 1% of GDP in 1990-2013, peaking at 1.5% of GDP between 1998 and 2000. According to the latest available data, total investment commitments in PPI projects reached 1.2% of GDP in 2013, virtually all of which was investment in physical assets.

Table III.2

Latin America and the Caribbean: investment commitments to private participation in infrastructure projects, 1990-2013

(Percentages of GDP)

Year

Investments in physical assets

Payments to the government

Total investment commitments

Year

Investments in physical assets

Payments to the government

Total investment commitments

1990

0.6

0.3

0.9

2002

1.0

0.1

1.1

1991

0.2

0.6

0.8

2003

0.8

0.0

0.8

1992

0.4

0.5

0.9

2004

0.7

0.1

0.8

1993

0.8

0.2

1.0

2005

0.8

0.0

0.8

1994

0.6

0.3

0.9

2006

0.9

0.1

1.0

1995

0.8

0.1

0.9

2007

0.9

0.2

1.1

1996

0.8

0.5

1.3

2008

1.0

0.1

1.1

1997

1.0

1.2

2.2

2009

1.2

0.1

1.3

1998

1.5

1.6

3.1

2010

0.8

0.1

0.9

1999

1.5

0.4

1.9

2011

1.0

0.1

1.0

2000

1.5

0.3

1.8

2012

1.3

0.3

1.6

2001

1.4

0.1

1.6

2013

1.2

0.0

1.2

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of figures by World Bank, Private Participation in Infrastructure Projects Database [online] http://ppi.worldbank.org/.

During recent decades, energy was the sector that posted the fastest growth in PPI investment in Latin American and Caribbean (see figure III.6); investment commitments in the transportation sector have also performed strongly, especially in the past two years.

Figure III.6

Latin America and the Caribbean: investment commitments to private participation in infrastructure projects, by sector, 1990-2013

(Millions of dollars)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of figures by World Bank, Private Participation in Infrastructure Projects Database [online] http://ppi.worldbank.org/.

Although investment commitments in telecommunications have grown at a slower rate, the cumulative figures since 1990 show that the sector accounted for 40% of total investment committed, but just 8% of the total number of projects, meaning that average investment in these projects was greater than in other sectors. Over the past 24 years, one third of total cumulative investment went to the energy sector (which accounted for 48% of the total number of projects in the region), while 23% of investment was earmarked for transportation (30% of projects) and only 4% was allocated to water and sanitation projects (15% of projects).

For data disaggregation purposes, the Private Participation in Infrastructure Database classifies private infrastructure projects in four categories:

(i)Management and lease contracts: a private entity takes over the management of a State-owned enterprise for a fixed period while ownership and investment decisions remain with the State. There are two subclasses: management contracts (in which the government pays a private operator to manage the facility, while the operational risk remains with the government) and lease contracts (the government leases the assets to a private operator for a fee, and the private operator takes on the operational risk).

(ii)Concessions (or management and operation contracts with major private capital commitments): a private entity takes over the management of a State-owned enterprise for a given period during which it also assumes significant investment risk. The database classifies concessions according to the following categories: rehabilitate, operate, and transfer (ROT); rehabilitate, lease, and transfer (RLT); and build, rehabilitate, operate and transfer (BROT).

(iii)Greenfield projects: a private entity or a public-private joint venture builds and operates a new facility for the period specified in the project contract. The database classifies greenfield projects under the following categories: build, lease, and transfer (BLT); build, operate, and transfer (BOT); build, own, and operate (BOO); merchant projects (in which the government provides no revenue guarantees) and rental projects (the government rents an asset from a private sponsor and a private party places, owns and operates a new facility under its own risk during the contract period).

(iv)Divestitures: a private entity buys an equity stake in a State-owned enterprise through an asset sale, public offering, or mass privatization programme. The database classifies divestitures in two categories: partial and full.

Of the cumulative total of PPI projects in Latin America and the Caribbean between 1990 and 2014, more than half (54%) were greenfield projects, one third were concessions, 8% divestitures and the rest management and lease contracts. Greenfield projects were the type of private participation that grew fastest during the study period (see figure III.7) and are currently the most utilized form of PPI in the region (97 projects in 2013). By contrast, the latest divestitures recorded in the database were from 2007.

Figure III.7

Latin America and the Caribbean: number of infrastructure projects by type of private participation, 1990-2013

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of figures by World Bank, Private Participation in Infrastructure Projects Database [online] http://ppi.worldbank.org/.

Although public-private partnerships that invest in “pure” public goods (education, health and public safety) would provide a real option for reducing the bias against public investment, they represent a negligible proportion of projects, which illustrates the difficulty of managing this type of initiative. It should thus be emphasized that most public investment remains conventional, even in countries where procurement is open to private finance.

Consolidating the fiscal framework requires that strategic investment plans be strengthened, both to moderate the business cycle and to promote and augment private-sector participation in the creation of public goods.

E. Concluding remarks: towards an inclusive fiscal framework to promote investment

The influence of the State in the accumulation of physical capital goes far beyond its direct action, and it is therefore essential to create the right fiscal framework for investment promotion. This should not be geared towards providing incentives to reduce labour or capital costs or to increase the profits of private enterprises. Investment promotion means, on the one hand, generating the fiscal space needed to finance public goods and building the capacities to manage them and, on the other, creating the conditions for private-sector participation in achieving development goals.

Fiscal frameworks should be conducive to investments that support geographical integration, through the coordination of multiple initiatives aimed at boosting localized activity and thereby avoiding poverty traps. States often tend to prioritize major projects over coordinated inclusive investment activities in sensitive areas such as urbanization, house-building and renovation, drinking water and waste management, and the development of rural communities. Moreover, the practice of carrying out ex ante evaluations for individual projects, which is widespread in the region, tends to obstruct integrated planning.

In certain geographical areas, integrated local investments provide essential support for a number of concerted actions. This type of approach, whose planning architecture is based on inclusive assessments and lines of action, offers the possibility of combining public and private funding. While these localized initiatives involve smaller sums than major national infrastructure projects (since they consist largely of multiple community investments), they are vital for the fulfilment of development goals and may have a significant impact on long-term growth.

Although the most powerful influence on investment dynamics is exerted by macroeconomic policy, it is also exceptionally important to eliminate the organizational and institutional constraints that inhibit “the state of long-term expectation”.[8] Fiscal frameworks for investment promotion should therefore aim to create an investment-friendly climate through organizational capacity-building and improved institutional arrangements.

In this way, publicly managed investment plans could reverse diminishing investment rates while ensuring long-term competitiveness and productivity gains in strategic areas for structural change and supporting efforts to close infrastructure gaps. Investment plans may combine mutually interactive ventures, mobilizing public and private sources of funding, contributing to jobs and growth with a strategic and territorial perspective, and promoting clean and renewable energies.

Bibliography

Afonso, José Roberto R. and Sergio Wulff Gobetti (2015), “Impactos das reformas tributária e do gasto público sobre o crescimento e os investimentos: o caso do Brasil”, Santiago, Chile, Economic Commission for Latin America and the Caribbean (ECLAC), unpublished.

Agostini, Claudio and Michel Jorrat (2013), “Política tributaria para mejorar la inversión y el crecimiento en América Latina”, Macroeconomía del Desarrollo series, No. 130 (LC/L.3589), Santiago, Chile, Economic Commission for Latin America and the Caribbean (ECLAC).

Alfaro, Laura (2015), “Foreign direct investment: effects, complementarities and promotion”, Partners or Creditors? Attracting foreign investment and productive development to Central America and Dominican Republic, Sebastián Auguste, Mario Cuevas and Osmel Manzano (eds.), Inter-American Development Bank (IDB).

Ahmad, E. and others (2014), “Involving the private sector and PPPs in financing public investments. Some opportunities and challenges”, Asia Research Centre Working Paper, vol. 67.

Auerbach A. and Y. Gorodnichenko (2012), “Measuring the output responses to fiscal policy”, American Economic Journal: Economic Policy, vol. 4, No. 2.

Blanchard, Olivier and Francesco Giavazzi (2004), Improving the SGP through a Proper Accounting of Public Investment, London, Centre for Economic Policy Research [online] www.cepr.org/active/publications/discussion_papers/dp.php?dpno=4220.

Cabrera, Maynor (2015), “Estudio de los impactos de las reformas tributarias y de gasto público sobre el crecimiento y la inversión en Guatemala, Nicaragua y Panamá”, Santiago, Chile, Economic Commission for Latin America and the Caribbean (ECLAC), unpublished.

Cetrángolo, Oscar, Juan Carlos Gómez Sabaíni and Dalmiro Morán (2015), “Argentina: reformas fiscales, crecimiento e inversión (2000-2014)”, Santiago, Chile, Economic Commission for Latin America and the Caribbean (ECLAC), unpublished.

DeLong, J. Bradford and Lawrence Summers (2012), “Fiscal policy in a depressed economy”, Brookings Papers on Economic Activity [online] www.brookings.edu/~/media/Projects/BPEA/Spring%202012/2012a_DeLong.pdf.

ECLAC (Economic Commission for Latin America and the Caribbean) (2015), Fiscal Panorama of Latin America and the Caribbean 2015: Policy space and dilemmas. Executive Summary (LC/L.3962), Santiago, Chile.

____(2014), Panorama Fiscal de América Latina y el Caribe 2014: hacia una mayor calidad de las finanzas públicas (LC/L.3766), Santiago, Chile.

____(2013), Fiscal Panorama of Latin America and the Caribbean: Tax reform and renewal of the fiscal covenant (LC/L.3580), Santiago, Chile.

____(2010), Time for Equality: closing gaps, opening trails (LC/G.2432(SES.33/3)), Santiago, Chile.

Fanelli, J.M. (2013), “Política fiscal e inversión: un enfoque sistémico y de crecimiento inclusivo”, Macroeconomía del Desarrollo series, No. 127 (LC/L.3556), Santiago, Chile, Economic Commission for Latin America and the Caribbean (ECLAC), February.

Gómez Sabaini, Juan Carlos and Dalmiro Morán (2013), “Política tributaria en América Latina: agenda para una segunda generación de reformas”, Macroeconomía del Desarrollo series, No. 133 (LC/L.3632), Santiago, Chile, Economic Commission for Latin America and the Caribbean (ECLAC).

IMF (International Monetary Fund) (2014a), “World Economic Outlook”, Washington, D.C., October.

____(2014b), Government Finance Statistics Manual 2014, Washington, D.C.

James, Sebastian (2009), “Incentives and Investments: Evidence and Policy Implications” [online]https://www.wbginvestmentclimate.org/uploads/IncentivesandInvestments.pdf.

Keynes, John Maynard (1945), The General Theory of Employment, Interest, and Money [online] http://cas.umkc.edu/economics/people/facultypages/kregel/courses/econ645/winter2011/generaltheory.pdf.

Lucioni, Luis (2009), “La provisión de infraestructura en América Latina: tendencias, inversiones y financiamiento”, Macroeconomía del desarrollo series, No. 72 (LC/L.2981-P), Santiago, Chile, Economic Commission for Latin America and the Caribbean (ECLAC).

Manuelito, Sandra and Luis Felipe Jiménez (2013), “La inversión y el ahorro en América Latina: nuevos rasgos estilizados, requerimientos para el crecimiento y elementos de una estrategia para fortalecer su financiamiento”, Macroeconomía del Desarrollo series, No. 129 (LC/L.3603), Santiago, Chile, Economic Commission for Latin America and the Caribbean (ECLAC).

OECD (Organization for Economic Cooperation and Development) (2011), “From Lessons to Principles for the Use of Public-Private Partnerships” [online] www.oecd.org/gov/budgeting/48144872.pdf.

Sánchez, W. and H. Galindo (2013), Multiplicadores asimétricos del gasto público y de los impuestos en el Perú, Ministry of Economic Affairs and Finance of Peru [online] https://www.mef.gob.pe/contenidos/pol_econ/documentos/Multiplicadores_Asimetricos_G_y_T_2802.pdf.

Shack, Nelson (2015), “Reformas de gasto público y crecimiento económico: el caso de las APPs en el Perú y la inversión impulsada”, Santiago, Chile, Economic Commission for Latin America and the Caribbean (ECLAC), unpublished.

Tanzi, Vito (2014), “Taxation and Equitable Economic Development: A Historical Note” [online] http://www.wilsoncenter.org/sites/default/files/VitoTanzi_2014_final.pdf.

Vargas H., A. González and I. Lozano (2012), “Macroeconomic effects of structural fiscal policy changes in Colombia”, Borradores de Economía, No. 691.

WEF (World Economic Forum) (2014), Creating New Models Innovative Public-Private Partnerships for Inclusive Development in Latin America, Geneva.

World Bank Institute (2012), Public-Private Partnerships. Reference Guide. Version 1.0 [online] http://wbi.worldbank.org/wbi/Data/wbi/wbicms/files/drupal-acquia/wbi/WBIPPIAFPPPReferenceGuidev11.0.pdf.

[1] In the author’s words, “low taxes do not compensate for a poor investment climate. Countries should improve their investment climates”.

[2] According to Tanzi (2014), “fiscal termites (the opportunities available to taxpayers with global operations to avoid or evade taxes) are slowly damaging the very foundation of tax systems and contributing to increasing Gini coefficients”.

[3] See, for example, OECD (2011), World Bank Institute (2012), Ahmad and others (2014), Manuelito and Jiménez (2013), and WEF (2014).

[4] See Decree 967/2005.

[5] Public Works Concession Law, articles 1 and 25.

[6] Law on Public-Private Partnerships (2012 and 2014), article 2.

[7] Data from the World Bank database refer to investment amounts committed and do not necessarily coincide with those actually disbursed.

[8] An expression coined by Keynes (1945, chapter 12). The author concludes the chapter with the following affirmation: “I expect to see the State, which is in a position to calculate the marginal efficiency of capital-goods on long views and on the basis of the general social advantage, taking an ever greater responsibility for directly organizing investment”.

Chapter IV

Economic infrastructure in Latin America: a persistent challenge for progress towards sustainable development

Introduction

A. The availability of economic infrastructure in Latin America

B. Evolution and characteristics of infrastructure investment

C. Towards better public policies for economic infrastructure

Bibliography

Introduction

According to the specialized literature, demand for infrastructure investment correlates in the long run with economic growth and demographic processes (the structure and dynamic of the population). More specifically, economic growth, and particularly per capita income growth, is the variable recognized as the main determinant of infrastructure demand growth. Other factors that may affect the demand for investment include the structure of economic activity, geopolitical factors, security, financing sources and technology. Although it is possible to establish a relationship between infrastructure development and per capita GDP growth or economic and demographic growth, the direction of causality is hard to determine, and a number of studies have suggested that it can work both ways in the short or medium term.[1]

There is now a fairly widespread consensus about the importance of high-quality infrastructure and the services it provides as key factors in economic and social growth. Economic infrastructure is usually considered to consist in a country’s stock of fixed capital, meaning essentially its productive installations (roads, ports, airports, bridges, reservoirs for power generation, transmission systems, etc.). Thus considered, it is a fundamental element in the production and generation of wealth and in improving people’s economic and social welfare. There has recently been a tendency to extend the meaning of the term to encompass the fixed capital employed in developing human capital and in managing natural resources and protecting the environment. With this broader definition, infrastructure becomes a central factor in achieving sustainable development.[2] In this connection, it is important to highlight the inclusion of the goal of developing quality, reliable, sustainable and resilient infrastructure in the current debate about the sustainable development goals and the post-2015 development agenda (United Nations, 2014).

The analyses carried out by ECLAC have shown that the provision and quality of economic infrastructure, or, more precisely, the clear deficit that Latin America has in this area, is a constraint on the region’s growth, development and sustainability. It has been observed that this situation is a result of the public policies on infrastructure availability, conservation and expansion applied in the past four decades (Cipoletta Tomassian, 2011). In particular, ECLAC has highlighted low levels of investment in economic infrastructure by both the public and the private sector, which, at a time of unremitting growth in demand for infrastructure services, results in the continuation or worsening of constraints on access to these services, a phenomena known in the region as the “infrastructure gap” (Perrotti and Sánchez, 2001).

This chapter offers two axes of analysis to the subject, evaluating, first, the current situation with economic infrastructure availability in the region[3] and, second, public and private investment made in four infrastructure sectors, with a view to formulating some policy recommendations for the region in its conclusions. It analyses four economic infrastructure sectors: transport, energy, telecommunications, and drinking water and sewage systems.[4] The infrastructure networks of these sectors play an indispensable role in linking up the economic structure of territories and their markets. They are factors for social inclusion and mechanisms for coupling national economies to the rest of the world as they facilitate cargo and passenger movements, transactions within particular geographical and economic spaces (and between these and the outside) and social cohesion and a sense of belonging among a country’s inhabitants.

Although the situation is not homogeneous across countries or specific sectors, certain regional averages make it possible to distinguish overall patterns. Section A shows that Latin America continues to have a severe infrastructure shortfall in all the sectors analysed. The shortcomings on display are especially striking when the region is compared not only with developed countries, but also with certain developing countries that had a similar infrastructure endowment level to Latin America in the 1980s. When the criterion of infrastructure quality is included in addition to that of availability, furthermore, the current situation in the Latin American countries looks even more alarming, and the profound need for substantial investment efforts in the sector becomes apparent.

As is shown in section B, there has as yet been no adequate response to the demand for infrastructure investment. The highest investment ratios of the past 30 years were in the 1980s, while in the 1990s there was a sharp contraction in most of the region’s countries. Only in the period between 2002 and 2012 was there a small recovery, and infrastructure investment in general and by sector did not reach the levels estimated by ECLAC and other multilateral organizations as necessary to meet the requirements of firms and final consumers.

Against this background, as part C argues, the issue of investment in economic infrastructure in Latin America remains a central concern for sustainable development-oriented public policymaking. Although many of the region’s countries have adopted ambitious infrastructure plans, greater efforts are needed in terms not only of the quantity of investment but also of its quality, and thus the quality of the public policies on infrastructure planning and management.

A. The availability of economic infrastructure in Latin America

This section offers an overview of the current situation in Latin America with respect to access to economic infrastructure, based on selected indicators for the four sectors considered: transport, energy, water and sanitation, and telecommunications.

Analysis of the latest data available confirms that infrastructure availability in the region is far lower not only than in developed countries but also than in some developing countries that evinced similar infrastructure shortfalls not long ago. Furthermore, modest rates of growth in infrastructure services provision in Latin America suggest that it is unrealistic to expect further-reaching change in this area over the coming years in terms of improved availability and quality, although in some cases more efficient infrastructure usage could make it possible to maintain or improve the productivity of services. However, there are large differences both between countries (as regards infrastructure services coverage) and between sectors (as regards service access growth rates). Thus, while infrastructure supply growth has been fairly modest in recent years in the transport and energy sectors, the region has made greater progress in the telecommunications and water and sanitation sectors.

The following subsections describe the main infrastructure supply trends by sector. The indicators selected, based on the infrastructure stock and accessibility data available from various national and international sources,[5] are used to compare the region with certain countries and country groupings outside it, including high-income countries of the Organization for Economic Cooperation and Development (OECD), the European Union, the United States and the Republic of Korea, among others, as data availability allows.

1. The transport sector

Given that there is no indicator for the stock of transport infrastructure that includes all forms of transport (sea, air, river, road and railway), this section uses the frequently used indicator of the length of the total and paved road network. Although partial, this indicator is vitally important in the region, where road transport is generally predominant, or at least accounts for a substantial share of cargo movements (Wilmsmeier and Guidry, 2013). Also included to supplement this is an evaluation of the railway network, since rail is usually a more sustainable means of transport and one that is currently underexploited in the region.

Analysis of road density relative to territory clearly flags up the continuing dearth of infrastructure. As figure IV.1 shows, with an average density of 17.2 km of road for every 100 km^2, the region falls well short of the average for high-income OECD countries and the figures for certain OECD member countries in particular. Although there are large differences, all 17 countries of the region included in the chart, with the very striking exception of Costa Rica, have less developed total road networks than the OECD countries under consideration. Nonetheless, road density relative to territory did grow in all the countries over the period considered (2007-2012), albeit at differing rates.

Figure IV.1

Density of total road networks, 2007 and 2012 a

(Kilometres per 100 km^2)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of information from the countries; Organization for Economic Cooperation and Development (OECD); Food and Agriculture Organization of the United Nations (FAO); World Bank; Ministry of Land, Infrastructure and Transport of the Republic of Korea.

a The OECD average includes high-income countries only. In the case of OECD and Germany, the 2012 data are actually for 2011. The Latin American average includes only the countries represented in the figure.

b Organization for Economic Cooperation and Development (OECD).

The situation with the availability of road infrastructure relative to the population is somewhat less alarming, as the average density is 5.9 km per 1,000 inhabitants, with most of the Latin American countries presenting figures similar to those of the countries selected for comparison. However, it is important to note that 8 of the 17 countries studied showed a decline in total road density relative to population between 2007 and 2012, owing to higher population growth (see figure IV.2).

Figure IV.2

Density of total road networks, 2007 and 2012 a

(Kilometres per 1,000 inhabitants)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of information from the countries; Organization for Economic Cooperation and Development (OECD); Latin American and Caribbean Demographic Centre (CELADE)-Population Division of ECLAC; Food and Agriculture Organization of the United Nations (FAO); World Bank; Ministry of Land, Infrastructure and Transport of the Republic of Korea.

a The OECD average includes high-income countries only. In the case of OECD and Germany, the 2012 data are actually for 2011. The Latin American average includes only the countries represented in the figure.

b Organization for Economic Cooperation and Development (OECD).

If the analysis is extended to incorporate the issue of basic infrastructure quality, such as the paved portion of the network, then the infrastructure shortfall becomes much more apparent. In terms of surfaced roads, the region is far less developed than the Republic of Korea or the United States. The shortage of paved road infrastructure is very marked in the latest year analysed, whether density is measured relative to territory or to population. With 3.2 km of surfaced roads for every 100 km^2 in 2012, Latin America lags very far behind the United States and the Republic of Korea, with 46.6 km and 90.7 km of surfaced roads per 100 km^2, respectively. To a lesser degree, the dearth of paved roads relative to population in Latin America is also manifest, especially in comparison with the United States.

Figure IV.3

Density of paved road networks, 2007 and 2012

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of information from the countries; Organization for Economic Cooperation and Development (OECD); Latin American and Caribbean Demographic Centre (CELADE)-Population Division of ECLAC; Food and Agriculture Organization of the United Nations (FAO); World Bank; Ministry of Land, Infrastructure and Transport of the Republic of Korea.

a The Latin American average includes only the countries represented in figures IV.1 and IV.2.

At the national level, all the countries have a lower paved road network density per 100 km^2 than the United States or the Republic of Korea. At the same time, paved road network density relative to the population has grown in all of them except the Bolivarian Republic of Venezuela, with particularly strong growth in the Plurinational State of Bolivia and Ecuador, where the average annual increase between 2007 and 2012 was 15.4% and 12.8%, respectively.[6]

Total and paved networks showed a slight improvement in terms of infrastructure availability and quality during the period from 2007 to 2012, with the length of the paved road network increasing by more than that of the total network (average annual growth of 2.5% and 1.2%, respectively) in the region as a whole.

To complete the analysis, the data for the density of the railway network relative to territory provide an even stronger illustration of the shortage of transport infrastructure by comparison with some countries and regions where rail transportation is heavily used.[7]

Figure IV.4

Density of paved road networks, 2007 and 2012 a

(Kilometres per 100 km^2)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of information from the countries; Organization for Economic Cooperation and Development (OECD); Food and Agriculture Organization of the United Nations (FAO); World Bank; Ministry of Land, Infrastructure and Transport of the Republic of Korea.

a The Latin American average includes only the countries represented in the figure.

Figure IV.5

Density of paved road networks, 2007 and 2012 a

(Kilometres per 1,000 inhabitants)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of information from the countries; Organization for Economic Cooperation and Development (OECD); Food and Agriculture Organization of the United Nations (FAO); World Bank; Ministry of Land, Infrastructure and Transport of the Republic of Korea.

a The Latin American average includes only the countries represented in the figure.

Figure IV.6

Density of railway networks, 2012 a

(Kilometres per 100 km^2)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of information from the countries; Latin American Railways Association (ALAF); Economic Commission for Europe (ECE), 2012 or latest information available; Korea Railroad Corporation.

a The Latin American average includes only the countries represented in figure IV.7.

When the evolution of railway networks over recent years is observed, it transpires that their overall length in the region did not change between 2007 and 2012, which means that there was a decline in density relative to population, given that the latter grew at an average rate of 1.1% a year over the same period in the 11 countries analysed. There was a large decline in railway track length in Honduras and Colombia between 2007 and 2012, averaging 18.2% and 10.8% a year, respectively. In the Bolivarian Republic of Venezuela, Chile and Panama, however, there were average annual increases of 2.6%, 1.5% and 1.1%, respectively.

Figure IV.7

Density of railway networks, 2007 and 2012

(Kilometres per 100 km^2)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of data from official sources and the Latin American Railways Association (ALAF).

2. The energy sector

There is a large gap between Latin America and other countries and regions as regards electricity generating capacity relative to population. Particularly striking is the comparison with the Republic of Korea, which started off in 1980 with almost the same amount of installed capacity per 1,000 inhabitants but ended up after 2000 with a level very similar to that of the European Union and OECD countries.

Figure IV.8

Electricity generating capacity, 1980-2012

(Megawatts per 1,000 inhabitants)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of data from the Latin American Energy Organization (OLADE), the United States Energy Information Administration (EIA) and the World Bank.

The data for installed electricity generating capacity indicate that this grew at an average annual rate of 4.1% in the region between 1980 and 2012, rising from 86 GW in 1980 to 310 GW in 2012. Once again, this growth was below the 7.6% recorded in the Republic of Korea in the same period.

Figure IV.9

Electricity generating capacity, 1980-2012

(Megawatts)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of data from the Latin American Energy Organization (OLADE), the United States Energy Information Administration (EIA) and the World Bank.

This increase in electricity generating capacity was achieved essentially by expanding thermoelectric capacity (fuel oil, coal and, predominantly, natural gas) and nuclear capacity (from 7.41 TWh in 1980 to 88.7 TWh in 2004). Hydroelectric generation, conversely, grew less dynamically than the overall electricity supply. The share of hydroelectricity fell steadily from 2000, stabilizing at about 9% of the primary energy supply by around 2013. This is because of the reform process and the dynamic of investment in the electricity sector, which has prioritized the development of less capital-intensive thermal power plants to the detriment of hydroelectric plants (Altomonte, 2014; ECLAC/SEGIB, 2006).

Although some countries of the region, such as Brazil, Guatemala, Mexico, Peru and the Plurinational State of Bolivia, reduced their dependence on oil as an electricity generating fuel to less than 20% of the total between 2000 and 2011, many others, far from reducing their dependence, actually increased it. By way of comparison, more developed countries such as Sweden and the United States had reduced this dependence to below 1% by 2011, while the figures for Italy, Japan and the Republic of Korea in 2011 were 3%, 10% and 7%, respectively.

Figure IV.10

Electricity generation from oil and its derivatives, 1990, 2000 and 2011

(Percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of World Bank data.

In addition to this heavy dependence on fossil fuels, there are still sections of the Latin American population (usually in slums and rural areas) that lack access to energy. All the region’s countries increased coverage between 1990 and 2010, but only six (the Bolivarian Republic of Venezuela, Brazil, Chile, Costa Rica, Mexico and Uruguay) can be considered to have full coverage, while elsewhere a great deal remains to be done (see figure IV.11).

Figure IV.11

Latin America: population with access to electricity, 1990, 2000 and 2010

(Percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of World Bank data.

3. The drinking water and sanitation sector

Following the general pattern, the availability of drinking water and sanitation infrastructure in Latin America lags behind the European Union, OECD and the Republic of Korea in coverage and access and in service quality. In 2012, the region still trailed the comparison group on both measures, but especially where access to improved sanitation facilities was concerned, with coverage of 82% as compared to 100% in the European Union and the Republic of Korea.

Attention should also be drawn to the qualitative differences in the technological solutions used, since coverage in Latin America is of lower quality. For example, the use of public sources (for water) and latrines (for sanitation) is greater in the region than in the European Union countries, where household connections are the rule.

Figure IV.12

Access to improved drinking water sources and sanitation facilities, 2012

(Percentages of the population with access)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of data from the World Health Organization (WHO)/United Nations Children’s Fund (UNICEF) Joint Monitoring Programme for the Water and Sanitation Sector [online] http://www.wssinfo.org/.

a Does not include the Bolivarian Republic of Venezuela.

In absolute terms, the coverage of improved water sources was extended to an extra 174 million people between 1990 and 2012, bringing the total up to 505 million. The rest of the population of Latin America, over 27 million people, still depends on non-potable water sources, and some of the 505 million people mentioned also receive non-potable water. In 2012, 439 million people had access to improved sanitation facilities in Latin America, an increase of 180 million since 1990, but that still left 94 million people without access to such sanitation services.

The sector expanded steadily between 1990 and 2012, with average annual growth of 1.9% and 2.4% in the number of people with access to water and sanitation, respectively, while the population of Latin America grew by an average of 1.4% a year. These figures meant that the coverage of improved drinking water and sanitation facilities increased to 95% and 82% of the population, respectively, from the 85% and 67% recorded in 1990. Growth rates have been slowing, however.

The target laid down by the Millennium Development Goals is to halve, by 2015, the proportion of people without sustainable access to safe drinking water and basic sanitation, taking 1990 as the base year. Latin America as a region has met the drinking water access target and is close to achieving the target for improved sanitation facilities.

Figure IV.13

Latin America:a access to improved sanitation facilities and drinking water sources, 1990-2012

(Percentages of the population with access)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of data from the World Health Organization (WHO)/United Nations Children’s Fund (UNICEF) Joint Monitoring Programme for the Water and Sanitation Sector [online] http://www.wssinfo.org/.

a Does not include the Bolivarian Republic of Venezuela.

In the case of access to improved water sources, population coverage in Latin America in 2012 was above the world average and that for a number of developing regions. In addition, the region expanded coverage by more than regions that had had similar coverage in 1990, such as North Africa, West Asia, the Caucasus and Central Asia.

Figure IV.14

Access to improved drinking water sources and sanitation facilities, 1990 and 2012

(Percentages of the population with access)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of United Nations, The Millennium Development Goals Report 2014, New York, 2014, and data from the World Health Organization (WHO)/United Nations Children’s Fund (UNICEF) Joint Monitoring Programme for the Water and Sanitation Sector [online] http://www.wssinfo.org/.

a Does not include the Bolivarian Republic of Venezuela.

The region’s urbanization appears to have a positive effect on the drinking water and sanitation segment, provided it goes together with adequate investment. After over 30 years without major change, the sector saw rapid expansion from the late 1990s. The coverage of water treatment, for example, doubled from 14% to 28% in less than 10 years.

Nonetheless, there is still concern about the quality of water and sanitation services and about the large and persistent differences between urban and rural areas.

4. The telecommunications sector

The behaviour of the telecommunications sector differs depending on the technology analysed. Whereas mobile telephony and fixed broadband Internet expanded during the period from 2000 to 2013, fixed-line telephony held steady.

Fixed broadband Internet access is the part of the sector that grew most in the period analysed. Average annual growth in the number of fixed broadband subscriptions per 1,000 inhabitants between 2005 and 2013 was 25.2%, so that by 2013 there were 94 subscriptions per 1,000 inhabitants, almost double the number of five years before. However, Latin America still evinced a large gap in the latest year available, although a smaller one than at the start of the period analysed. Population coverage is four times as great in the Republic of Korea and three times as great in the European Union.

Figure IV.15

Fixed broadband subscriptions, 2000-2013

(Number of subscriptions per 1,000 inhabitants)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of data from the International Telecommunication Union (ITU), the Latin American and Caribbean Demographic Centre (CELADE)-Population Division of ECLAC and the World Bank.

Mobile telephony moved broadly in line with Internet access. During the period from 2000 to 2013, it experienced steady growth averaging 18.9% a year. In terms of population density, it had the highest level of penetration of all the telecommunications technologies analysed, with more subscriptions than inhabitants in 2013 (1,190 subscriptions per 1,000 inhabitants). Growth was higher in the region than in the Republic of Korea or the European Union, and in 2013 it attained higher population coverage than the former, while almost catching up with the latter (see figure IV.16).

Fixed-line telephony, which is a less recent technology, held steady between 2000 and 2013, with modest average annual growth of 1.8%, just slightly above the 1.3% average annual population growth rate in the period. The infrastructure gap in this area remained in 2013, although it should be put into perspective given the strong development of mobile telephony, which has been taking over from fixed-line telephony. The number of fixed telephone lines in the European Union fell substantially between 2000 and 2013.

Figure IV.16

Mobile telephony subscriptions, 2000-2013

(Number of subscriptions per 1,000 inhabitants)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of data from the International Telecommunication Union (ITU), the Latin American and Caribbean Demographic Centre (CELADE)-Population Division of ECLAC and the World Bank.

Figure IV.17

Fixed telephone lines, 2000-2013

(Number of lines per 1,000 inhabitants)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of data from the International Telecommunication Union (ITU), the Latin American and Caribbean Demographic Centre (CELADE)-Population Division of ECLAC and the World Bank.

5. General trends in infrastructure availability

The supply of economic infrastructure has evolved more favourably in some ways over recent years, allowing the countries to achieve higher coverage in terms of territory and population. As has been shown, however, there is a continuing shortfall in economic infrastructure in the region.

In the transport sector, the region continues to lag considerably in terms of territorial coverage and density per 1,000 inhabitants, particularly if what is measured is not just the availability of infrastructure, but its quality. Population growth meant that a modest increase (in absolute terms) in the total and paved road networks of most countries in the region was not enough to bring about a substantial rise in overall road density relative to population between 2007 and 2012. A still greater cause for concern is the situation in other transport subsectors, such as railway transport, where the infrastructure available has diminished rather than grown in recent years.

Substantial progress has been made in the drinking water and sanitation services sectors, which cover 95% and 82% of the population, respectively, meaning that the targets of the Millennium Development Goals have been met. However, these are aggregate figures, masking differences in coverage between rural and urban areas.

The energy sector expanded more rapidly than the population in terms of installed electricity generating capacity. The region, however, remains heavily dependent on fossil fuels and there are still segments of the population without access to energy in most of the countries.

In the telecommunications sector, lastly, the region has been able to ameliorate the infrastructure shortfall by substantially developing mobile telephony, with mobile phone subscriptions now outnumbering the region’s total population. However, territorial coverage, which is important in measuring the quantity of infrastructure available in this sector, was not analysed.

In this context, it is important to reassess the link between the lack of economic infrastructure in Latin America and the performance of public policies in the area of infrastructure investment, together with the contribution of the private sector to the financing of infrastructure works. That is what the next section sets out to do.

B. Evolution and characteristics of infrastructure investment

This section analyses infrastructure investment as a vital aspect of public policy and covers the main trends in private investment in projects initiated under public-private partnership arrangements.[8] In general, what comes across is the ever-lower level of investment in the sector, especially if account is taken of the ECLAC estimate (Perrotti and Sánchez, 2011) that Latin America needed to spend some 6.2% of GDP a year on average to fund the flows of infrastructure investment (in the areas of transport, energy, telecommunications, and drinking water and sanitation) that it would take to meet the requirements of firms and final consumers during the period from 2012 to 2020.[9]

It is important to spell out a particular challenge, which is the difficulty of measuring public and private infrastructure investment. In Latin America and the Caribbean, the lack of data on how much is invested in infrastructure, the proportions contributed by the public and private sectors, the sums spent on maintenance or repair and the way this spending is distributed between levels of government is a very severe constraint on public policymaking. The absence of clear definitions and common measuring procedures affects data quality, analysis and the international comparability of figures, which can lead to inaccuracies and errors in decision-making. Measurement is further complicated by the growing tendency for public and private investors and operators to combine in the infrastructure sector and by the variety of forms taken on by public-private partnerships. Box IV.1 presents a summary of the efforts undertaken in the region in this area.

Box IV.1

Measuring economic infrastructure investment in Latin America and the Caribbean

Pioneering studies by World Bank economists (Fay and Morrison, 2007; Calderón and Servén, 2010) examined the behaviour of infrastructure investment in Latin America. As part of this work, Calderón and Servén (2010) developed the region’s first infrastructure investment database, which covers six countries from 1980 to 2006 and constitutes the longest historical series available at this time.

The subject was taken up by the Natural Resources and Infrastructure Division of ECLAC in the middle of the last decade as part of a theoretical reflection on the problems of development and an infrastructure investment measuring initiative for Latin America and the Caribbean (see, for example, Rozas and Sánchez, 2004; Rozas, 2009; Rozas, Bonifaz and Guerra-García, 2012; Perrotti and Sánchez, 2011).

Different infrastructure investment initiatives have continued this line of research. Since 2012, ECLAC has received support from the Development Bank of Latin America (CAF) in the task of gathering and systematizing information on infrastructure investment in the different countries of Latin America and the Caribbean; to this end, a working programme was agreed and has been extended to a growing number of countries, currently 15 (Argentina, Brazil, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Mexico, Nicaragua, Panama, Paraguay, Peru, the Plurinational State of Bolivia and Uruguay). In 2014, the Inter-American Development Bank (IDB) joined the initiative, and the shared goal of extending coverage to all the countries in the region was maintained.

In 2013, ECLAC began a review of the information held in the different countries and of the processing applied to the data gathered up to that time, and identified a number of problems with the measurement of infrastructure spending, including a lack of common definitions for a number of infrastructure measurement terms, non-availability of some public records, entries whose timing did not match the accrual basis and differences in the items treated as capital spending in each country.

To address these difficulties, in 2014 the Natural Resources and Infrastructure Division and the Statistics Division of ECLAC prepared a joint document, now in final preparation, under a working title “Compilation and treatment of data on infrastructure investment on the basis of public finances in Latin America and the Caribbean: glossary and questionnaire”, as a reference and support tool for the collection, processing, validation and dissemination of information on public sector infrastructure spending. Implementation of the recommendations put forward in the document will make it possible to generate quantitative and qualitative information on the amounts, origin and dynamic of the infrastructure component of gross fixed capital formation and on the institutional context in which this investment takes place.

The document is divided into two major parts, a glossary and a questionnaire, closely interrelated, that cover six infrastructure sectors: transport, energy, telecommunications, water and sanitation, irrigation, and flood defences. Figures from each general government subsector (central government and subnational governments) and non-financial public-sector firms are compiled, with a special focus on the origin of the funds (general budget, transfers, own funds and special funds, among others). A procedure is also supplied; this is still in development and should improve as it is implemented and information is gathered in the countries.

Although the glossary and questionnaire have been designed for the compilation and processing of public-sector investments, they could be adapted for compiling, recording and validating information from the private sector. However, it is believed that this option would require a much greater collection effort than is currently being made, owing to the great amount of time and resources that would be needed to implement it. For the time being, ECLAC, like IDB and CAF, records private investment on the basis of the information incorporated into the World Bank Private Participation in Infrastructure Project Database, excluding sums that do not represent investment.

Similar initiatives being implemented in other regions of the world are the International Transport Forum (ITF), an intergovernmental organization with 54 member countries established in the framework of OECD, and the Africa Infrastructure Knowledge Programme.

Source: Economic Commission for Latin America and the Caribbean (ECLAC).

1. The main trends in economic infrastructure investment

As better-quality data have been constructed and as models and methodological approaches have been improved, controversy and scepticism about the early estimates of the economic and social benefits brought by infrastructure investment have diminished. In Latin America, investment in economic infrastructure fell from over 3.5% of GDP in the 1980s to just over 2% in the 1990s and 2000s. Figure IV.18 shows different aspects of the track record of infrastructure investment in Latin America from 1980 to 2012. In that period, the investment ratio peaked at an average of 3.6% of GDP in the region during the 1980s before declining to 2.2% between 1990 and 2001 and then recovering slightly to 2.3% between 2002 and 2012. Even at its highest in the 1980s, Latin America’s investment ratio was still low compared to those of other economies such as China (8.5%), Japan (5.0%) and India (4.7%), according to data from McKinsey Global Institute (2013) for the period from 1992 to 2011.

Public investment fell from 3.0% of GDP in the 1980s to 1.1% in the 1990s. An upward trend began in 1999, although with periods of decline, so that the average from 2002 to 2012 was 1.3%. Movements in public investment during these three periods reflect factors such as the external debt crisis, when most of the region’s governments stopped using external credit and instead financed investment out of their own resources. This fiscal effort eventually became unsustainable and public investment fell sharply.

In the 1990s, the proportion of public investment in the financing total declined because of fiscal constraints and debt service, so that the State adopted a more passive role than formerly.

In 2002, the region began to receive large amounts of extraordinary revenues because of the commodity price boom and more favourable terms of trade, leading to a rise in national saving and a major improvement in the fiscal situation. These developments proved fundamental in reducing the region’s external vulnerability and enabling it to mount a countercyclical response in the form of vigorous public investment programmes when the international financial crisis struck in 2008 and 2009. The region had 10 years of steady economic growth, interrupted only in 2009; that same year, having partially recovered, infrastructure investment came very close to the averages of the 1980s.

Private investment was more dynamic in the 1990s, with the investment ratio rising to 1.2% of GDP from the 0.5% that had been the average for the 1980s. This increase did not offset the drop in public investment however, which meant that overall infrastructure investment fell off sharply in the 1990s. The privatization processes begun in the region’s countries in the late 1980s substantially boosted the incorporation of private capital into the infrastructure sector. Likewise, tendering out public works projects made it possible to incorporate private agents into infrastructure financing, construction and services management, particularly from the mid-1990s. Private investment fell off in 2001, since when its performance has been uneven, averaging 1.0% of GDP in the period from 2002 to 2012.[10]

Figure IV.18

Latin America: infrastructure investment by sector, 1980-2012 a

(Percentages of GDP)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of national data; César Calderón and Luis Servén, “Infrastructure in Latin America”, World Bank Policy Research Working Paper, No. 5317, Washington, D.C., World Bank, 2010; and World Bank, Private Participation in Infrastructure Database [online] http://ppi.worldbank.org/index.aspx.

a Includes investment in transport, energy, telecommunications, and water and sanitation. ECLAC data are preliminary. Solely for illustration purposes and to highlight trends, the data from Calderón and Servén (2010) for the period from 1980 to 2006 and the ECLAC data for the period from 2007 to 2012 are shown as data series, even though there are differences in the way the figures are processed.

2. Sectoral trends in economic infrastructure investment

When infrastructure investment trends in all four sectors are reviewed over a period of 32 years, it transpires that investment funding during the 1980s was allocated, in descending order of importance, to energy, transport, telecommunications, and drinking water and sanitation, while in recent years it has gone mainly into transport (see figure IV.19).

Figure IV.19

Latin America: infrastructure investment by sector, 1980-2012 a

(Percentages of total infrastructure investment)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of national data; César Calderón and Luis Servén, “Infrastructure in Latin America”, World Bank Policy Research Working Paper, No. 5317, 2010; and World Bank, Private Participation in Infrastructure Database [online] http://ppi.worldbank.org/.

a ECLAC data are preliminary. Solely for illustration purposes and to highlight trends, the data from Calderón and Servén (2010) for the period from 1980 to 2006 and the ECLAC data for the period from 2007 to 2012 are shown as data series, even though the figures have been processed differently.

Recent studies based on samples of OECD countries indicate that public infrastructure has a positive effect on the productivity of an economy, since, while an increase in public capital investment crowds out private capital at the outset, in the long run the dominant effect is one of complementarity.[11] In Latin America, the functions and responsibilities of the public and private sectors have also shifted over time. In conformity with what was observed earlier concerning infrastructure investment, up to the mid-1990s public investment mainly went to the energy sector, followed by transport and telecommunications and, lastly, drinking water and sanitation, whereas since 2003 it has been transport that has received the most, followed by energy, drinking water and sanitation, and telecommunications (see figure IV.20).

Figure IV.20

Latin America: public infrastructure investment by sector, 1980-2012 a

(Percentages of GDP)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of national data and César Calderón and Luis Servén, “Infrastructure in Latin America”, World Bank Policy Research Working Paper, No. 5317, 2010.

a ECLAC data are preliminary. Solely for illustration purposes and to highlight trends, the data from Calderón and Servén (2010) for the period from 1980 to 2006 and the ECLAC data for the period from 2007 to 2012 are shown as data series, even though the figures have been processed differently.

Since the 1990s, the private sector has made major investments in telecommunications, which had been an area of weakness in the public sector. Private investment in energy and transport has also increased, owing in part to the tendering of public works projects. As for drinking water and sanitation, although this is an area traditionally associated with the State, private-sector participation seems to have grown in importance, at least in some of the region’s countries, by way of public-private partnerships (Brazil, Chile, Colombia, Mexico and Peru) (see figure IV.21).

Figure IV.21

Latin America: private infrastructure investment by sector, 1980-2012 a

(Percentages of GDP)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of César Calderón and Luis Servén, “Infrastructure in Latin America”, World Bank Policy Research Working Paper, No. 5317, 2010, and World Bank, Private Participation in Infrastructure Database [online] http://ppi.worldbank.org/.

a ECLAC data are preliminary. Solely for illustration purposes and to highlight trends, the data from Calderón and Servén (2010) for the period from 1980 to 2006 and the ECLAC data for the period from 2007 to 2012 are shown as data series, even though the figures have been processed differently.

In practice, there is a complementary relationship between public and private investment. Each has its own strengths and limitations, and when their respective roles in national infrastructure development plans are being decided upon, consideration should be given at least to the institutional context, the targets and objectives of infrastructure investment policies (investment needs) and the peculiarities of each sector (transport, energy, telecommunications, and drinking water and sanitation services).

This complementarity can be expected to exist not only between public and private investment, but also between one infrastructure activity and another, as has been highlighted in earlier studies on the subject (Calderón and Servén, 2004). It has been empirically confirmed that, with technological progress, the four sectors mentioned are interacting more and more closely with one another and generating all kinds of synergies, throwing up complementarity and substitution effects. For example, telecommunications and transport have been becoming complementary in some road toll charging systems; when transport improves accessibility in remote areas, this is likely to be followed by the creation of new settlements which raise demand for water, energy and telecommunications services; environmental concerns can result in changes in the transport mix, reducing the proportion of cars with diesel engines and replacing them with electrical transportation or bicycles. In practice, the dynamic of one activity can affect the rest, so isolated analyses may yield incomplete results.

3. Looking to the future: national infrastructure investment planning

Given the scale of infrastructure gaps, a brief review of investment plans in Latin American countries such as Brazil, Costa Rica, Mexico and Peru shows that this issue is being given increasing priority and strategic importance by the countries. As a percentage of GDP, planned investment amounts in several sectors are higher than the investments made in earlier periods, as are long-term projections (up to 2018 in Mexico, 2021 in Peru and 2030 in Brazil).

Despite the greater importance now given to infrastructure in national planning, however, the amounts involved remain well below those recommended by ECLAC (Perrotti and Sánchez, 2011) and other international organizations (see table IV.1). It should be noted that, if likely investment by private-sector agents is factored in, the planned investment amounts presented here probably underestimate the total value of projects that are actually going to be implemented.

Table IV.1

Latin America (selected countries): infrastructure investment plans

Country

Amount

(millions of dollars)

Investment amount the first year a

(percentages of GDP)

Brazil, 2014-2017

Transport

71 000

0.8

Electricity

76 500

0.9

Telecommunications, drinking water and sanitation

74 000

0.8

Total

221 500

2.5

Costa Rica, 2015-2018

Transport

3 100

1.5

Energy

1 257

0.6

Telecommunications

59

0.0

Water and sanitation

352

0.2

Total

4 768

2.3

Mexico, 2014-2018

Transport

48 636

0.8

Energy b

90 952

1.4

Telecommunications

50 695

0.8

Hydraulics c

31 452

0.5

Total

221 735

3.4

Peru, 2012-2021

Electricity, natural gas and water

32 953

1.6

Transport

41 619

2.0

Total

74 572

3.6

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official information from the development plans of the respective countries: Ministry of Finance, Secretariat of Economic Monitoring (SEAE), “The Federal Logistic Investment Program (PIL)”, December 2013 [online] http://www.law.harvard.edu/programs/about/pifs/symposia/brazil/2013-brazil/seae-presentation---the-federal-logistic-investment-program---pil.pdf; Government of Costa Rica, Plan Nacional de Desarrollo 2015-2018 “Alberto Cañas Escalante”, November 2014 [online] http://documentos.mideplan.go.cr/alfresco/d/d/workspace/SpacesStore/cd1da1b4-868b-4f6f-bdf8-b2dee0525b76/PND%202015-2018%20Alberto%20Ca%C3%B1as%20Escalante%20WEB.pdf; Government of Mexico, Programa Nacional de Infraestructura 2014-2018, 2014 [online] http://www.pwc.com/es_MX/mx/industrias/archivo/2014-05-analisis-pni-2014-2018-detallada.pdf; Government of Peru, Plan Bicentenario: El Perú hacia el 2021, March 2011 [online] https://www.mef.gob.pe/contenidos/acerc_mins/doc_gestion/PlanBicentenarioversionfinal.pdf.

a Investment amounts are assumed to be distributed evenly over the whole period at constant values (those of the first year).

b Includes natural gas projects, but does not include projects relating to oil and oil derivatives. Nonetheless, the figure could be an overestimate, since projects with the federal states could include investments of this type.

c Includes drinking water, sanitation, irrigation and flood defences.

The challenges posed by climate change will further heighten needs in terms of infrastructure investment. While the costs of mitigating climate change differ from country to country, achieving the targets set in this area will require considerable resources and additional funding efforts (see box IV.2).

Box IV.2

Preserving a global public good: the economic cost of climate change

Climate change is a global negative externality: certain economic activities generate greenhouse gas emissions, at no economic cost to those responsible, which cause climate change (Stern, 2007). Climate change poses an additional challenge for the economic development of the economies of Latin America and the Caribbean, calling as it does for simultaneous efforts to be made to address the economic, social and environmental costs of its impact and to effect the structural and short-term changes necessary to adapt to new climatic conditions and face up to the economic and social costs associated with greenhouse gas mitigation processes. Although these costs are not necessarily cumulative, reducing the effects of climate change entails building a new development paradigm. In the event that the region’s temperature rises by 2.5oC —above the climate danger threshold, and something that is highly likely to take place shortly after 2050— several tentative preliminary estimates put the economic costs of climate change at between 1.5% and 5.0% of current regional GDP. Although the costs vary between countries, sectors and geographical regions, the main effects will be seen in farming, water availability, biodiversity, forestry and tourism. The economic costs of adaptation measures are also tentatively estimated at between 0.5% and 1.0% of regional GDP, and the costliest such measures will be those linked to infrastructure, coastal zones, farming and extreme weather events (ECLAC, 2014).

Figure 1

Latin America and the Caribbean: costs of climate change in the event of a 2.5°C increase in temperature, according to various sources, second half of the twenty-first century

(Percentages of regional GDP)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of F. Bosello, C. Carraro and E. De Cian, “Market- and policy-driven adaptation”, Smart Solutions to Climate Change: Comparing Costs and Benefits, Bjørn Lomborg (ed.), Cambridge University Press, 2010.

Figure 2

Latin America and the Caribbean: annual costs of adaptation to climate change

(Billions of 2005 dollars)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of F. Bosello, C. Carraro and E. De Cian, “Market- and policy-driven adaptation”, Smart Solutions to Climate Change: Comparing Costs and Benefits, Bjørn Lomborg (ed.), Cambridge University Press, 2010; and World Bank, The Cost to Developing Countries of Adapting to Climate Change. New Methods and Estimates, Washington, D.C., 2010.

a Wettest scenario.

b Driest scenario.

There is also uncertainly as to estimated costs of mitigation of greenhouse gases, which vary depending on the goals set. The current consensus is that to stabilize climatic conditions so as to avoid a temperature rise of over 2oC by 2050, greenhouse gas emissions will have to be cut from 45.4 gigatons of CO_2-equivalent (GtCO_2-eq) per year to 20 GtCO_2-eq per year (Hepburn and Stern, 2008). Assuming that, as forecast, the current world population of 7 billion will grow to around 9 billion by 2050, annual emissions will have to be reduced from just under 7 tons per capita to 2 tons per capita by 2050. Strong economic growth is also expected, which will lead to greater energy consumption. The economic costs of the transforming production patterns to bring emissions down to about 2 tons per capita by 2050 are estimated at between 0.15% and 1.0% of the current GDP of Latin America and the Caribbean, depending on the specific objectives set (Vergara and others, 2013). The amounts needed vary from country to country, and include the cost of setting up carbon sinks in forests and underground storage sites, transforming agriculture, ensuring energy efficiency, decarbonizing the energy sector and electrifying and modifying means of transport.

The process of changing today’s economies will also have positive effects since it will give rise to new sectors of production, new jobs and more sustainable consumption habits, heralding a structural change towards greater environmental sustainability. It will also entail forging a new public-private matrix of public goods and services and formulating a public policy strategy that is unequivocally oriented towards sustainable development. Building new infrastructure, for instance, that paves the way for constituting a clean energy matrix, ensuring sustainable public transport, imposing taxes on the negative externalities of fossil fuels and offering subsidies to encourage the development of renewable energies.

In a global economy, the preservation of global public goods, such as the climate, is crucial. There is a growing awareness of the fact that damage to the climate holds back economic development and may even undermine the foundations of the current cycle of economic growth. Latin America and the Caribbean is faced with a time-based paradox: the challenge of climate change both entails considering scenarios that stretch 50 or 100 years into the future and requires urgent action in respect of, for example, timelines for the construction, utilization and depreciation of infrastructure, since infrastructure that is currently being built will still be in use in 2050. The challenge thus lies in coming up with a development paradigm that is in line with climate preservation and sustainable development objectives and can ensure the safekeeping of economic, social and environmental assets for future generations.

Source: Economic Commission for Latin America and the Caribbean (ECLAC).

C. Towards better public policies for economic infrastructure

In a sustainable development context, a rigorous infrastructure accounting exercise must set out from the assumption that infrastructure forms part of the capital produced by public and private investment on the basis of domestic saving, external investment and the transformation of natural capital. Another assumption is that consideration will be given not only to the infrastructure used to facilitate production, trade and consumption, and thence economic growth, but also to that which supports the provision of services intended to improve quality of life and facilitate the expansion of human capital, and to that whose purpose is to protect the environment and manage natural resources.[12] The positioning of infrastructure in the sustainable development goals implies a greater responsibility for public policy in efforts to move towards the higher levels of quality investment required to bring about real and equitable improvements in people’s quality of life in the region. In this context, the present chapter looks afresh at a number of points in the discussion about the development of economic infrastructure in Latin America.

First, it emphasizes that the shortage of basic infrastructure in the vital economic infrastructure sectors is still one of the main challenges for the region, despite the progress made by individual countries or sectors in recent years. When infrastructure quality criteria are brought in, the gap between the region and developed countries (and some developing countries) becomes even more striking. Although it is not an aspect that has been addressed in much detail in this chapter, the incorporation of sustainability criteria would probably show the situation in a worse light as well. Analysis of the situation in the transport sector, for example, reveals that growth has centred on road infrastructure, neglecting other types that are often more sustainable, such as railway infrastructure.

Second, this chapter confirms that providing and maintaining quality, reliable, sustainable and resilient infrastructure, which is one of the proposed sustainable development goals of the post-2015 development agenda, requires major efforts by governments and the private sector. A review of the current infrastructure investment plans of the Latin American countries suggests that, despite the greater importance now being given to infrastructure in national planning, the amounts set aside for this remain low compared with those recommended as being necessary to meet current and future infrastructure demand.

Third, it demonstrates that public investment has been and still is the key element in infrastructure development. Within the wide spectrum of infrastructure projects, there are cases where the financing will inevitably be public, even if the private sector is involved in implementation and operation. On the other hand, there are areas where the private sector has proved highly capable of providing financing and management expertise, as in the case of infrastructure projects carried out under public-private partnership schemes. It would seem that the public policy challenge in this area is to establish planning and evaluation mechanisms which can guarantee not only that the resources available are channelled into the projects with the highest social returns and fewest externalities, but also that different financing sources and methods are employed as the situation requires, both in the public-private dimension and at the different levels of the public sector.

Lastly, it is essential to emphasize that financing needs, along with the constraints on the resources available to the region’s governments, make it indispensable to improve public policies relating to the planning, implementation and management of infrastructure projects. There needs to be an integrated approach based on a comprehensive overview of all infrastructure sectors and their impact on national development, with recognition of the quality required of the services the infrastructure provides and with appropriate coordination of the respective roles and responsibilities of the public and private sectors. In order to anticipate and manage demand for infrastructure in line with the sustainable development goals, it would also seem to be indispensable to incorporate the sustainability approach and criteria into every stage of the institutional cycle for promoting infrastructure development, from initial planning to operation, maintenance and impact assessment.

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____(2004), “Trends in infrastructure in Latin America: 1980-2001”, Working Paper, No. 3401, Washington, D.C., World Bank.

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[1] See, for example, OECD (2006).

[2] As argued in Lardé, Marconi and Oleas (2014).

[3] Owing to a lack of data, the analysis of this chapter is confined to Latin America. Extending the ECLAC research to the countries of the Caribbean will be one of the next steps in this line of study, however.

[4] In concise terms, infrastructure can be defined as a set of engineering structures and installations with a long service life that provide the basis for services considered necessary for the pursuit of productive, geopolitical, social and personal goals (cited in Rozas, Bonifaz and Guerra-García, 2012).

[5] The choice of indicators has in many cases been determined, and thus limited, by the availability of information. The scarcity of available information also accounts for the differences in the geographical coverage of the analysis. Generally speaking, data availability has meant the largest set of countries being considered in the case of Latin America, including Argentina, Belize, the Bolivarian Republic of Venezuela, Brazil, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, the Plurinational State of Bolivia and Uruguay. In some cases, however, the analysis may include a smaller number of countries owing to lack of information.

[6] Note should be taken of the limitations of these indicators, which do not fully reflect the geographical distribution of the population.

[7] It is important to recognize that differences in countries’ topography and geographical size play an important role in determining the use or potential use of railway transportation, making the level of usage harder to compare across countries or regions.

[8] Data on private investment in projects involving a public-private partnership arrangement are based on the World Bank Private Participation in Infrastructure Database and are only an initial approximation, given the considerable limitations of this information source, as set out in Lardé and Sánchez (2014). In view of this, the figures from the World Bank database are subjected to a number of adjustments in accordance with pre-set criteria, such as the treatment of privatizations, mergers and acquisitions (the amounts for which are not deemed to form part of gross fixed capital spending on infrastructure), and adjustments to the amounts of public-private projects.

[9] This calculation includes investment in maintenance and major repairs and is only an approximation of investment needs rather than a firm recommendation, since it assumes that the historical pattern of investments will be repeated.

[10] See Rozas (2010) and Rozas, Bonifaz and Guerra-García (2012).

[11] See OECD (2006) and Aschauer (1989).

[12] Noted in Lardé, Marconi and Oleas (2014).

Chapter V

Financing investment in Latin America and the Caribbean: the issues and main challenges

Introduction

A. Stylized facts of company financing

B. The characteristics of SMEs

C. The characteristics of the financial system in Latin America

D. Low levels of domestic saving

E. The need for an inclusive financial system

F. Conclusions

Bibliography

Annex V.A1

Introduction

In the Latin American and Caribbean production sector, 40% of small firms and 70% of large ones have access to funding from the formal financial system. The factors explaining the financial inclusion gap between larger and smaller firms include information asymmetries and high financing costs, as well as the characteristics of the financial system in Latin America and the Caribbean.

The financial systems of the region’s countries are generally shallow, short-termist and essentially reliant on commercial banks. There are few long-term financing instruments. Furthermore, one consequence of the information asymmetries that prevail in the region is credit rationing, especially for small and medium-sized enterprises (SMEs) and innovation activities. These features have resulted in high and segmented costs and low levels of banking coverage.

Besides the characteristics mentioned, another important factor that hinders firms from accessing financing is the still incipient and limited development of capital markets in Latin America and the Caribbean, with low capitalization levels and share trading volumes. What is more, the number of firms listed on the region’s stock exchanges has declined in the past decade, and trading is largely confined to a handful of shares.

These characteristics of the region’s economies mean that firms generally tend to finance investment out of their own funds, either because they are shut out from formal financial markets or, when they do have access to these, because they prefer internal to external financing. The data for a set of manufacturing and services firms at the regional, subregional and country level indicate that these finance over 60% of their fixed and working capital investment out of their own funds, and among SMEs the proportion is even higher.

Firms that do have access to financing beyond what they can supply from their own resources tend to prefer commercial bank borrowing to share issuance. The capital market is generally found to be a very minor source of financing for productive investment.

When firms’ access to external financing is limited, their production capacity and ability to grow and prosper are also constrained, as they are forced to finance their operations solely out of their own funds. Furthermore, the evidence for SMEs is that they use the financial system mainly for deposits and as a medium of payment, and far less for credit products, and this can constrain their capacity for future expansion and growth.

This state of affairs limits investment, innovation, productivity and growth. It also creates a vicious circle that keeps smaller production units in a constant state of vulnerability and low growth, with serious consequences for poverty and social inequality.

In a context of shallow financial markets and underdeveloped capital markets, boosting domestic resource mobilization for productive investment requires a set of economic and financial policies oriented towards developing financial markets and encouraging saving for long-term financing. The capacity and effectiveness of the financial system when it comes to channelling resources into production activities depend on the provision of low-cost intermediation services and the development of financial instruments and institutions that can adapt to different risk profiles, liquidity needs and maturities in the production sector.

The development of financial systems is a complex process that calls for public and financial policies aimed, among other things, at strengthening economic and legal institutions and economic stability and creating new instruments for administering economic and financial risks.

This chapter examines the issues surrounding investment financing in Latin America and the Caribbean and its subregions and the main challenges involved. It is divided into six sections. Section A analyses the stylized facts of investment financing in the region, presenting the evidence that the great majority of firms finance themselves out of their own resources, a practice that is particularly prevalent among SMEs, and showing that there is a hierarchy of external financing sources. Sections B, C and D centre on the factors limiting access to financing, such as the characteristics of SMEs and the financial sector, low levels of domestic saving and the volatility of external saving. Section E identifies a need to create an inclusive financial system as part of a production policy that can meet economic and social development needs. Lastly, section F presents some closing reflections.

A. Stylized facts of company financing

The way firms finance investment depends, first, on the opportunities and conditions of access to banking and financial markets available to them and, second, on the decision as to whether to use external funds or their own resources.

Where access is concerned, the empirical evidence for Latin America and the Caribbean shows that just over 40% of small firms and 70% of large ones are in a position to obtain credit from formal financial institutions. While low, access levels for both types of firms, large and small, compare favourably with those in other developing regions such as the Middle East and North Africa, East Asia and the Pacific, South Asia, and Eastern Europe and Central Asia, as well as high-income countries (see figure V.1).

Figure V.1

Selected regions and country groupings: firms with a bank loan or credit line, 2011

(Percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of World Bank, “World Enterprise Surveys”, 2015 [online] http://data.worldbank.org/data-catalog/enterprise-surveys.

Even so, the financing access gap between small and large firms is wide, and this constrains smaller firms’ production capacity and ability to grow and prosper. One result is a vicious circle that keeps smaller production units in a constant state of vulnerability and low growth, with serious consequences for poverty and social inequality (Vera and Titelman, 2013).

Accordingly, SME access to the financial system should be a central concern for economic policymakers in the countries of Latin America and the Caribbean, both out of considerations of equity and because these firms are an essential part of the region’s production and employment fabric. SMEs make up the bulk of all firms and account for 60% of employment and 40% of total output in Latin America and the Caribbean.

Lack of access to financing is reflected in the fact that firms largely finance investment out of their own funds (retained earnings). This is one of the best-documented facts in the various analyses of investment and its financing that have been carried out for the different regions of the world, and it holds for both working capital and fixed capital.

As figure V.2 shows, the proportion of total investment, including working capital and fixed capital, that firms finance out of their own funds exceeds 60% in all the world’s regions, including both industrialized and developing countries. In the case of Latin America and the Caribbean, an average of 63% of all investment is financed in this way.

Analysis at the country level in the region yields similar findings. Indeed, in no case does internal financing account for as little as half the total (see table V.1).

Analysis by firm size (small, medium-sized and large) in the manufacturing and services sectors shows that smaller firms usually tend to make more intensive use of internal financing than larger ones in the region. On average, over 80% of small firms finance themselves out of internal resources, while the average for large firms is 75%.

Figure V.2

Selected regions and country groupings: manufacturing sector investment financed out of firms’ own funds, 2006-2010

(Percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of World Bank, “World Enterprise Surveys”, 2015 [online] http://data.worldbank.org/data-catalog/enterprise-surveys.

a Organization for Economic Cooperation and Development.

Table V.1

Latin America (selected countries): manufacturing and services sector investment financed out of firms’ own funds, by firm size, 2010

(Percentages of total investment)

Manufacturing

Services

Type of firm

Type of firm

Small

Medium

Large

Small

Medium

Large

Argentina

81.6

76.7

74.2

85.3

78.3

74.0

Bolivia (Plurinational State of)

73.8

72.2

70.0

80.2

86.5

68.0

Chile

78.9

74.0

77.6

66.5

78.0

69.2

Colombia

69.8

66.2

64.0

73.2

80.5

72.2

Ecuador

69.6

76.5

69.2

76.4

76.2

77.6

El Salvador

80.0

68.5

73.0

79.6

73.8

72.8

Guatemala

80.7

84.9

77.8

92.9

80.0

73.3

Honduras

83.2

63.2

68.9

77.2

80.3

70.8

Mexico

84.5

76.9

82.6

91.7

91.3

86.8

Nicaragua

90.7

86.5

83.7

95.7

92.2

87.5

Panama

100.0

98.3

95.0

85.6

100.0

98.0

Paraguay

88.8

78.4

74.8

84.6

83.3

77.9

Peru

73.5

65.7

57.4

75.4

59.7

73.9

Uruguay

86.6

79.5

79.7

89.8

86.3

85.3

Venezuela (Bolivarian Republic of)

80.0

78.6

72.9

80.0

92.6

63.2

Regional average

81.4

76.4

74.7

82.3

82.6

76.7

South America

78.1

74.2

71.1

79.0

80.1

73.5

Central America

86.9

80.3

79.7

86.2

85.3

80.5

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of World Bank, “World Enterprise Surveys”, 2015 [online] http://data.worldbank.org/data-catalog/enterprise-surveys.

This trend holds for both the sectors considered. The subregional analysis shows that, in both sectors, Central America generally presents a larger share of internal financing than South America, the respective averages being 86% and 80% for manufactures and 78% and 72% for services.

The empirical evidence shows a negative correlation between the number of years a firm has been in business and the proportion of internal financing. In other words, the newer firms are, the greater the share of financing drawn from their own funds, and thus the smaller the share of outside financing. This holds for all firms, irrespective of size (see table V.2).

Table V.2

Selected regions:a correlation coefficient between company age and the share of internal financing, 2002-2013

Year

Large firms

Medium-sized firms

Small firms

2002

-0.21

-0.12

-0.14

2006

-0.46

-0.28

-0.19

2009

-0.34

-0.19

-0.20

2013

-0.20

-0.45

-0.40

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of World Bank, “World Enterprise Surveys”, 2015 [online] http://data.worldbank.org/data-catalog/enterprise-surveys.

a East Asia and the Pacific; Eastern Europe and Central Asia; High-income countries of the Organization for Economic Cooperation and Development (OECD); Latin America and the Caribbean; Middle East and North Africa; South Asia; and Sub-Saharan Africa.

In the case of firms that are able to access external financing, analysis by type of origin shows that there is a hierarchy in the financing sources used. Firms usually prefer to finance themselves with debt (commercial credit) rather than opting for other sources such as the capital market (stock market).

Indeed, the stock market seems to be a minor source of external investment financing. This holds true for all sizes of firm and for countries and regions with different levels of income and development. As figure V.3 shows, the portion of external financing raised on the stock market accounts for about 2% of total financing for different types of firms in both the manufacturing and services sectors.

Figure V.3

Selected regions:a equity financing raised by large, medium-sized and small manufacturing and services firms, 2002-2014

(Percentages of total financing)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of World Bank, “World Enterprise Surveys”, 2015 [online] http://data.worldbank.org/data-catalog/enterprise-surveys.

a East Asia and the Pacific; Eastern Europe and Central Asia; High-income countries of the Organization for Economic Cooperation and Development (OECD); Latin America and the Caribbean; Middle East and North Africa; South Asia; and Sub-Saharan Africa.

The choice of external financing source depends on the type of investment considered. Financial intermediaries are in all cases the main source of financing for the acquisition of fixed capital. Working capital is financed mainly with credit from suppliers (see annex V.A1).

This hierarchy in the choice of external financing sources can be put down to the fact that company managers have more information about the financial situation of their firms than investors, who can only know them from the outside. According to the pecking order theory, managers tend to issue shares when these are overvalued, but investors, knowing that this incentive exists, discount the price they are willing to pay for them. This discounting procedure creates a potential problem of underinvestment (Leary and Roberts, 2010).

Access difficulties aside, when firms are in a position to raise financing from formal institutions, they use the financial system more as a medium of payment than as an instrument for enterprise and production financing. Data for a set of firms in the manufacturing and services sectors worldwide show that 88% have a current or savings account while just 35.5% have a loan or credit line arranged in the financial system. In Latin America and the Caribbean, 91.5% of all the firms surveyed had a current or savings account and 45.8% a loan or credit line.

Table V.3

Firms with a current or savings account or with a loan or credit line, 2010

(Percentages)

Firms with a current

or savings account

Firms with a loan

or credit line

World

88.4

35.5

East Asia and the Pacific

85.8

35.0

Eastern Europe and Central Asia

88.2

36.7

High-income countries of the Organization for Economic Cooperation and Development (OECD)

97.7

52.8

Latin America and the Caribbean

91.5

45.8

Middle East and North Africa

68.9

20.4

South Asia

79.6

34.6

Sub-Saharan Africa

87.3

23.6

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of World Bank, “World Enterprise Surveys”, 2015 [online] http://data.worldbank.org/data-catalog/enterprise-surveys.

The levels of access SMEs have to the formal financial system in Latin America and the Caribbean are explained by a range of factors, chief among them the difficulties directly affecting these firms, the characteristics of the region’s financial system, low domestic saving rates and the volatility of external saving.

B. The characteristics of SMEs

The difficulties affecting SMEs derive in part from their own characteristics. Their limited access to the financial system is explained by failures in the workings of credit markets, and specifically the inadequacy of the information available to banks for carrying out risk assessments. The amount of funding provided is also influenced by the predominant method of selecting beneficiaries, which depends on the quantity and quality of information and the characteristics of the firms operating in the market.

When information on firms’ plans, sales and growth potential is lacking and balance sheets are opaque or non-existent, it is difficult for financial institutions to measure the risk of non-payment or to oversee and monitor debt and credit contracts generally. In the case of bank lending, furthermore, the transaction costs involved in evaluating, processing and monitoring loans are fixed, which means that in proportional terms they fall with loan size, making it costlier for banks to lend to small firms. Because information is inadequate and such loans are considered risky, financial institutions demand collateral and charge higher interest rates.

In addition, SMEs find it enormously difficult to meet the requirements placed on them. For one thing, they are prone to technical errors when they present loan applications to banks. For another, they are severely constrained in their ability to find the collateral amounts demanded by financial institutions, which are far higher than those asked of larger firms.

Table V.4 shows the amount of collateral that has to be put up for a loan, expressed as percentages of loan value, in the case of large and small firms in the manufacturing and services sectors in different developing regions. In comparative terms, more collateral is required from small firms in Latin America and the Caribbean than in any other developing region except South Asia: they are required to put up 34% more collateral than large firms and 27% more than medium-sized ones.

Table V.4

Selected regions: value of collateral needed to obtain a loan, by size of firm applying, 2009-2013

(Percentages of loan amount)

Region

Sector

Type of firm

Manufacturing

Services

Large

(100 employees or more)

Small

(5 to 19 employees)

Latin America and the Caribbean

189.5

207.6

159.4

214.3

East Asia and the Pacific

187.1

209.4

191.0

201.5

Eastern Europe and Central Asia

190.9

193.1

174.7

169.3

South Asia

228.2

225.2

236.6

258.3

Sub-Saharan Africa

181.3

176.1

183.8

164.8

Source: Economic Commission for Latin America and the Caribbean, on the basis of World Bank, “World Enterprise Surveys”, 2015 [online] http://data.worldbank.org/data-catalog/enterprise-surveys.

C. Characteristics of the financial system in Latin America

A second factor accounting for the lack of access to financing are the characteristics of the financial system, starting with shallow and underdeveloped markets. The ratio between lending to the private sector and GDP in 2013 was 30%, less than in more developed countries such as those of the Organisation for Economic Co-operation and Development (OECD) (94%) and even than in other developing regions such as East Asia and the Pacific (127%) (see figure V.4).

Figure V.4

Selected regions: lending by the banking system to the private sector, 2013

(Percentages of GDP)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of World Bank, “World Enterprise Surveys”, 2015 [online] http://data.worldbank.org/data-catalog/enterprise-surveys.

a Organization for Economic Cooperation and Development.

In addition, financial systems are centred on commercial banking and on what are usually short-term instruments. In Latin America, commercial banks account for an average of over 90% of financial system assets. Capital markets have low capitalization levels and little publicly traded stock, with trading largely confined to just a few shares. These indicators place Latin America and the Caribbean below the averages for other regions such as East Asia and the Pacific, Eastern Europe and Central Asia, the Middle East and North Africa, and South Asia (see figure V.5).

Figure V.5

Selected developing regions: capital market indicators, 2009

(Percentages)

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of T. Beck and A. Demirgüç-Kunt, “Financial institutions and markets across countries and over time: data and analysis”, World Bank Policy Research Working Paper, No. 4943, Washington, D.C., World Bank, May 2009.

These markets are also segmented and have high financing costs. The book value of general expenses as a proportion of total assets in 2007 was over 5% for Latin America, higher than in South Asia, the Middle East and North Africa, and Asia and the Pacific (2.0%, 2.3% and 3.0% respectively).

A similar result is obtained when the ratio of commercial banks’ total costs (that is, operating costs) to total revenues is calculated, this being the standard indicator for measuring banking efficiency. Higher values for this indicator reflect lower efficiency and vice versa. Latin America consistently displays the lowest levels of efficiency among all developing regions, including Sub-Saharan Africa (see table V.5).

Table V.5

Selected regions: average commercial bank efficiency, 1998-2011

(Percentages)

1998-2000

2000-2005

2005-2011

East Asia and the Pacific

55.5

51.5

47.0

Eastern Europe and Central Asia

59.1

58.2

56.7

Latin America and the Caribbean

67.5

64.4

61.7

Middle East and North Africa

54.3

53.8

46.9

South Asia

63.8

55.5

48.1

Sub-Saharan Africa

51.5

56.3

59.0

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of T. Beck and A. Demirgüç-Kunt, “Financial institutions and markets across countries and over time: data and analysis”, World Bank Policy Research Working Paper, No. 4943, Washington, D.C., World Bank, May 2009, and T. Beck and others, “Financial Development and Structure Dataset”, Washington, D.C., World Bank, 2015.

Lastly, it should be noted that banking activity does not finance development in the sense of being oriented towards production activities, but rather finances consumption and property purchases.

Bank financing for the production sector in the region’s countries is mainly oriented towards large firms. The cost of financing is substantially higher for SMEs than for larger firms. Table V.6 shows that spreads between ordinary and preferential rates can range from 120 basis points (Uruguay) to 1,800 (Brazil).

Thus, a major challenge still facing the countries of Latin America and the Caribbean is to further develop their financial systems, improving their ability, first, to channel savings towards production financing and investment, thereby contributing to higher growth rates in their economies, and, second, to act inclusively and bring financial services to larger segments of the production fabric and households that are currently outside the system.

Table V.6

Latin America (selected countries): spreads between ordinary and preferential rates, 2007-2015

(Percentage points)

Year

Country

Brazil a

Colombia b

Uruguay c

Venezuela (Bolivarian Republic of) d

2007

12.6

4.1

...

...

2008

11.8

2.6

1.2

6.9

2009

9.9

3.2

3.1

4.3

2010

-

4.2

2.7

...

2011

17.9

4.0

1.8

...

2012

16.3

3.9

2.1

...

2013

13.8

3.6

2.2

...

2014

14.6

2.8

2.6

...

2015

15.2

3.4

3.6

...

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official information from central banks.

a Difference between the average lending rate and the average rate applied to legal persons. The 2009 figure is for January to September.

b Difference between the ordinary rate and the preferential rate. The 2009 figure is for January to September.

c Difference between the rate applied to micro- and small enterprises and the rate for large and medium-sized enterprises. The 2007 figure is for June to December and the 2009 figure for January to August.

d Difference between the non-preferential industry rate and the preferential industry rate. The 2009 figure is for January to September.

A more developed financial system in the region would be one that reflected the great heterogeneity of production structures, in other words that was able to provide instruments or services that matched the differing situations of actors in the production system, opening the way to better resource allocation and greater risk diversification and coverage. A basic prerequisite for this is that there should be sufficient instruments and mechanisms in place to cope with the different saving and financing needs that the various agents may present.

Greater availability of instruments and markets (with the necessary size and liquidity) would give agents a wider range of options for accessing finance. For example, firms operating within developed financial systems have access to a range of financing instruments and mechanisms that match the different financing needs that arise over their life cycle, from specialized financing such as venture capital or private capital in the early stages to equity financing at the most advanced stage of the cycle, with different types of loans or credit and working capital financing, among other things, in between.

Besides the issue of whether different markets and instruments with the required size and liquidity exist, another key aspect of greater financial development is inclusiveness. From this perspective, there is a growing awareness that the ability of financial systems to support sustainable economic and social growth depends on their ability not only to mobilize large quantities of resources and channel them efficiently towards the best investment opportunities, but also to be inclusive, in the sense of providing a wide range of individuals and firms with access to financial services.

In the countries of Latin America and the Caribbean, both the challenge of creating an adequate variety of markets and instruments to meet the financial needs of a multiplicity of agents and the task of bringing a large proportion of individuals and firms into the financial system generally remain unaccomplished.

Nonetheless, the will and ability to innovate to develop financing for the production sector are constrained by the high profit margins the financial sector enjoys in activities related to consumption, housing and, in some cases, the public sector. These high profit margins provide a veritable comfort zone for the financial sector to operate in, discouraging any shift in the orientation of lending towards other activities that are inherently risky, such SME investment financing.

As table V.7 shows, the profitability of financial institutions (measured as the ratio of net earnings to total assets) was 10.6% in the 1960s, rising to 14% in the 1990s and almost 15% in the six-year period (2000-2006) that preceded the outbreak of the global financial crisis.

In developed countries such as those of the eurozone, the rise in bank profitability came in 2000 to 2006, and especially from 2003, when the euro came into operation. From about 10% in 2001, banking returns rose to over 16% in 2006.

Table V.7

Selected countries and regions: return on assets in the financial sector, 1960-2012

(Percentages)

1960-1970

1970-1980

1980-1990

1990-2000

2000-2006

2007-2009

2010-2012

Developed countries and regions

United States

All banks

10.6

12.0

12.2

14.2

14.8

7.0

7.5

Banks with assets of US$ 1 billion to US$ 15 billion

…

…

13.2

15.4

14.4

4.8

6.0

Banks with assets of more than US$ 15 billion

…

…

12.7

14.3

15.5

7.3

7.8

Banks with assets of less than US$ 1 billion

…

…

11.1

12.8

12.2

7.2

6.3

Investment banks

Countries of the Organization for Economic Cooperation and Development (OECD)

…

…

…

6.3

13.0

8.9

9.0

Eurozone

…

…

…

10.3

11.3

7.1

4.5

Spain

…

…

…

11.1

9.6

12.7

3.7

Developing regions

East Asia and the Pacific

…

…

…

17.2

13.0

14.2

15.5

Eastern Europe and Central Asia

…

…

…

9.6

11.9

12.3

7.2

Latin America and the Caribbean

…

…

…

14.5

14.3

17.4

15.2

Middle East and North Africa

…

…

…

11.8

9.9

13.6

10.5

Sub-Saharan Africa

…

…

…

17.9

19.9

18.9

16.3

Source: Federal Reserve Bank of St. Louis, FRED 2015 [online database] http://research.stlouisfed.org/fred2/; World Bank, “World Enterprise Surveys”, 2015 [online] http://data.worldbank.org/data-catalog/enterprise-surveys; T. Beck and others, “Financial Development and Structure Dataset”, Washington, D.C., World Bank, 2015.

The profitability of the financial system in Latin America and the Caribbean has also increased, and is high by comparison with other regions of the world. This can be seen from the estimates of the kernel function for the return on equity (ROE)[1] for banks in different regions of the world, taking a cross-section of various countries in 2013 on the basis of ROE data from the Global Financial Development Database of the World Bank (see figure V.6 and box V.1). It can be seen that the average return on equity in Latin America and the Caribbean is high at 15.6%, a figure exceeded only in Sub-Saharan Africa (19.8%) and the countries of East Asia and the Pacific (16.3%). The heterogeneity of this indicator in the countries of the region is also low, something expressed in a standard deviation (7.4%) that is lower than in any other region except the Middle East and North Africa (6.0%).

Figure V.6

Selected regions: kernel density curves for commercial banks’ return on equity, 2013

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of T. Beck and A. Demirgüç-Kunt, “Financial institutions and markets across countries and over time: data and analysis”, World Bank Policy Research Working Paper, No. 4943, Washington, D.C., World Bank, May 2009; T. Beck and others, “Financial Development and Structure Dataset”, Washington, D.C., World Bank, 2015; and World Bank, Global Financial Development Database [online] http://data.worldbank.org/data-catalog/global-financial-development.

Box V.1

Financial system returns

The profitability of the financial system can be approximated by a simple banking profit identity, also known as the Du Pont de Nemours and Company return on equity (ROE) decomposition, stating that by a simple identity the ratio of earnings to equity equals the product of the ratio of earnings to assets and assets to equity. Formally:

(1)

where ROE represents the return on equity.

In turn, the ratio of earnings to assets is none other than the return on assets (ROA), and the ratio of assets to equity is known as leverage. To summarize, ROE is equal to the product of ROA and leverage, namely:

(2)

where ROA is the return on assets and L is leverage.

Increasing profitability can result from different financial strategies. Larger and more complex financial institutions have a strategy based on high levels of leverage, which tends to exhibit procyclical behaviour. At the same time, they seek to generate greater returns by increasing the rate of return on assets and, more specifically, by way of non-interest earnings.

Between 1993 and 2001, a period that included major crises and economic recessions such as the Mexican crisis of 1995, the Asian crisis of 1998, the Russian crisis of 1999 and the Argentine crisis of 2001, the average leverage in the region’s large countries was 9.9. Between 2002 and 2007, an economic boom period when Latin America and the Caribbean averaged its highest per capita GDP growth rate in three decades, the leverage ratio averaged 10.

Smaller banks base their financial strategy essentially on increasing the return on assets (ROA), which can be broken down into the net interest margin (NIM), non-interest revenues and expenses (NIR and NIE, respectively), provisions (PRO), income from investments in assets and securities (INC) and taxes (T). Formally:

(3) , and

(4)

where A is the value of the average asset.

From the commercial bank profitability equation (3) it can be seen that profitability can increase (decrease) either because of a higher (lower) ROA for a given level of leverage, or because of higher (lower) leverage for a given level of ROA, or a combination of the two.

Source: Esteban Pérez Caldentey and Daniel Titelman, “The current global financial crisis: What was really ‘purely prime’?”, 2009 [online] http://www.cepal.org/noticias/paginas/3/35143/Thecurrentglobalcrisis_Whatwasreallyprime.pdf.

D. Low levels of domestic saving

The shortcomings of the financial system are compounded by the fact that domestic saving is low and external saving does not necessarily help to close financial access divides.

The region has historically generated low levels of domestic saving, even at times of high growth. Gross domestic saving in Latin America is about 20% of GDP, which is lower than in other developing regions.

This situation has been partially offset by private sector external saving, traditionally an important source of financing for the region. The main source of external financing is foreign direct investment (FDI), which accounts for over 60% of the total flows received by the region. In 2014, Latin America and the Caribbean received net FDI flows worth US$ 158 billion (equivalent to 2.8% of regional GDP).

Despite their importance, FDI flows have not helped to increase access to financing for SMEs or narrow the gaps that exist in this respect between larger and smaller firms in Latin America.

The evidence is that external financing is highly concentrated in the region’s major economies (Argentina, Brazil, Chile, Colombia, Mexico and Peru receive the bulk of FDI flows). More importantly still, these flows go mainly to the sectors of economic activity where large firms predominate, including extractive industries (mining and oil) and the automotive, electronics and chemical industries. According to the latest estimates, in 2013 the natural resources (hydrocarbons and mining), manufacturing and services sectors received 26%, 36% and 38%, respectively, of all FDI flows (ECLAC, 2015). In the case of services, FDI goes into telecommunications, tourism and financial services, mainly in the form of mergers and acquisitions that are often led by transnational enterprises.

Similarly, some of the instruments whereby external saving is channelled to the region are not conducive to a narrowing of the financing gap. One example is venture capital, funds of which have grown substantially in Latin America and the Caribbean over the last decade and now exceed US$ 10 billion, up from just US$ 1 billion in 2001. Even so, these funds in Latin America represent just 1% of the worldwide total.

As in the general case of FDI, venture capital funding is largely confined to the region’s major economies (Argentina, Brazil, Chile, Colombia, Mexico and Peru), being very scarce in small countries. In addition, these funds tend to be invested in projects and firms that are already consolidated, with over half going to finance project growth and expansion phases, while only a minor share goes on early stage and project incubation financing.

E. The need for an inclusive financial system

The financial system has a key role to play in boosting savings and channelling them efficiently, in order both to fund investment and technological innovation and to facilitate access to financing for the different production agents, including households, firms and especially SMEs.

Inclusiveness is a prerequisite if financial systems are to serve the needs of sustainable economic and social development. In non-inclusive financial systems, small firms and lower-income individuals are unable to access these services, and this reinforces inequalities, since these agents have to fall back on their own resources. Conversely, an inclusive financial system provides access to formal financial services for those who lack them, thereby helping to reduce poverty and inequality.

In addition to expanding access to finance and banking, which is limited in the region, inclusiveness also means improving and enhancing use of the formal financial system by those already in it.

On this logic, inclusiveness, far from being a social welfare mechanism, is an economic participation policy. The idea is to use the financial system as an instrument for enhancing people’s saving and consumption opportunities while at the same time making better use of business talent and investment opportunities. Thus, financial inclusiveness enables the financial system to respond to the various and heterogeneous financing needs of households at the different phases of the life cycle, and of firms at the different stages of the production and technology process.

An inclusive financial system requires private sector efforts supplemented by public sector measures designed, among other things, to strengthen economic and legal institutions and economic stability and to create new instruments for managing economic and financial risk.

In this context, development banks can play an essential role in financing production and promoting financial inclusion.

The traditional functions of development banks include direct support for production sectors, which has usually consisted in identifying, promoting and financing business opportunities, promoting projects that match national development strategies and social needs, and facilitating the development of new technologies in the countries. Outside of their traditional functions, development banks have increasingly supplemented the work of commercial banks in the region by applying financial criteria such as profit maximization. In this role, the focus has been on expanding access to financial services by introducing products or services designed to meet market demand in this area, enlarging the financial network and making the methods used to evaluate individuals’ and firms’ repayment capacity more flexible.

Further developing these functions will mean pursuing and coordinating public-private cooperation efforts by way of an increase in the density of the financial system.

Two successful examples of public-private cooperation in creating new financial inclusion instruments, particularly for SME financing, are the Supply Chain Programme operated by the Nacional Financiera (NAFIN) development bank in Mexico and the Seed Capital Fund in Costa Rica (see boxes V.2 and V.3).

Box V.2

The Supply Chain Programme in Mexico

In the early 2000s, Mexico’s State-owned Nacional Financiera (NAFIN) development bank decided to focus on providing financing to small and medium-sized enterprises (SMEs). Its strategy was based on the development of mass-appeal, low-cost financial products under the Programme for Private Sector Credits and Guarantees. One of the components of this programme was reverse factoring, which has proved to be a successful way of dealing with the critical problem posed by Mexico’s disjointed supply chains.

Large firms and government agencies invite their suppliers (both SMEs and individual entrepreneurs) to form a chain. For each chain, a website is developed and turned into an e-marketplace for the exchange of information, products and services.

Membership in a supply chain opens up access to more attractive financing options. One of the instruments created for this purpose is a technological platform for e-invoicing that enables SMEs in a given supply chain to borrow on accounts receivable by issuing e-invoices in advance of the due date.

The reverse factoring service differs from traditional factoring because it is offered to a select group of SMEs in the supply chains of large companies that are known to be on a financially solid footing. Reverse factoring is offered as an option to participating firms that meet the highest standards in terms of their solidity and low levels of risk, so the factor of credit risk is virtually ruled out. The participants in the NAFIN Supply Chain Programme are top-rated large firms and their suppliers. In addition to providing substantial risk-reduction benefits, the NAFIN reverse factoring window is highly efficient, since all the associated transactions are carried out electronically, which lowers costs and shortens transaction times.

NAFIN acts as an intermediary for other financial, banking and non-banking institutions in providing factoring services. It can extend this financing in local currency or in dollars up to a ceiling of 3.26 million investment units (UDI), which are readjusted daily in line with the variation in the consumer price index. The term for these loans ranges from 30 to 120 days; the interest rate is determined on the basis of the interbank equilibrium interest rate (TIIE), and no fees or commissions are charged.

This system helps large companies enhance their supplier development programmes and allows SMEs to build up credit histories that will provide them with access to longer-term financing. The service has now been expanded to take in international supply chains and government procurement from SMEs.

The NAFIN Supply Chain Programme increased its market share from 2% in 2001 to 60% in 2004. By 2007, the programme had channelled 135 billion pesos in credit to over 15,000 firms in more than 300 supply chains. As of 2009, these supply chain initiatives involved nearly 700 large-scale buyers, 36% in the public sector and 64% in the private sector, with around 215,000 SME suppliers participating in the programme (70,000 with a digital record) and 39 financial intermediaries (banks, factoring enterprises and other non-bank intermediaries). That year, an average of 10,000 transactions were carried out each day, ultimately providing approximately 27,000 SMEs with an annual total of around 200 billion pesos in financing. Operations conducted from the service’s inception up to 2013 totalled about 24 million, most in the commercial sector, followed by industry and services (41%, 35%, and 14% of the

total, respectively).

Source: Economic Commission for Latin America and the Caribbean (ECLAC).

Box V.3

The Seed Capital Fund in Costa Rica

In October 2011, the Ministry of Economic Affairs, Industry and Commerce of Costa Rica launched the Seed Capital Fund to support corporate incubators in different production sectors operating in the country that could carry forward the government’s SME promotion policy and the entrepreneurship initiatives being advanced by the Ministry. The purpose of this fund is to assist new ventures by providing support for their initial research and development efforts and to cover their start-up operating expenditures until such time as they generate sufficient resources on their own or can attract other investors. At these early stages, the level of risk is generally high and potential growth rates are low, which is why such enterprises find it difficult to gain access to traditional commercial lenders, which tend to channel resources towards more mature, lower-risk activities.

The first seed capital fund was set up through the development banking system. Since then, efforts have been made to create other financial instruments for business start-ups, such as risk capital funds and angel capital funds. Initially, the development banking system provides non-reimbursable grants of up to 13 million colones (approximately US$ 26,000); the entrepreneur must be able to provide 20% of the total investment. At a later stage, the development banking system can provide up to 52 million colones (US$ 104,000) in loans, which have to be paid back once the business begins to generate cash flow, and in any event within seven years. These funds are disbursed in stages, according to a timetable that is based on the venture’s business plan, as the benchmarks included in the loan agreement are reached. Prior to each disbursement, the development banking system makes sure that the previous disbursement has been used for its stated purposes.

In 2013, the Ministry of Economic Affairs, Industry and Commerce and the development banking system selected 13 out of the 41 projects that applied for seed capital grants in the first such exercise. The selection criteria to be met were that the projects or project ideas had to be technically, commercially and financially viable. These 13 projects, which dealt with digital technologies, alternative energy sources, biotechnology and other areas of technology, were granted a total of 860 million colones (US$ 1.7 million) by the National Development Trust Fund (FINADE). The programme is to hold two competitive rounds for seed capital applications each year to reach out to highly talented entrepreneurs who would otherwise lack access to financing. In the second round (February 2014), applications were accepted for agro-industrial projects to be sited in rural areas of Costa Rica, as well as technology projects.

Source: Economic Commission for Latin America and the Caribbean (ECLAC).

NAFIN has been the most important instrument available to the Government of Mexico for channelling financing to SMEs. For some years, NAFIN has been operating a factoring (supply chain) scheme for SMEs supplying large firms and the government; using an electronic system in which commercial banks also participate, it has attained a high level of efficiency and effectiveness. The Supply Chain Programme can be rated a success in view of its great dynamism, whether measured by the number of firms incorporated or the sums financed. It also addresses a critical problem in Mexico, that of disjointed supply chains (see box V.2).

In the case of Costa Rica, the Seed Capital Fund (2011) works through the development banking system and provides support for ventures at the stages of conceptualization of production ideas, initial trading and early-stage expansion, when risk is high and growth low. Seed capital serves to supplement traditional commercial bank financing (which tends to go to less risky projects at more advanced stages), and is oriented towards the financing of technology, alternative energy and agro-industrial projects (see box V.3).

F. Conclusions

Levels of financial inclusion in Latin America and the Caribbean are low and unequal. In the production sector, 40% of small firms have access to funding from the formal financial system, while for large firms the figure is about 70%.

These levels, and the financial inclusion gaps between larger and smaller firms, are partly explained by information asymmetries and financing costs, which are higher for SMEs. The characteristics of the financial system in Latin America are also a factor, as it is shallow and underdeveloped, short-termist and lacking in financial instruments.

The difficulties smaller firms in particular have in accessing the formal financial system means that they have to meet a substantial portion of their total financing needs out of their own resources. Firms with access to financing other than their own funds usually prefer commercial bank borrowing to the stock market.

When access to financing from outside the firm is limited, firms’ production capacity and ability to grow and prosper are also constrained. In addition, the data show that SMEs use the financial system mainly for deposits and as a medium of payment and far less for borrowing, which greatly limits their potential for future expansion and growth.

Alongside these factors, traditionally low rates of national saving and firms’ sectoral orientation and size have also been factors in the low level of access to financing that is a feature of the Latin American and Caribbean countries.

This context results in a vicious circle that keeps smaller production units in a constant state of vulnerability and low growth, with severe consequences for poverty and social inequality.

Given a shallow financial system and underdeveloped capital markets, boosting financing for productive investment requires a range of economic and financial policies designed to develop financial markets and promote saving for long-term financing. This in turn requires financial inclusion to be conceived as an economic participation policy encompassing all efforts and initiatives aimed at opening up access to formal financial services for those who currently lack this and at improving and enhancing the use made of the formal financial system by those who are already part of it.

The capacity and effectiveness of the financial system when it comes to increasing its inclusiveness and channelling resources into production activities depend partly on the provision of low-cost intermediation services and the development of financial instruments and institutions that can adapt to different risk profiles, liquidity needs and maturities in the production sector.

In policy terms, this means generating innovations by introducing new capabilities, skills and routines to improve efficiency, including changes in technology, methodology and forms of intermediation. There is also a need to create new financial products to meet demand from households and firms.

Besides the design of new instruments and mechanisms with public and private sector involvement, financial policies for development need to work to ensure that these innovations connect up better with existing institutions, processes and products.

This requires an effort to coordinate the public and private agendas in terms of development goals and priorities, and means that spaces and mechanisms need to be created so that public policies can attract the efforts of the private sector and channel them towards inclusive development goals by creating an appropriate context and incentives.

Development banks are a vital instrument in this effort, firstly because of their ability, as second-tier banks, to mobilize resources for long-term financing covering different income segments, and secondly because they supplement the commercial activities of private sector banks, extend the availability of and access to financing sources and mechanisms for the production sector, and are able to expand financing instruments in a way that matches the requirements, characteristics and risks of the different production activities.

Bibliography

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Beck, T. and others (2015), “Financial Development and Structure Dataset”, Washington, D.C., World Bank.

ECLAC (Economic Commission for Latin America and the Caribbean) (2015), Financing for development in Latin America and the Caribbean: a strategic analysis from a middle-income country perspective (LC/L.3968), Santiago, March.

____(2014c), Compacts for Equality: Towards a Sustainable Future (LC/G.2586(SES.35/3)), Santiago, Chile.

Federal Reserve Bank of St. Louis (2015), FRED [online database] http://research.stlouisfed.org/fred2/.

Leary, M.T. and M.R. Roberts (2010), “The pecking order, debt capacity and information asymmetry”, Journal of Financial Economics, vol. 95, No. 3.

Pérez Caldentey, Esteban and Daniel Titelman (2009), “The current global financial crisis: What was really ‘purely prime’?” [online] http://www.cepal.org/noticias/paginas/3/35143/Thecurrentglobalcrisis_Whatwasreallyprime.pdf.

Vera, Cecilia and Daniel Titelman (2013), “El sistema financiero en América Latina y el Caribe. Una caracterización”, Financiamiento para el Desarrollo series, No. 248 (LC/L.3746), Santiago, Economic Commission for Latin America and the Caribbean (ECLAC).

World Bank (2015), “World Enterprise Surveys” [online] http://data.worldbank.org/data-catalog/enterprise-surveys.

Annex V.A1

Table V.A1.1

Selected regions: sources of external financing for fixed investment, 2006-2014

(Percentages of fixed investment financed by each source)

Type of firm

Banking

institutions

Non-bank financial institutions

Commercial

credit

Other external sources

Sub-Saharan Africa

Small (less than 20 employees)

43.2

9.5

20.0

27.3

Medium-sized (20 to 99 employees)

54.0

6.7

18.4

21.0

Large (100 employees or more)

61.8

5.0

15.2

18.0

East Asia and the Pacific

Small (less than 20 employees)

40.6

11.9

12.9

34.5

Medium-sized (20 to 99 employees)

54.3

2.2

8.8

34.7

Large (100 employees or more)

46.1

2.8

16.6

34.5

Eastern Europe and Central Asia

Small (less than 20 employees)

45.1

5.7

16.0

33.3

Medium-sized (20 to 99 employees)

54.4

6.2

14.8

24.6

Large (100 employees or more)

59.8

6.5

15.7

18.1

Latin America and the Caribbean

Small (less than 20 employees)

53.5

5.6

27.3

13.6

Medium-sized (20 to 99 employees)

58.2

4.9

25.1

11.9

Large (100 employees or more)

65.5

4.6

21.8

8.1

Middle East and

North Africa

Small (less than 20 employees)

16.6

5.6

46.3

31.6

Medium-sized (20 to 99 employees)

43.4

4.9

22.3

28.4

Large (100 employees or more)

48.1

4.6

15.6

28.9

South Asia

Small (less than 20 employees)

56.7

10.7

5.7

26.9

Medium-sized (20 to 99 employees)

55.1

10.5

6.4

28.0

Large (100 employees or more)

63.0

7.8

5.9

23.3

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of World Bank, “World Enterprise Surveys”, 2015 [online] http://data.worldbank.org/data-catalog/enterprise-surveys.

Table V.A1.2

Selected regions: sources of external financing for working capital, 2006-2014

(Percentages of working capital financed by each source)

Type of firm

Banking

institutions

Non-bank financial institutions

Commercial

credit

Other external sources

Sub-Saharan Africa

Small (less than 20 employees)

27.8

6.8

49.0

16.5

Medium-sized (20 to 99 employees)

37.2

4.4

49.1

9.3

Large (100 employees or more)

41.8

4.9

49.0

4.3

East Asia and the Pacific

Small (less than 20 employees)

57.5

4.0

23.6

14.9

Medium-sized (20 to 99 employees)

65.4

2.3

17.6

14.6

Large (100 employees or more)

58.3

3.5

30.3

7.9

Eastern Europe and Central Asia

Small (less than 20 employees)

48.7

4.0

36.1

11.1

Medium-sized (20 to 99 employees)

54.3

3.8

34.8

7.1

Large (100 employees or more)

61.8

6.2

26.8

5.2

Latin America and the Caribbean

Small (less than 20 employees)

39.8

5.6

48.1

6.5

Medium-sized (20 to 99 employees)

44.9

4.3

45.6

5.2

Large (100 employees or more)

51.4

4.0

42.1

2.5

Middle East and

North Africa

Small (less than 20 employees)

24.1

3.2

48.9

23.8

Medium-sized (20 to 99 employees)

40.5

2.6

38.0

18.9

Large (100 employees or more)

61.1

5.2

26.4

7.3

South Asia

Small (less than 20 employees)

56.8

10.0

22.3

13.3

Medium-sized (20 to 99 employees)

63.6

6.0

22.9

7.4

Large (100 employees or more)

69.2

6.6

19.0

5.2

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of World Bank, “World Enterprise Surveys”, 2015 [online] http://data.worldbank.org/data-catalog/enterprise-surveys.

[1] The kernel density function has the advantage of smoothing the data distribution for a variable. The narrower the class intervals in a histogram are, the finer the distribution will be, and the wider the intervals are, the flatter and more dispersed it will be. When the former case is taken to an extreme, the rectangles of the interval become points; and since interval width is decided by the amount of data available, the distribution curve will become smoother as the sample size tends to infinity, which is what a kernel density function estimation converges on.

Statistical annex

Table A.1

Latin America and the Caribbean: main economic indicators

2006

2007

2008

2009

2010

2011

2012

2013

2014 a

Annual growth rates

Gross domestic product b

5.4

5.8

3.9

-1.2

6.2

4.7

2.9

2.9

1.1

Latin America b

4.1

4.5

2.8

-2.3

5.0

3.6

1.8

1.8

0.1

Consumer prices c

5.1

6.5

8.1

4.6

6.5

6.9

5.7

7.6

9.5

Percentages

Urban open unemployment

8.6

7.9

7.3

8.1

7.3

6.7

6.4

6.2

6.0

Total gross external debt / GDP d e

20.8

19.5

17.5

20.6

19.7

19.3

21.5

22.2

24.5

Total gross external debt / exports

of goods and services

87.1

85.4

78.2

105.7

100.6

91.9

99.2

103.7

116.3

Millions of dollars

Balance of payments e

Current account balance

47 078

6 601

-39 126

-29 392

-64 406

-81 715

-107 008

-163 431

-167 659

Exports of goods f.o.b.

697 738

785 646

906 137

704 960

893 325

1 105 395

1 121 120

1 116 348

1 083 027

Imports of goods f.o.b.

605 487

723 079

867 055

653 930

844 665

1 034 475

1 077 755

1 104 135

1 091 421

Services trade balance

-10 881

-17 935

-32 996

-34 670

-50 756

-66 163

-71 803

-78 732

-74 820

Income balance

-98 310

-104 291

-112 594

-103 372

-124 080

-149 861

-140 850

-158 498

-147 782

Net current transfers

64 018

66 259

67 382

57 620

61 770

63 390

62 280

61 776

63 492

Capital and financial balance f

16 560

118 332

77 204

76 259

150 314

188 057

163 529

178 844

205 241

Net foreign direct investment

34 250

94 471

102 215

70 987

87 105

127 954

134 856

160 562

137 435

Other capital movements

-17 690

23 861

-25 011

5 272

63 209

60 103

28 673

18 281

67 806

Overall balance

63 853

124 445

38 078

46 867

85 696

105 927

56 808

15 413

37 581

Variation in reserve assets g

-51 327

-126 698

-42 099

-50 623

-87 097

-106 314

-57 886

-16 226

-37 313

Other financing

-12 526

2 253

4 021

3 757

1 401

387

1 079

814

-268

Net transfer of resources

-94 276

16 295

-31 369

-23 356

27 635

38 583

23 757

21 159

57 191

International reserves

138 193

145 525

134 590

567 070

655 672

773 910

835 727

830 009

857 400

Percentages of GDP

Fiscal sector h

Overall balance

0.0

0.2

-0.5

-2.8

-1.9

-1.6

-1.9

-2.4

-2.8

Primary balance

2.2

2.1

1.1

-1.1

-0.3

0.0

-0.2

-0.7

-1.1

Total revenue

18.1

18.5

18.6

17.5

17.8

18.3

18.6

18.9

18.6

Tax revenue

13.9

14.3

14.2

13.6

13.8

14.4

14.8

15.0

15.0

Total expenditure

18.1

18.3

19.1

20.2

19.7

19.9

20.7

21.3

21.4

Capital expenditure

3.3

3.6

4.0

4.1

4.1

4.1

4.3

4.5

4.5

Central-government public debt

35.9

30.6

29.1

30.7

29.0

29.0

30.6

32.0

33.0

Public debt of the non-financial public-sector

38.2

32.9

31.4

33.0

31.7

31.3

32.9

34.4

35.7

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Preliminary figures.

b Based on official figures expressed in 2010 dollars.

c December-December variation.

d Estimates based on figures denominated in dollars at current prices.

e Does not include Cuba.

f Includes errors and omissions.

g A minus sign (-) indicates an increase in reserve assets.

h Central government. Simple averages for 19 countries.

Table A.2

Latin America and the Caribbean: gross domestic product

(Millions of dollars)

2006

2007

2008

2009

2010

2011

2012

2013

2014 a

Latin America and the Caribbean

3 270 804

3 873 174

4 510 529

4 229 855

5 101 683

5 969 320

6 001 746

6 145 219

6 243 353

Latin America

3 218 387

3 814 948

4 444 095

4 173 859

5 042 013

5 904 615

5 935 105

6 075 684

6 172 188

Argentina

264 738

331 865

408 346

380 454

464 757

562 513

609 569

623 932

543 490

Bolivia (Plurinational State of)

11 452

13 120

16 674

17 340

19 650

23 949

27 067

30 601

34 139

Brazil

1 107 787

1 395 967

1 694 613

1 664 561

2 209 399

2 615 190

2 413 469

2 392 094

2 345 894

Chile

154 412

172 869

179 627

171 957

217 538

250 832

265 232

276 674

258 062

Colombia

162 590

207 417

243 983

232 901

287 018

335 415

369 660

380 063

377 740

Costa Rica

22 526

26 322

29 838

29 383

36 298

41 237

45 301

49 237

49 553

Cuba

52 743

58 604

60 806

62 079

64 328

68 990

73 139

77 150

78 810

Dominican Republic

38 040

43 750

47 857

48 005

53 663

58 026

60 441

61 198

63 969

Ecuador

46 802

51 008

61 763

62 520

69 555

79 277

87 623

94 473

100 543

El Salvador

18 551

20 105

21 431

20 661

21 418

23 139

23 814

24 351

25 164

Guatemala

30 231

34 113

39 136

37 734

41 338

47 655

50 388

53 851

58 728

Haiti

4 880

5 971

6 408

6 502

6 708

7 474

7 820

8 387

8 599

Honduras

10 918

12 361

13 882

14 587

15 839

17 731

18 529

18 500

19 565

Mexico

965 281

1 043 124

1 101 275

893 369

1 049 925

1 169 360

1 184 565

1 259 201

1 291 062

Nicaragua

6 786

7 458

8 491

8 381

8 741

9 756

10 460

10 851

11 806

Panama

18 287

21 122

24 884

25 925

28 814

33 271

37 956

42 648

46 515

Paraguay

10 646

13 795

18 503

15 934

20 048

25 100

24 595

28 897

30 985

Peru

88 659

102 202

120 612

120 487

147 070

171 257

192 806

200 643

202 098

Uruguay

19 579

23 411

30 366

31 661

40 285

47 962

51 384

57 525

57 471

Venezuela (Bolivarian Republic of)

183 478

230 364

315 600

329 419

239 620

316 482

381 286

385 409

567 997

The Caribbean

52 417

58 226

66 434

55 997

59 670

64 705

66 641

69 535

71 166

Antigua and Barbuda

1 135

1 289

1 347

1 206

1 136

1 130

1 205

1 201

1 269

Bahamas

7 966

8 319

8 247

7 820

7 910

7 890

8 234

8 432

8 511

Barbados

4 314

4 513

4 542

4 602

4 446

4 358

4 314

4 281

4 351

Belize

1 217

1 291

1 369

1 337

1 397

1 487

1 574

1 624

1 695

Dominica

398

429

469

499

493

508

515

517

538

Grenada

699

759

826

771

771

779

800

836

882

Guyana

1 458

1 740

1 923

2 026

2 259

2 577

2 851

2 990

3 086

Jamaica

11 928

12 796

13 708

12 124

13 234

14 449

14 825

14 270

14 166

Saint Kitts and Nevis

636

684

735

709

692

728

732

774

834

Saint Lucia

1 060

1 143

1 171

1 177

1 244

1 290

1 303

1 336

1 365

Saint Vincent and the Grenadines

611

684

695

675

681

677

694

719

729

Suriname

2 626

2 937

3 533

3 875

4 368

4 423

5 013

5 299

5 681

Trinidad and Tobago

18 369

21 642

27 870

19 175

21 038

24 410

24 581

27 257

28 060

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Preliminary figures.

Table A.3

Latin America and the Caribbean: gross domestic product

(Annual growth rates)

2006

2007

2008

2009

2010

2011

2012

2013

2014 a

Latin America and the Caribbean b

5.4

5.8

3.9

-1.2

6.2

4.7

2.9

2.9

1.1

Latin America

5.4

5.7

4.0

-1.2

6.3

4.7

2.9

2.9

1.1

Argentina

8.4

8.0

3.1

0.1

9.5

8.4

0.8

2.9

0.5

Bolivia (Plurinational State of)

4.8

4.6

6.1

3.4

4.1

5.2

5.2

6.8

5.4

Brazil

4.0

6.0

5.0

-0.2

7.6

3.9

1.8

2.7

0.1

Chile

4.6

4.6

3.7

-1.0

5.8

5.8

5.5

4.2

1.9

Colombia

6.7

6.9

3.5

1.7

4.0

6.6

4.0

4.9

4.6

Costa Rica

8.8

7.9

2.7

-1.0

5.0

4.5

5.2

3.4

3.5

Cuba

12.1

7.3

4.1

1.4

2.4

2.8

3.0

2.7

1.3

Dominican Republic

10.7

8.5

3.1

0.9

8.3

2.8

2.6

4.8

7.3

Ecuador

4.4

2.2

6.4

0.6

3.5

7.9

5.2

4.6

3.8

El Salvador

3.9

3.8

1.3

-3.1

1.4

2.2

1.9

1.8

2.0

Guatemala

5.4

6.3

3.3

0.5

2.9

4.2

3.0

3.7

4.2

Haiti

2.3

3.3

0.8

3.1

-5.5

5.5

2.9

4.2

2.8

Honduras

6.6

6.2

4.2

-2.4

3.7

3.8

4.1

2.8

3.1

Mexico

5.0

3.2

1.4

-4.7

5.2

3.9

4.0

1.4

2.1

Nicaragua

4.2

5.3

2.9

-2.8

3.2

6.2

5.1

4.5

4.7

Panama

8.5

12.1

9.1

4.0

5.9

10.8

10.2

8.4

6.2

Paraguay

4.8

5.4

6.4

-4.0

13.1

4.3

-1.2

14.2

4.4

Peru

7.5

8.5

9.1

1.0

8.5

6.5

6.0

5.8

2.4

Uruguay

4.1

6.5

7.2

4.2

7.8

5.2

3.3

5.1

3.5

Venezuela (Bolivarian Republic of)

9.9

8.8

5.3

-3.2

-1.5

4.2

5.6

1.3

-4.0

The Caribbean

7.9

6.5

1.3

-3.4

0.2

1.2

1.2

1.3

1.8

Antigua and Barbuda

13.4

9.5

0.1

-12.0

-7.1

-1.8

4.0

-0.1

3.2

Bahamas

2.5

1.4

-2.3

-4.2

1.5

0.6

2.2

0.0

1.0

Barbados

5.7

1.7

0.3

-1.5

0.3

0.8

0.3

-0.1

0.2

Belize

4.6

1.1

3.2

0.7

3.3

2.1

3.8

1.5

3.6

Dominica

4.9

6.1

7.4

-1.1

1.1

-0.1

-1.4

-0.9

2.4

Grenada

-4.0

6.1

0.9

-6.6

-0.5

0.8

-1.2

2.4

3.8

Guyana

5.1

7.0

2.0

3.3

4.4

5.4

4.8

5.2

3.9

Jamaica

2.9

17.1

-0.7

-4.4

-1.5

1.7

-0.6

0.6

0.4

Saint Kitts and Nevis

5.9

2.8

4.1

-5.6

-3.2

1.7

-1.2

3.7

6.3

Saint Lucia

8.3

-0.6

3.5

0.6

-1.0

1.2

-1.6

-0.4

-1.6

Saint Vincent and the Grenadines

7.7

3.3

1.6

-2.1

-3.4

-0.5

1.2

1.8

-0.3

Suriname

11.4

5.1

4.1

3.0

5.2

5.3

3.0

2.9

3.4

Trinidad and Tobago

14.4

4.5

3.4

-4.4

-0.1

0.0

1.4

1.7

0.9

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Preliminary figures.

b Based on official figures expressed in 2010 dollars.

Table A.4

Latin America and the Caribbean: per capita gross domestic product

(Annual growth rates)

2006

2007

2008

2009

2010

2011

2012

2013

2014 a

Latin America and the Caribbean b

4.1

4.5

2.8

-2.3

5.0

3.6

1.8

1.8

0.1

Latin America

4.1

4.5

2.8

-2.3

5.1

3.6

1.8

1.8

0.1

Argentina

7.4

7.0

2.2

-0.8

8.5

7.5

-0.1

2.0

-0.4

Bolivia (Plurinational State of)

3.0

2.8

4.4

1.7

2.5

3.6

3.6

5.2

3.9

Brazil

2.9

5.0

4.1

-1.1

6.6

3.0

0.9

1.9

-0.6

Chile

3.5

3.6

2.7

-2.0

4.8

4.9

4.5

3.3

1.1

Colombia

5.1

5.3

2.0

0.2

2.5

5.1

2.6

3.6

3.2

Costa Rica

7.0

6.2

1.2

-2.5

3.5

3.1

3.8

2.1

2.2

Cuba

12.0

7.2

4.1

1.4

2.4

2.8

3.0

2.8

1.3

Dominican Republic

9.1

7.0

1.7

-0.4

6.9

1.5

1.3

3.5

6.1

Ecuador

2.6

0.5

4.6

-1.1

1.8

6.1

3.5

3.0

2.2

El Salvador

3.5

3.4

0.8

-3.6

0.8

1.7

1.3

1.2

1.3

Guatemala

2.8

3.7

0.8

-1.9

0.4

1.7

0.5

1.2

1.8

Haiti

0.9

2.0

-0.4

1.8

-6.7

4.2

1.6

3.0

1.6

Honduras

4.5

4.1

2.2

-4.3

1.7

1.8

2.1

0.8

1.2

Mexico

3.7

1.9

0.1

-5.9

4.0

2.7

2.8

0.3

1.0

Nicaragua

2.8

4.0

1.6

-4.0

1.8

4.8

3.6

3.0

3.2

Panama

6.6

10.1

7.2

2.2

4.1

8.9

8.4

6.6

4.5

Paraguay

2.9

3.5

4.5

-5.6

11.2

2.6

-2.8

12.4

2.7

Peru

6.3

7.4

8.0

0.0

7.3

5.3

4.7

4.5

1.2

Uruguay

3.9

6.3

6.8

3.9

7.5

4.8

3.0

4.7

3.1

Venezuela (Bolivarian Republic of)

8.0

6.9

3.5

-4.8

-3.0

2.6

4.0

-0.1

-5.4

The Caribbean

7.1

5.8

0.6

-4.0

-0.5

0.5

0.5

0.6

1.1

Antigua and Barbuda

12.2

8.3

-1.0

-13.0

-8.1

-2.8

2.9

-1.1

2.2

Bahamas

0.5

-0.5

-4.1

-5.8

-0.2

-1.0

0.7

-1.4

-0.3

Barbados

5.2

1.2

-0.1

-2.0

-0.2

0.3

-0.2

-0.6

-0.3

Belize

1.9

-1.4

0.6

-1.8

0.8

-0.4

1.3

-0.9

1.2

Dominica

4.7

5.9

7.3

-1.3

0.8

-0.4

-1.8

-1.3

1.9

Grenada

-4.3

5.8

0.6

-6.9

-0.9

0.4

-1.5

2.0

3.4

Guyana

4.5

6.3

1.3

2.6

3.7

4.8

4.2

4.7

3.4

Jamaica

2.3

16.6

-1.1

-4.8

-1.9

1.2

-1.1

0.0

-0.1

Saint Kitts and Nevis

4.4

1.5

2.8

-6.7

-4.4

0.5

-2.4

2.6

5.2

Saint Lucia

6.9

-2.0

1.9

-0.8

-2.3

0.2

-2.5

-1.2

-2.3

Saint Vincent and the Grenadines

7.5

3.2

1.5

-2.2

-3.4

-0.5

1.1

1.8

-0.2

Suriname

10.1

4.0

3.1

2.1

4.2

4.3

2.1

2.0

2.5

Trinidad and Tobago

13.8

3.9

2.9

-4.8

-0.5

-0.4

1.0

1.5

0.6

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Preliminary figures.

b Based on official figures expressed in 2010 dollars.

Table A.5

Latin America and the Caribbean: gross domestic product a

(Variation from same quarter of preceding year)

2013

2014

2015

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Argentina

1.3

5.2

3.3

1.7

0.8

0.7

-0.2

0.5

1.1

Belize

0.8

1.8

1.4

2.2

-1.2

9.2

4.8

1.6

7.0

Bolivia (Plurinational State of)

6.7

6.7

6.8

7.0

5.6

4.6

6.0

…

…

Brazil

2.6

3.9

2.4

2.1

2.7

-1.2

-0.6

-0.2

-1.6

Chile

5.4

4.0

4.8

2.8

2.7

2.1

1.0

1.8

2.4

Colombia

2.9

4.6

6.0

6.0

6.5

4.2

4.3

3.5

2.8

Costa Rica

1.4

3.5

5.0

3.9

3.9

3.8

3.4

3.0

2.6

Dominican Republic

0.8

3.8

6.8

7.7

8.1

8.0

6.8

6.6

6.5

Ecuador

3.6

4.1

5.6

5.2

4.3

3.8

3.7

3.5

3.0

El Salvador

1.7

1.8

2.0

1.9

2.3

2.2

1.6

1.7

2.3

Guatemala

3.0

4.7

4.1

3.1

3.4

4.4

4.8

4.4

4.8

Honduras b

2.0

3.6

2.9

2.6

3.0

2.8

2.5

4.0

…

Jamaica c

-1.2

-0.2

0.4

1.9

1.8

2.0

-1.4

-0.3

0.4

Mexico

1.0

1.8

1.6

1.1

2.0

1.7

2.2

2.6

2.5

Nicaragua

4.7

5.9

4.8

2.9

6.8

4.5

4.1

3.6

…

Panama

7.6

6.4

7.9

11.4

6.0

6.7

6.4

6.2

5.9

Paraguay

16.5

14.8

11.3

14.3

4.1

3.2

4.2

5.8

4.2

Peru

5.1

5.5

4.4

5.2

4.8

1.7

1.8

1.0

1.7

Trinidad and Tobago

2.7

2.8

0.3

2.6

0.2

1.0

2.1

0.1

...

Uruguay

4.7

6.5

3.7

5.5

3.0

3.7

3.5

3.1

4.0

Venezuela (Bolivarian Republic of)

0.8

2.6

1.1

1.0

-4.8

-4.9

-2.3

…

…

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Based on figures in local currency at constant prices.

b Variation in the seasonally adjusted series.

c Gross domestic product measured in basic prices.

Table A.6

Latin America and the Caribbean: gross fixed capital formation a

(Percentages of GDP)

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014 b

Latin America and the Caribbean

17.5

18.3

19.3

20.4

19.3

20.2

21.1

21.2

21.3

20.5

Argentina

15.8

17.2

18.1

18.9

16.1

18.0

19.8

18.3

18.3

17.2

Bahamas

24.2

29.0

27.9

25.8

25.4

24.0

25.3

26.8

25.9

27.3

Belize

20.2

19.6

20.0

24.9

20.1

15.3

14.9

15.7

18.1

...

Bolivia (Plurinational State of)

12.8

13.4

14.4

16.1

16.1

16.6

19.5

18.8

19.9

21.2

Brazil

16.5

16.9

17.8

19.1

18.8

20.6

21.1

20.6

21.3

20.3

Chile

18.7

18.3

19.4

22.4

19.9

21.0

22.8

24.1

23.6

21.8

Colombia

17.8

19.6

21.0

22.3

21.7

21.9

24.4

24.6

24.8

26.3

Costa Rica

18.2

18.6

20.3

22.0

19.7

19.8

20.7

21.2

23.0

23.2

Cuba

7.8

10.0

9.6

9.9

9.1

8.6

8.8

9.1

9.4

...

Dominican Republic

23.1

25.3

26.3

27.1

22.9

25.0

23.4

22.3

21.3

21.9

Ecuador

21.7

21.8

22.1

24.1

23.1

24.6

26.1

27.4

29.0

29.0

El Salvador

15.1

16.3

16.9

15.8

13.2

13.3

14.8

14.3

15.4

14.1

Guatemala

18.2

20.0

19.7

18.0

15.6

14.8

15.2

15.3

15.0

15.0

Haiti

25.2

25.2

25.1

25.6

25.7

25.4

26.4

27.2

27.7

27.5

Honduras

26.2

27.9

32.7

33.3

22.1

21.6

24.3

24.2

23.1

22.1

Mexico

21.0

21.7

22.3

23.1

22.0

21.2

21.9

22.1

21.5

21.5

Nicaragua

22.5

22.0

23.8

23.9

19.4

21.4

24.4

27.7

27.9

26.4

Panama

17.0

18.3

23.0

26.2

23.6

24.6

26.5

27.8

27.4

29.7

Paraguay

13.0

12.9

13.7

15.2

14.7

15.9

16.9

15.8

15.4

16.0

Peru

15.0

16.6

18.7

21.9

20.4

23.2

23.9

25.9

25.8

24.7

Uruguay

15.7

17.2

17.6

19.6

17.7

19.1

19.4

22.3

22.1

21.9

Venezuela (Bolivarian Republic of)

15.7

18.5

21.3

20.7

19.6

18.7

18.7

21.9

20.7

16.8

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Based on official figures expressed in 2010 dollars.

b Preliminary figures.

Table A.7

Latin America and the Caribbean: balance of payments

(Millions of dollars)

Exports of goods f.o.b.

Exports of services

Imports of goods f.o.b.

Imports of services

2012

2013

2014 a

2012

2013

2014 a

2012

2013

2014 a

2012

2013

2014 a

Latin America and the Caribbean

1 121 120

1    116 348

1 083 027

146 997

152 301

154 015

1 077 755

1 104 135

1 091 421

218 800

231 033

228 835

Latin America

1 099 392

1 096 199

1 065 746

132 964

139 304

141 912

1 051 087

1 079 657

1 069 600

207 655

220 242

219 267

Argentina

80 246

81 660

71 935

15 211

14 725

13 896

65 088

70 541

62 451

18 262

18 643

16 958

Bolivia (Plurinational

State of)

11 254

11 657

12 266

1 006

1 104

1 242

8 578

9 338

10 535

1 348

1 731

2 341

Brazil

242 578

242 034

225 101

39 864

39 127

40 764

223 183

239 748

229 060

80 905

86 229

89 692

Chile

77 791

76 477

75 675

12 387

12 452

10 967

75 458

74 657

67 908

15 131

15 855

14 724

Colombia

61 604

60 281

56 982

6 430

6 859

6 937

56 648

57 101

61 676

12 229

12 788

13 523

Costa Rica

8 833

8 879

9 139

6 106

6 693

6 877

14 294

14 627

14 814

2 084

2 076

2 121

Dominican Republic

8 936

9 424

9 920

6 140

6 449

7 044

17 673

16 801

17 288

2 939

2 761

2 818

Ecuador

24 569

25 686

26 604

1 807

2 029

2 334

24 519

26 178

26 672

3 198

3 524

3 553

El Salvador

4 235

4 334

4 256

1 867

2 087

2 226

9 162

9 629

9 463

1 335

1 470

1 487

Guatemala

10 103

10 183

10 994

2 491

2 570

2 750

15 838

16 359

17 052

2 413

2 651

2 886

Haiti

775

915

954

549

652

701

3 079

3 329

3 483

1 116

1 090

1 075

Honduras

8 359

7 805

8 072

1 056

1 013

1 087

11 371

10 953

11 070

1 647

1 681

1 785

Mexico

371 442

380 729

397 866

16 146

20 116

21 037

371 151

381 638

400 440

30 708

32 128

34 910

Nicaragua

3 491

3 292

3 622

1 244

1 325

1 388

5 938

5 802

6 024

899

1 071

960

Panama

18 857

17 160

15 332

9 302

9 851

10 901

25 272

24 136

23 479

4 606

4 792

4 900

Paraguay

11 654

13 605

13 117

756

849

892

11 083

11 942

12 079

927

1 068

1 114

Peru

47 411

42 861

39 533

4 915

5 814

5 874

41 135

42 248

40 809

7 335

7 615

7 674

Uruguay

9 916

10 256

10 380

3 482

3 381

3 215

12 277

11 608

11 298

2 408

3 240

3 214

Venezuela (Bolivarian

Republic of)

97 340

88 962

74 000

2 205

2 208

1 780

59 339

53 023

44 000

18 164

19 830

13 532

The Caribbean

21 728

20 149

17 281

14 032

12 997

12 103

26 668

24 478

21 821

11 145

10 791

9 568

Antigua and Barbuda

63

68

55

484

482

498

492

503

500

210

218

225

Bahamas

984

955

849

2 691

2 671

2 716

3 385

3 166

3 270

1 538

1 628

1 720

Barbados

826

...

...

1 128

...

...

1 688

...

...

486

...

...

Belize

628

608

589

407

448

494

837

876

926

188

208

225

Dominica

39

41

41

122

134

137

183

179

181

67

65

68

Grenada

43

45

46

164

169

192

300

324

299

95

100

98

Guyana

1 415

1 376

0

298

165

0

1 997

1 847

0

526

500

0

Jamaica

1 728

1 580

1 453

2 694

2 666

2 826

5 632

5 462

5 184

2 158

2 048

2 160

Saint Kitts and Nevis

63

57

58

202

253

270

235

252

270

116

128

134

Saint Lucia

212

200

182

391

408

445

566

546

522

185

190

184

Saint Vincent and the Grenadines

48

54

54

143

127

129

314

327

319

87

92

92

Suriname

2 695

2 395

2 149

172

172

203

1 972

2 126

1 966

612

584

782

Trinidad and Tobago

12 983

12 770

11 806

5 137

5 302

4 193

9 065

8 871

8 386

4 876

5 030

3 880

Goods and services balance

Income balance

Current transfers balance

Current account balance

2012

2013

2014 a

2012

2013

2014 a

2012

2013

2014 a

2012

2013

2014 a

Latin America and the Caribbean

-28 438

-66 708

-83 370

-140 850

-158 498

-147 782

62 280

61 776

63 492

-107 008

-163 431

-167 659

Latin America

-26 385

-64 396

-81 209

-136 446

-155 091

-144 329

59 413

58 928

60 934

-103 418

-160 559

-164 604

Argentina

12 106

7 201

6 423

-12 758

-11 027

-11 402

-518

-871

-89

-1 170

-4 696

-5 069

Bolivia (Plurinational

State of)

2 334

1 692

632

-1 629

-1 908

-1 707

1 266

1 270

1 084

1 970

1 054

10

Brazil

-21 647

-44 815

-52 888

-35 448

-39 778

-40 323

2 846

3 366

1 922

-54 249

-81 227

-91 288

Chile

-411

-1 582

4 010

-11 274

-10 730

-8 857

2 060

2 187

1 851

-9 624

-10 125

-2 995

Colombia

-843

-2 749

-11 280

-15 042

-14 175

-12 857

4 579

4 594

4 357

-11 306

-12 330

-19 781

Costa Rica

-1 439

-1 132

-919

-1 272

-1 470

-1 619

310

269

268

-2 401

-2 333

-2 270

Dominican Republic

-5 536

-3 689

-3 143

-2 344

-2 994

-3 209

3 909

4 147

4 326

-3 971

-2 537

-2 026

Ecuador

-1 341

-1 988

-1 287

-1 303

-1 395

-1 579

2 480

2 399

2 264

-164

-984

-602

El Salvador

-4 395

-4 677

-4 468

-861

-997

-1 044

4 021

4 100

4 318

-1 235

-1 574

-1 194

Guatemala

-5 657

-6 257

-6 195

-1 298

-1 207

-1 638

5 645

6 113

6 446

-1 310

-1 351

-1 387

Haiti

-2 872

-2 853

-2 904

55

32

12

2 368

2 283

2 291

-449

-537

-600

Honduras

-3 603

-3 815

-3 695

-1 266

-1 353

-1 322

3 288

3 405

3 572

-1 581

-1 763

-1 444

Mexico

-14 271

-12 922

-16 447

-24 164

-38 767

-32 919

22 559

21 243

22 913

-15 877

-30 446

-26 453

Nicaragua

-2 102

-2 256

-1 973

-321

-313

-308

1 310

1 369

1 443

-1 113

-1 200

-838

Panama

-1 719

-1 918

-2 146

-1 897

-3 064

-3 232

88

63

120

-3 528

-4 920

-5 258

Paraguay

401

1 443

815

-1 661

-1 683

-1 542

759

720

621

-501

479

-105

Peru

3 856

-1 188

-3 077

-12 399

-10 631

-9 328

3 307

3 346

4 374

-5 237

-8 474

-8 031

Uruguay

-1 287

-1 210

-917

-1 519

-1 842

-1 836

115

129

129

-2 691

-2 924

-2 623

Venezuela (Bolivarian

Republic of)

22 042

18 317

18 248

-10 048

-11 788

-9 620

-978

-1 202

-1 278

11 016

5 327

7 349

The Caribbean

-2 053

-2 312

-2 161

-4 404

-3 407

-3 452

2 867

2 847

2 558

-3 589

-2 872

-3 055

Antigua and Barbuda

-155

-171

-172

-51

-31

-37

30

26

29

-176

-176

-181

Bahamas

-1 248

-1 168

-1 424

-268

-329

-437

11

3

0

-1 505

-1 494

-1 860

Barbados

-219

-189

-157

-172

-195

-197

-9

-13

-15

-401

-397

-369

Belize

9

-28

-67

-118

-118

-143

76

73

74

-33

-73

-136

Dominica

-90

-68

-70

-18

-20

-19

17

20

21

-91

-68

-68

Grenada

-189

-210

-159

-34

-30

-35

30

18

26

-193

-221

-168

Guyana

-810

-807

0

24

38

0

419

344

0

-367

-426

0

Jamaica

-3 368

-3 263

-3 065

-122

-277

-386

2 111

2 221

2 292

-1 379

-1 320

-1 160

Saint Kitts and Nevis

-87

-71

-75

-24

-23

-23

45

45

45

-66

-48

-54

Saint Lucia

-148

-128

-78

-35

-26

-26

6

5

10

-177

-150

-94

Saint Vincent and the Grenadines

-211

-236

-229

-4

0

0

24

14

13

-191

-223

-216

Suriname

283

-142

-396

-191

-122

-61

73

67

71

164

-198

-386

Trinidad and Tobago

4 180

4 170

3 733

-3 390

-2 276

-2 088

34

25

-8

824

1 920

1 637

Capital and financial balance b

Overall balance

Reserve assets

(variation) c

Other financing

2012

2013

2014 a

2012

2013

2014 a

2012

2013

2014 a

2012

2013

2014 a

Latin America and the Caribbean

163 529

178 844

205 241

56 808

15 413

37 581

-57 886

-16 226

-37 313

1 079

814

-268

Latin America

161 569

175 482

199 869

58 151

14 923

35 265

-59 201

-15 705

-35 125

1 050

783

-139

Argentina

-2 135

-7 127

6 229

-3 305

-11 824

1 160

3 305

11 824

-1 160

0

0

0

Bolivia (Plurinational

State of)

-258

67

961

1 712

1 122

971

-1 712

-1 122

-971

0

0

0

Brazil

73 148

75 300

102 121

18 900

-5 926

10 833

-18 900

5 926

-10 833

0

0

0

Chile

9 258

10 436

4 052

-367

311

1 057

367

-311

-1 057

0

0

0

Colombia

16 711

19 277

24 217

5 406

6 946

4 437

-5 406

-6 946

-4 437

0

0

0

Costa Rica

4 510

2 794

2 156

2 110

461

-113

-2 110

-461

113

0

0

0

Dominican Republic

3 530

3 877

2 640

-440

1 341

614

548

-1 146

-162

-108

-195

-453

Ecuador

-418

2 830

177

-582

1 846

-424

475

-1 878

411

107

32

13

El Salvador

1 886

1 248

1 161

651

-327

-33

-651

327

33

0

0

0

Guatemala

1 808

2 053

1 459

499

702

73

-499

-702

-73

0

0

0

Haiti

703

178

506

254

-359

-94

-285

-58

479

31

418

-385

Honduras

1 290

2 235

1 904

-291

473

459

283

-485

-459

8

12

-1

Mexico

33 401

48 234

42 781

17 524

17 789

16 329

-17 524

-17 789

-16 329

0

0

0

Nicaragua

1 097

1 295

1 120

-15

96

282

15

-96

-282

0

0

0

Panama

2 570

4 810

5 792

-958

-109

534

-36

-402

-1 217

994

511

682

Paraguay

477

556

1 243

-24

1 036

1 138

25

-1 036

-1 131

0

0

-7

Peru

20 025

11 376

5 843

14 788

2 902

-2 188

-14 806

-2 907

2 178

19

5

10

Uruguay

5 978

5 869

3 983

3 287

2 945

1 360

-3 287

-2 945

-1 360

0

0

0

Venezuela (Bolivarian

Republic of)

-12 012

-9 827

-8 477

-996

-4 500

-1 128

996

4 500

1 128

0

0

0

The Caribbean

1 960

3 362

5 372

-1 344

490

2 317

1 315

-522

-2 188

29

31

-129

Antigua and Barbuda

187

218

275

11

42

94

-11

-42

-94

0

0

0

Bahamas

1 430

1 425

1 906

-75

-69

46

75

69

-46

0

0

0

Barbados

89

240

323

-25

-157

-46

25

157

46

0

0

0

Belize

89

190

221

55

117

85

-53

-114

-84

-3

-4

-1

Dominica

97

61

86

6

-6

18

-6

6

-18

0

0

0

Grenada

191

253

191

-2

31

23

2

-31

-23

0

0

0

Guyana

256

475

0

-111

49

0

80

-84

0

31

34

0

Jamaica

555

1 140

1 960

-823

-179

800

823

179

-673

0

0

-128

Saint Kitts and Nevis

90

88

81

24

40

27

-24

-40

-27

0

0

0

Saint Lucia

193

110

161

16

-40

67

-16

40

-67

0

0

0

Saint Vincent and the Grenadines

212

249

239

21

26

23

-21

-26

-23

0

0

0

Suriname

16

47

236

180

-151

-150

-180

151

150

0

0

0

Trinidad and Tobago

-1 446

-1 133

-307

-622

786

1 330

622

-786

-1 330

0

0

0

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Preliminary figures.

b Includes errors and omissions.

c A minus sign (-) indicates an increase in reserve assets.

Table A.8

Latin America and the Caribbean: international trade of goods

(Indices 2010=100)

Exports of goods, f.o.b.

Value

Volume

Unit value

2012

2013

2014 a

2012

2013

2014 a

2012

2013

2014 a

Latin America

125.5

125.2

121.7

108.2

110.7

113.1

116.0

113.0

107.6

Argentina

117.7

119.8

105.5

96.6

100.0

90.0

121.9

119.7

117.2

Bolivia (Plurinational State of)

175.8

182.1

191.6

140.4

148.0

162.2

125.2

123.1

118.1

Brazil

120.1

119.9

111.5

102.7

106.2

104.3

116.9

112.9

106.9

Chile

109.4

107.5

106.4

105.2

108.8

110.8

104.0

98.8

96.0

Colombia

151.1

147.9

139.8

124.1

131.0

139.0

121.8

112.9

100.6

Costa Rica

92.8

93.3

96.0

90.6

92.4

95.7

102.5

100.9

100.3

Dominican Republic

131.1

138.3

145.6

122.6

135.3

144.0

106.9

102.2

101.1

Ecuador

135.5

141.6

146.7

110.3

115.8

123.1

122.8

122.3

119.1

El Salvador

121.9

124.8

122.5

114.7

118.6

114.3

106.3

105.2

107.2

Guatemala

118.4

119.3

128.8

111.8

117.4

129.3

105.8

101.6

99.6

Haiti

137.5

162.4

169.3

122.1

152.3

155.8

112.6

106.6

108.7

Honduras

133.4

124.6

128.9

123.3

125.9

130.2

108.3

98.9

98.9

Mexico

124.3

127.4

133.1

110.3

113.4

124.0

112.7

112.4

107.4

Nicaragua

144.0

135.7

149.4

127.4

132.0

145.2

113.0

102.8

102.8

Panama

148.8

135.4

121.0

137.1

126.7

113.2

108.5

106.9

106.9

Paraguay

111.3

129.9

125.2

97.4

115.3

112.4

114.2

112.6

111.4

Peru

132.4

119.7

110.4

111.4

106.8

105.8

118.9

112.1

104.4

Uruguay

123.5

127.7

129.2

102.3

106.9

108.6

120.7

119.5

119.0

Venezuela (Bolivarian Republic of)

148.1

135.3

112.6

110.8

103.3

92.7

133.6

130.9

121.4

Imports of goods, f.o.b.

Value

Volume

Unit value

2012

2013

2014

2012

2013

2014

2012

2013

2014 a

Latin America

127.6

131.0

129.8

115.8

119.3

119.2

110.2

109.9

108.9

Argentina

120.2

130.2

115.3

114.1

117.3

103.7

105.3

111.0

111.2

Bolivia (Plurinational State of)

153.5

167.0

188.4

140.6

153.1

175.3

109.1

109.1

107.5

Brazil

122.8

131.9

126.0

106.7

116.0

113.0

115.1

113.7

111.5

Chile

136.8

135.3

123.1

124.8

126.2

116.7

109.6

107.2

105.5

Colombia

147.5

148.7

160.6

131.2

132.8

147.1

112.4

112.0

109.1

Costa Rica

110.3

112.9

114.3

103.1

107.4

110.5

107.0

105.1

103.5

Dominican Republic

116.2

110.5

113.7

101.9

98.9

104.9

114.0

111.7

108.4

Ecuador

124.8

133.3

135.8

113.5

123.3

128.7

110.0

108.1

105.5

El Salvador

122.2

128.5

126.3

111.1

117.5

117.2

110.0

109.3

107.7

Guatemala

123.7

127.7

133.2

109.4

115.4

123.4

113.0

110.7

107.9

Haiti

102.3

110.6

115.7

78.1

83.6

88.4

131.0

132.3

130.9

Honduras

127.7

123.0

124.3

111.6

110.1

113.6

114.4

111.7

109.4

Mexico

123.0

126.5

132.7

114.6

118.1

123.0

107.3

107.1

107.8

Nicaragua

136.5

133.4

138.5

120.3

119.9

129.7

113.5

111.2

106.8

Panama

146.8

140.2

136.4

132.8

128.1

127.2

110.5

109.4

107.2

Paraguay

115.5

124.5

125.9

104.6

113.6

116.7

110.5

109.6

107.9

Peru

142.8

146.6

141.6

126.2

129.5

127.0

113.2

113.2

111.5

Uruguay

143.5

135.6

132.0

126.8

116.8

118.5

113.1

116.1

111.4

Venezuela (Bolivarian Republic of)

154.0

137.6

114.2

139.9

125.0

105.2

110.1

110.1

108.5

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Preliminary figures.

Table A.9

Latin America and the Caribbean: exports of goods, f.o.b.

(Millions of dollars)

2013

2014

2015

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Latin America and the Caribbean

254 482

285 992

283 668

281 851

251 585

284 257

281 333

241 572

207 766

…

Latin America

249 695

281 006

277 513

277 408

247 239

279 813

276 060

237 633

206 609

…

Argentina

17 466

23 456

21 718

19 020

15 877

20 943

19 338

15 819

13 395

10 552 a

Bolivia (Plurinational State of)

2 982

2 775

3 143

3 080

3 192

3 453

3 473

2 888

2 321

1 571 a

Brazil

50 837

63 588

63 226

64 528

49 588

60 943

63 104

51 466

42 775

51 554

Chile

18 563

20 065

18 550

19 299

19 038

19 628

18 061

18 948

17 468

17 057

Colombia

14 135

15 153

14 480

15 056

13 488

14 511

14 931

11 864

9 442

6 572 a

Costa Rica

2 857

2 990

2 872

2 884

2 860

3 016

2 813

2 562

2 398

1 675 a

Dominican Republic

2 211

2 519

2 378

2 317

2 377

2 552

2 548

2 443

2 263

…

Ecuador

6 194

5 952

6 405

6 297

6 636

6 791

6 530

5 775

4 892

3 298 a

El Salvador

1 362

1 460

1 394

1 275

1 289

1 379

1 354

1 251

1 428

922 a

Guatemala

2 606

2 662

2 363

2 394

2 676

2 779

2 708

2 670

2 781

1 960 a

Haiti

190

243

240

224

201

249

277

…

…

…

Honduras

1 102

1 027

863

895

1 030

1 164

945

929

1 152

…

Mexico

88 228

96 663

96 307

98 829

90 759

101 870

101 120

103 379

90 404

64 294 a

Nicaragua

626

636

568

571

687

687

644

617

671

449 a

Panama

3 650

3 764

4 389

3 776

2 771

3 707

3 895

3 408

3 015

1 024 b

Paraguay

2 233

2 814

2 529

1 857

2 549

2 961

2 305

1 841

2 466

2 061

Peru

10 508

10 121

11 264

10 967

9 780

9 491

10 364

9 898

8 094

4 983 a

Uruguay

1 686

2 701

2 621

2 058

1 780

2 909

2 594

1 874

1 643

1 682 a

Venezuela (Bolivarian Republic of)

22 260

22 419

22 203

22 080

20 660

20 780

19 057

…

…

…

The Caribbean

4 787

4 986

6 155

4 443

4 346

4 444

5 273

3 939

1 157

…

Antigua and Barbuda

7

19

4

3

5

9

5

5

5

…

Bahamas

194

215

211

192

173

176

…

…

…

…

Barbados

115

117

103

123

122

108

108

136

113

36 b

Belize

163

170

147

129

134

167

152

137

148

…

Dominica

8

9

10

11

8

9

10

11

8

…

Grenada

9

13

8

6

10

12

8

7

8

…

Guyana

271

319

392

381

251

278

295

…

…

…

Jamaica

469

385

363

363

388

357

375

331

336

…

Saint Kitts and Nevis

12

14

13

16

14

15

13

15

15

…

Saint Lucia

40

48

38

48

31

47

45

36

35

…

Saint Vincent and the Grenadines

11

11

13

14

12

11

13

12

10

…

Suriname

616

614

609

557

538

541

541

525

479

…

Trinidad and Tobago

2 872

3 053

4 244

2 601

2 659

2 714

3 709

2 724

…

…

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Figures as of May.

b Figures as of April.

Table A.10

Latin America and the Caribbean: imports of goods, c.i.f.

(Millions of dollars)

2013

2014

2015

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Latin America and the Caribbean

263 920

282 969

284 065

281 537

260 463

276 559

284 425

262 935

228 796

…

Latin America

256 978

276 875

277 955

273 891

253 782

270 490

279 228

257 225

227 117

…

Argentina

c.i.f.

15 967

19 809

20 259

17 622

15 721

17 772

17 049

14 781

13 226

9 945 a

Bolivia (Plurinational State of)

c.i.f.

2 101

2 123

2 359

2 719

2 397

2 378

2 880

2 896

2 384

1 453 a

Brazil

f.o.b.

56 018

61 537

61 792

60 400

55 667

57 378

61 315

54 777

48 332

43 775

Chile

c.i.f.

19 241

20 002

20 257

19 749

17 986

17 792

18 069

18 313

15 749

15 095

Colombia

c.i.f.

14 171

14 660

15 234

15 317

14 760

15 802

16 777

16 690

14 113

4 461 b

Costa Rica

c.i.f.

4 391

4 484

4 565

4 574

4 520

4 404

4 240

4 022

3 685

2 562 a

Dominican Republic

f.o.b.

3 269

3 350

3 461

3 610

3 181

3 626

3 528

3 504

3 022

…

Ecuador

c.i.f.

6 618

6 976

6 920

6 632

6 478

6 901

7 016

7 345

6 107

3 678 a

El Salvador

c.i.f.

2 542

2 866

2 731

2 634

2 615

2 756

2 534

2 608

2 534

1 774 a

Guatemala

c.i.f.

4 149

4 589

4 394

4 385

4 380

4 632

4 623

4 641

4 184

2 969 a

Haiti

c.i.f.

931

951

780

934

921

934

956

…

…

…

Honduras

c.i.f.

2 213

2 267

2 305

2 367

2 170

2 431

2 388

2 322

2 410

…

Mexico

f.o.b.

89 347

97 561

97 280

97 022

92 064

100 864

102 840

104 209

92 605

65 397 a

Nicaragua

c.i.f.

1 287

1 439

1 446

1 452

1 330

1 435

1 450

1 661

1 397

894 a

Panama

c.i.f.

3 108

3 299

3 188

3 440

3 169

3 515

3 457

3 573

2 972

871 b

Paraguay

c.i.f.

2 965

3 035

3 064

3 077

2 790

2 906

3 271

3 201

2 615

2 483

Peru

f.o.b.

10 229

10 532

11 149

10 337

9 959

10 392

10 546

9 912

9 189

5 875 a

Uruguay

c.i.f.

2 649

2 838

3 128

3 028

3 031

2 897

2 787

2 770

2 594

1 509 a

Venezuela (Bolivarian Republic of)

c.i.f.

15 782

14 556

13 642

14 591

10 643

11 676

13 501

…

…

…

The Caribbean

6 942

6 094

6 111

7 647

6 681

6 070

5 198

5 710

1 679

…

Antigua and Barbuda

c.i.f.

140

120

119

129

158

124

136

134

126

…

Bahamas

c.i.f.

833

811

829

893

852

898

…

…

…

…

Barbados

c.i.f.

425

425

425

485

423

444

428

445

373

120 b

Belize

f.o.b.

200

234

217

225

205

240

240

253

232

…

Dominica

c.i.f.

51

51

48

53

50

56

61

63

53

…

Grenada

c.i.f.

82

88

89

109

83

87

88

82

85

…

Guyana

c.i.f.

451

456

448

492

402

437

464

…

…

…

Jamaica

f.o.b.

1 533

1 272

1 341

1 436

1 271

1 314

1 314

1 285

…

…

Saint Kitts and Nevis

c.i.f.

58

57

60

74

59

63

62

84

71

…

Saint Lucia

c.i.f.

143

154

152

171

150

145

132

166

135

…

Saint Vincent and the Grenadines

c.i.f.

84

98

94

94

80

95

89

98

75

…

Suriname

c.i.f.

519

548

594

513

474

505

505

528

530

…

Trinidad and Tobago

c.i.f.

2 422

1 781

1 695

2 973

2 473

1 662

1 679

2 572

…

…

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Figures as of May.

b Figures as of April.

Table A.11

Latin America: terms of trade for goods f.o.b./f.o.b.

(Indices 2010=100)

2006

2007

2008

2009

2010

2011

2012

2013

2014 a

Latin America

91.5

94.1

97.2

89.8

100.0

108.0

105.3

102.9

98.8

Argentina

81.0

86.0

96.4

97.2

100.0

111.3

115.8

107.8

105.4

Bolivia (Plurinational State of)

88.7

90.1

91.3

88.4

100.0

111.0

114.8

112.8

109.9

Brazil

83.5

85.2

88.3

86.2

100.0

107.9

101.6

99.3

95.9

Chile

89.8

92.9

80.8

81.7

100.0

100.6

94.9

92.2

91.0

Colombia

82.4

86.4

91.5

86.2

100.0

114.6

108.4

100.9

92.2

Costa Rica

105.7

104.7

100.8

104.1

100.0

96.3

95.8

96.1

97.0

Dominican Republic

97.3

100.5

96.0

103.8

100.0

94.7

93.8

91.5

93.3

Ecuador

91.0

93.5

102.6

90.8

100.0

110.0

111.7

113.1

112.9

El Salvador

104.5

103.5

100.6

103.9

100.0

100.0

96.6

96.2

99.6

Guatemala

96.9

95.1

92.6

100.5

100.0

99.1

93.7

91.8

92.3

Haiti

114.4

111.2

79.9

103.4

100.0

83.0

86.0

80.6

83.1

Honduras

98.8

97.0

91.1

97.3

100.0

108.4

94.6

88.6

90.4

Mexico

102.9

103.8

104.6

92.9

100.0

107.2

105.0

104.9

99.6

Nicaragua

95.4

94.5

90.4

99.1

100.0

99.6

99.6

92.4

96.3

Panama

102.9

101.9

97.3

101.9

100.0

97.8

98.2

97.7

99.7

Paraguay

91.0

95.3

102.3

100.0

100.0

102.4

103.4

102.8

103.3

Peru

89.8

94.0

84.7

82.9

100.0

107.2

105.0

99.0

93.6

Uruguay

87.4

87.4

94.4

100.9

100.0

102.9

106.7

102.9

106.8

Venezuela (Bolivarian Republic of)

85.4

93.6

115.5

84.1

100.0

120.2

121.4

118.9

111.8

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Preliminary figures.

Table A.12

Latin America and the Caribbean (selected countries): remittances from emigrant workers

(Millions of dollars)

2010

2011

2012

2013

2014

2015

Q1

Q2

Q3

Q4

Q1

Q2

Bolivia (Plurinational State of)

939

1 012

1 094

1 182

288

272

291

313

273

…

Brazil

2 189

2 134

1 990

1 944

466

464

476

504

540

…

Colombia

3 996

4 064

3 970

4 071

1 021

949

1 005

1 118

1 034

1 053

Costa Rica a

505

487

527

561

142

138

139

140

120

…

Dominican Republica

2 998

3 200

3 158

3 333

1 172

1 179

1 518

1 083

1 215

…

Ecuador

2 591

2 672

2 467

2 450

598

634

624

607

530

…

El Salvador

3 455

3 628

3 894

3 953

989

1 116

1 048

1 064

988

742 b

Guatemala

4 127

4 378

4 783

5 105

1 237

1 467

1 445

1 395

1 396

1 023 b

Honduras

2 526

2 750

2 842

3 093

736

912

868

921

855

…

Jamaica

1 906

2 025

2 037

2 065

514

540

549

555

528

…

Mexico

21 304

22 803

22 438

21 892

5 459

6 166

5 967

6 052

5 727

4 201 b

Nicaragua a

823

912

1 014

1 078

277

278

280

301

289

199 b

Peru

2 534

2 697

2 788

2 707

633

660

660

687

627

…

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a New methodology according to the sixth edition of the Balance of Payments Manual of the International Monetary Fund (IMF).

b Figures as of May.

Table A.13

Latin America and the Caribbean: net resource transfer a

(Millions of dollars)

2006

2007

2008

2009

2010

2011

2012

2013

2014 b

Latin America and the Caribbean

-94 276

16 295

-31 369

-23 356

27 635

38 583

23 757

21 159

57 191

Latin America

-89 804

17 960

-28 931

-22 295

30 719

40 041

26 173

21 173

55 401

Argentina

-10 388

-198

-14 317

-15 947

-8 304

-16 239

-14 893

-18 154

-5 173

Bolivia (Plurinational State of)

-175

-43

-154

-1 094

-707

923

-1 888

-1 840

-746

Brazil

-10 553

56 642

-9 401

37 269

56 887

63 791

37 701

35 522

61 798

Chile

-23 481

-29 153

-1 352

-13 265

-15 432

3 358

-2 016

-294

-4 805

Colombia

-2 896

2 776

-669

-2 857

581

-2 042

1 670

5 101

11 360

Costa Rica

2 058

1 929

2 022

-247

1 097

1 192

3 239

1 323

538

Cuba

-618

-960

...

...

...

...

...

...

...

Dominican Republic

-221

665

2 462

1 248

3 167

2 522

1 079

688

-1 022

Ecuador

-3 691

-2 138

-2 246

-2 264

-625

-522

-1 614

1 467

-1 389

El Salvador

375

1 040

1 477

179

-302

79

1 025

251

117

Guatemala

1 096

1 159

809

-902

29

154

511

846

-179

Haiti

573

688

374

373

969

573

788

627

133

Honduras

149

612

1 530

-429

546

521

32

894

582

Mexico

-9 698

2 423

8 201

-1 921

12 579

21 204

9 237

9 468

9 862

Nicaragua

802

1 124

1 316

895

761

993

777

983

812

Panama

-1 198

925

1 562

-713

1 072

2 854

1 667

2 257

3 243

Paraguay

-1 101

-1 046

-915

-767

-1 036

-603

-1 184

-1 127

-305

Peru

-7 681

-165

-288

-6 728

3 531

-5 495

7 644

749

-3 475

Uruguay

-52

710

3 045

929

-1 131

2 320

4 459

4 027

2 147

Venezuela (Bolivarian Republic of)

-23 103

-19 031

-22 386

-16 054

-22 965

-35 543

-22 060

-21 615

-18 098

The Caribbean

-4 472

-1 665

-2 438

-1 061

-3 085

-1 458

-2 416

-14

1 791

Antigua and Barbuda

260

333

292

108

146

88

136

187

238

Bahamas

787

723

903

909

627

992

1 162

1 096

1 469

Barbados

74

235

137

187

120

685

-83

45

126

Belize

-51

-84

38

22

-88

-60

-32

68

77

Dominica

48

66

108

118

72

64

79

42

67

Grenada

203

211

201

160

154

177

157

223

156

Guyana

137

137

235

-51

9

341

311

547

0

Jamaica

798

937

2 120

430

871

1 326

433

864

1 446

Saint Kitts and Nevis

70

89

183

172

142

143

66

65

58

Saint Lucia

268

295

257

125

195

231

158

84

135

Saint Vincent and the Grenadines

106

168

204

189

221

163

208

249

239

Suriname

-211

-181

-96

-68

-720

-389

-175

-75

175

Trinidad and Tobago

-6 962

-4 594

-7 022

-3 362

-4 833

-5 220

-4 835

-3 409

-2 395

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a The net resource transfer is calculated as total net capital income minus the income balance (net payments of profits and interest). Total net capital income is the balance on the capital and financial accounts plus errors and omissions, plus loans and the use of IMF credit plus exceptional financing. Negative figures indicate resources transferred outside the country.

b Preliminary figures.

Table A.14

Latin America and the Caribbean: net foreign direct investment a

(Millions of dollars)

2006

2007

2008

2009

2010

2011

2012

2013

2014 b

Latin America and the Caribbean

34 250

94 471

102 215

70 987

87 105

127 954

134 856

160 562

137 435

Latin America

30 961

90 643

96 471

68 038

84 608

124 811

131 631

158 449

135 429

Argentina

3 099

4 969

8 335

3 306

10 368

9 352

14 269

10 204

4 495

Bolivia (Plurinational State of)

278

363

509

420

651

859

1 060

1 750

648

Brazil

-9 380

27 518

24 601

36 033

36 919

67 689

68 093

67 491

66 035

Chile

6 586

8 326

7 453

6 159

6 049

3 057

7 902

8 956

9 950

Colombia

5 558

8 136

8 110

3 789

947

6 228

15 646

8 547

12 155

Costa Rica

1 371

1 634

2 072

1 339

1 441

2 216

1 915

2 474

1 838

Dominican Republic

1 085

1 667

2 870

2 165

1 622

2 277

3 142

1 990

2 209

Ecuador

271

194

1 058

308

166

644

585

731

774

El Salvador

267

1 455

824

366

-226

218

484

176

274

Guatemala

552

720

737

574

782

1 009

1 205

1 262

1 365

Haiti

161

75

30

55

178

119

156

160

99

Honduras

669

926

1 007

505

971

1 012

851

992

1 120

Mexico

15 224

24 064

27 453

8 075

11 033

10 740

-3 519

31 488

17 594

Nicaragua

266

366

608

463

474

930

715

708

756

Panama

2 547

1 899

2 147

1 259

2 407

2 956

3 254

4 373

4 351

Paraguay

114

202

209

95

216

557

738

72

238

Peru

3 467

5 425

6 188

6 020

8 189

7 518

11 840

9 161

7 789

Uruguay

1 495

1 240

2 117

1 512

2 349

2 511

2 539

3 027

2 741

Venezuela (Bolivarian Republic of)

-2 666

1 462

143

-4 405

73

4 919

756

4 888

1 000

The Caribbean

3 289

3 828

5 744

2 948

2 497

3 143

3 225

2 113

2 005

Antigua and Barbuda

359

338

159

81

97

65

133

95

161

Bahamas

706

746

860

664

872

667

526

388

259

Barbados

298

394

470

303

344

750

426

...

...

Belize

108

139

167

108

96

95

193

92

138

Dominica

26

40

57

42

24

14

29

24

33

Grenada

90

157

135

103

60

43

31

113

40

Guyana

102

152

168

164

198

247

278

201

0

Jamaica

797

751

1 361

480

169

144

411

741

701

Saint Kitts and Nevis

110

134

178

131

116

110

108

136

118

Saint Lucia

234

272

161

146

121

81

74

92

73

Saint Vincent and the Grenadines

109

119

159

110

97

86

115

160

138

Suriname

-163

-247

-231

-93

-248

73

128

138

4

Trinidad and Tobago

513

830

2 101

709

549

771

772

-66

339

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Corresponds to direct investment in the reporting economy after deduction of outward direct investment by residents of that country. Includes reinvestment of profits.

b Preliminary figures.

Table A.15

Latin America and the Caribbean: total gross external debt a

(Millions of dollars, end-of-period stocks)

2007

2008

2009

2010

2011

2012

2013

2014

Latin America and the Caribbean

736 827

769 325

829 735

990 114

1 112 291

1 225 238

1 282 925

1 404 688

Latin America

723 872

755 883

815 404

973 359

1 094 589

1 207 715

1 264 127

1 385 022

Argentina

Total

125 366

125 859

116 622

130 843

142 492

143 336

141 076

147 853

Public

71 620

65 388

62 871

70 999

74 558

73 168

71 595

77 689

Private

53 746

60 471

53 751

59 844

67 934

70 168

69 496

69 767

Bolivia (Plurinational State of)

Total

5 403

5 930

5 801

5 875

6 298

6 711

7 756

8 543

Public

2 209

2 443

2 601

2 891

3 582

4 282

5 262

5 736

Private

3 134

3 424

3 092

2 815

2 716

2 430

2 494

2 807

Brazil

Total

193 159

198 492

198 136

256 804

298 204

327 590

312 517

352 684

Public

85 956

84 160

95 502

82 847

77 300

82 245

122 641

139 051

Private

107 203

114 331

102 635

152 864

195 763

199 336

189 876

213 633

Chile

Total

53 627

63 534

72 617

84 986

99 306

120 546

132 632

145 666

Public

11 684

11 530

13 617

17 498

21 091

26 183

24 908

28 622

Private

41 943

52 003

59 000

67 488

78 216

94 364

107 725

117 044

Colombia

Total

44 553

46 369

53 719

64 723

75 903

78 763

91 923

100 905

Public

28 819

29 447

37 129

39 546

42 769

46 065

52 102

59 664

Private

15 734

16 921

16 590

25 177

33 135

32 698

39 821

41 241

Costa Rica

Total

8 444

9 105

8 238

9 135

10 919

14 509

17 654

19 234

Public

3 768

3 401

3 632

4 381

4 345

7 428

7 418

7 855

Private

4 676

5 704

4 606

4 754

6 574

7 081

10 237

11 379

Dominican Republic

Public

6 556

7 219

8 215

9 947

11 625

12 872

14 919

16 074

Ecuador

Total

17 445

16 900

13 514

13 914

15 210

15 913

18 801

24 296

Public

10 605

10 028

7 364

8 622

9 973

10 768

12 921

17 582

Private

6 839

6 871

6 149

5 292

5 237

5 145

5 880

6 714

El Salvador

Total

9 349

9 994

9 882

9 698

10 670

12 521

13 238

14 177

Public

5 444

5 837

6 550

6 831

7 142

7 637

7 764

8 673

Private

3 905

4 157

3 332

2 867

3 528

4 884

5 474

5 504

Guatemala

Total

10 909

11 163

11 248

12 026

14 021

15 339

17 307

19 025

Public

4 458

4 423

5 391

6 038

6 027

6 823

7 429

7 510

Private

6 451

6 741

5 857

5 988

7 993

8 516

9 877

11 515

Haiti

Public

1 627

1 921

1 333

354

709

11 730

1 562

1 827

Honduras

Total

3 190

3 499

3 365

3 785

4 208

4 861

6 709

7 180

Public

2 026

2 358

2 481

2 843

3 218

3 664

5 202

5 564

Private

1 164

1 141

884

942

990

1 197

1 507

1 616

Mexico

Total

125 494

124 007

160 787

193 950

208 972

223 733

254 747

279 861

Public

55 355

56 939

96 354

110 428

116 420

125 726

134 436

147 666

Private

70 139

67 068

64 434

83 522

92 552

98 007

120 311

132 195

Nicaragua

Public

3 385

3 512

3 661

4 068

4 263

4 481

4 724

4 796

Panama

Public

8 276

8 477

10 150

10 439

10 858

10 782

12 231

14 352

Paraguay

Total

2 731

3 124

3 044

3 621

3 864

4 580

5 131

5 324

Public

2 205

2 204

2 234

2 335

2 291

2 241

2 695

2 697

Private

526

920

810

1 286

1 573

2 339

2 436

2 627

Peru

Total

33 239

34 997

35 157

43 674

47 977

59 376

60 823

64 512

Public

21 476

20 230

20 241

22 980

24 275

26 510

24 079

23 935

Private

11 763

14 767

14 916

20 694

23 702

32 866

36 744

40 577

Uruguay

Total

14 864

15 425

17 969

18 425

18 345

21 122

22 862

24 192

Public

11 383

11 064

13 117

13 182

14 436

16 658

18 040

19 025

Private

3 480

4 361

4 853

5 243

3 909

4 464

4 822

5 167

Venezuela (Bolivarian

Republic of)

Total

56 256

66 358

81 946

97 092

110 745

118 949

127 515

134 522

Public

38 681

50 909

67 449

85 304

98 011

105 779

107 656

112 641

Private

17 575

15 449

14 497

11 788

12 734

13 170

19 859

21 881

2007

2008

2009

2010

2011

2012

2013

2014

The Caribbean

12 955

13 442

14 331

16 755

17 702

17 523

18 799

19 666

Antigua and Barbuda

Public

481

436

416

432

467

445

525

513

Bahamas

Public

273

384

703

728

799

1 038

1 188

1 555

Barbados

Public

997

989

1 198

1 359

1 382

1 325

1 436

1 491

Belize

Public

973

958

1 017

1 021

1 032

1 029

1 083

1 126

Dominica

Public

241

234

222

232

237

262

273

278

Grenada

Public

469

481

512

528

535

535

562

578

Guyana

Public

718

834

933

1 043

1 206

1 358

1 246

1 184

Jamaica

Public

6 123

6 344

6 594

8 390

8 626

8 256

8 310

8 659

Saint Kitts and Nevis

Public

323

312

325

296

320

317

320

284

Saint Lucia

Public

399

364

373

393

417

435

488

527

Saint Vincent and the Grenadines

Public

219

229

262

313

328

329

354

381

Suriname

Public

298

319

269

334

463

567

737

808

Trinidad and Tobago

Public

1 443

1 557

1 507

1 686

1 891

1 627

2 276

2 284

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Includes debt owed to the International Monetary Fund.

Table A.16

Latin America and the Caribbean: sovereign spreads on EMBI+ and EMBI global

(Basis points to end of period)

2010

2011

2012

2013

2014

2015

March

June

September

December

March

June

Latin America

EMBI+

305

410

317

410

404

345

414

491

525

528

Argentina

EMBI+

496

925

991

808

799

724

700

719

629

631

Belize

EMBI Global

617

1 391

2 245

807

724

765

695

819

784

736

Bolivia (Plurinational State of)

EMBI Global

…

…

…

289

246

250

233

277

334

268

Brazil

EMBI+

189

223

142

224

228

208

239

259

322

304

Chile

EMBI Global

115

172

116

148

143

123

137

169

158

158

Colombia

EMBI+

172

195

112

166

165

144

169

196

219

229

Dominican Republic

EMBI Global

322

597

343

349

330

326

351

381

379

351

Ecuador

EMBI Global

913

846

826

530

508

376

484

883

865

824

El Salvador

EMBI Global

302

478

396

389

420

376

383

414

459

443

Jamaica

EMBI Global

427

637

711

641

531

496

443

485

437

350

Mexico

EMBI+

149

187

126

155

156

139

166

182

192

194

Panama

EMBI+

162

201

129

199

189

178

186

189

199

195

Paraguay

EMBI Global

…

…

…

240

204

191

247

291

293

279

Peru

EMBI+

163

216

114

159

163

150

162

181

180

181

Uruguay

EMBI Global

188

213

127

194

192

169

196

208

214

213

Venezuela (Bolivarian Republic of)

EMBI+

1 044

1 197

773

1 093

1 130

926

1 323

2 295

2 804

2 611

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of information from JPMorgan, Emerging Markets Bond Index Monitor.

Table A.17

Latin America and the Caribbean: risk premia on five-year credit default swaps

(Basis points to end of period)

2010

2011

2012

2013

2014

2015

March

June

September

December

March

June

Argentina

602

922

1 442

1 654

1 876

1 761

2 666

2 987

2 987

5 393

Brazil

111

162

108

194

170

144

176

201

283

260

Chile

84

132

72

80

78

64

78

94

83

87

Colombia

113

156

96

119

108

81

100

141

159

169

Mexico

114

154

98

92

87

68

87

103

126

131

Panama

99

150

98

111

100

81

99

109

141

141

Peru

113

172

97

133

112

84

107

115

134

140

Venezuela (Bolivarian Republic of)

1 016

928

647

1 150

1 261

918

1 575

3 155

4 752

4 444

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of information from Bloomberg.

Table A.18

Latin America and the Caribbean: international bond issues a

(Millions of dollars)

2010

2011

2012

2013

2014

2015

Q1

Q2

Q3

Q4

Q1

Q2

Total

90 183

91 687

114 241

123 332

44 257

40 078

27 608

21 114

30 587

31 472

Latin America and the Caribbean

88 657

90 272

111 757

121 518

43 479

39 078

26 608

20 579

29 120

31 021

Argentina

3 146

2 449

663

1 025

-

1 200

-

741

1 286

2 000

Bahamas

-

-

-

-

300

-

-

Barbados

390

-

-

-

1 250

-

-

1 250

-

-

Bolivia (Plurinational State of)

-

-

500

500

-

-

-

-

-

-

Brazil

39 305

38 369

50 255

37 262

20 542

13 959

9 160

1 703

-

7 513

Chile

6 750

6 049

9 443

11 540

1 274

1 432

5 341

5 721

1 263

3 884

Colombia

1 912

6 411

7 459

10 012

2 000

3 250

2 950

1 000

3 000

1 900

Costa Rica

-

250

1 250

3 000

-

1 000

-

-

1 000

-

Dominican Republic

1 034

750

750

1 800

-

1 250

250

-

2 500

1 000

Ecuador

-

-

-

-

-

2 000

-

-

750

750

El Salvador

450

654

800

310

-

-

800

-

-

300

Guatemala

-

150

1 400

1 300

800

300

-

-

-

-

Honduras

20

-

-

1 000

-

-

-

-

-

-

Jamaica

1 075

694

1 750

1 800

1 000

-

800

-

925

-

Mexico

26 882

22 276

28 147

41 729

14 713

12 047

3 807

7 025

13 945

11 589

Panama

-

897

1 100

1 350

-

285

1 250

400

1 250

450

Paraguay

-

100

500

500

-

0

1 000

-

-

280

Peru

4 693

2 155

7 240

5 840

1 600

355

1 250

2 739

2 002

1 155

Trinidad and Tobago

-

175

-

550

-

-

-

-

-

-

Uruguay

-

1 693

500

2 000

-

2 000

-

-

1 200

200

Venezuela (Bolivarian Republic of)

3 000

7 200

-

-

-

-

-

Supranational issues

1 526

1 415

2 484

1 814

778

1 000

1 000

535

1 467

451

Central American Bank for Economic Integration (CABEI)

151

-

250

520

201

-

-

304

178

207

Caribbean Development Bank (CDB)

-

175

-

-

-

-

-

-

-

-

Foreign Trade Bank of Latin America (BLADEX)

-

-

400

-

-

-

-

-

-

Development Bank of Latin America (CAF)

1 375

1 240

1 834

1 294

577

1 000

1 000

231

1 289

244

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures from Merrill-Lynch, J.P. Morgan and Latin Finance.

a Includes sovereign, bank and corporate bonds.

Table A.19

Latin America and the Caribbean: stock exchange indices

(National indices to end of period, 31 December 2005=100)

2010

2011

2012

2013

2014

2015

March

June

September

December

March

June

Argentina

228

160

185

349

413

511

813

556

702

755

Brazil

207

170

182

154

151

159

162

149

153

159

Chile

251

213

219

188

192

197

201

196

199

198

Colombia

163

133

155

137

145

148

143

122

105

108

Costa Rica

118

121

129

190

197

208

212

211

203

200

Ecuador

126

128

135

148

152

156

161

168

169

173

Jamaica

82

91

88

77

72

68

69

73

80

93

Mexico

217

208

246

240

227

240

253

242

246

253

Peru

487

406

430

328

298

347

338

308

259

273

Trinidad and Tobago

78

95

100

111

110

109

107

108

108

109

Venezuela (Bolivarian Republic of)

320

574

2 312

13 421

12 374

10 362

14 267

18 925

24 977

63 057

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of information from Bloomberg.

Table A.20

Latin America and the Caribbean: gross international reserves

(Millions of dollars, end-of-period stocks)

2010

2011

2012

2013

2014

2015

March

June

September

December

March

May

Latin America and the Caribbean

655 672

773 910

835 727

830 013

835 223

861 734

865 223

857 400

855 291

844 903

Latin America

639 798

756 967

820 018

813 978

818 610

844 897

848 125

839 319

838 943

828 965

Argentina

52 145

46 376

43 290

30 599

27 007

29 278

27 866

31 443

31 490

33 283

Bolivia (Plurinational State of)

9 730

12 018

13 927

14 430

14 490

14 809

15 272

15 123

14 968

14 648

Brazil

288 575

352 012

373 147

358 808

363 914

373 516

375 513

363 551

362 744

366 647

Chile

27 864

41 979

41 640

41 094

40 970

41 088

40 087

40 447

38 427

38 723

Colombia

28 464

32 303

37 474

43 639

44 302

45 508

47 115

47 328

46 920

47 013

Costa Rica a

4 627

4 756

6 857

7 331

6 786

7 494

7 195

7 211

8 342

8 310

Dominican Republica

3 765

4 098

3 559

4 701

3 888

4 950

4 282

4 862

4 963

5 058

Ecuador b

2 622

2 958

2 483

4 361

3 976

5 822

6 689

3 949

3 668

4 567

El Salvador

2 882

2 503

3 175

2 745

2 957

2 760

3 192

2 693

2 661

2 959

Guatemala a

5 954

6 188

6 694

7 273

7 111

7 096

7 149

7 333

7 770

7 650

Haiti

1 284

1 343

1 337

1 690

1 163

1 202

1 189

1 126

1 014

...

Honduras a

2 775

2 880

2 629

3 113

3 126

3 230

3 083

3 570

3 636

3 701 c

Mexico

120 587

149 209

167 050

180 200

185 467

192 539

193 332

195 682

197 765

196 455

Nicaragua

1 708

1 793

1 778

1 874

1 884

1 963

2 005

2 147

2 201

2 243 c

Panama a

2 843

2 514

2 441

2 775

2 096

2 373

3 421

3 994

4 763

4 252 c

Paraguay

4 169

4 984

4 994

5 876

6 022

6 377

7 130

6 891

6 672

7 077

Peru

44 150

48 859

64 049

65 710

65 000

64 684

64 498

62 353

61 384

60 479

Uruguay

7 743

10 302

13 605

16 281

16 504

18 603

17 757

17 555

18 584

18 485

Venezuela (Bolivarian Republic of)

27 911

29 892

29 890

21 481

21 948

21 604

21 349

22 061

20 973

17 611

The Caribbean

15 874

16 944

15 709

16 034

16 614

16 837

17 098

18 081

16 348

15 939

Antigua and Barbuda d

136

147

161

202

255

272

266

297

...

...

Bahamas

861

892

812

740

947

1 005

792

787

839

943

Barbados

575

587

630

516

524

475

460

467

510

519

Belize

216

242

289

402

421

437

473

482

490

508

Dominica d

66

75

92

85

89

98

95

100

...

...

Grenada d

103

106

104

135

133

135

155

158

...

...

Guyana

780

798

862

777

709

671

630

666

616

613 c

Jamaica

2 979

2 820

1 981

1 818

2 049

2 017

2 715

2 473

2 690

2 795

Saint Kitts and Nevis d

156

233

252

291

349

354

345

318

...

...

Saint Lucia d

182

192

208

168

188

194

239

235

...

...

Saint Vincent and the Grenadines d

111

88

109

133

141

145

144

156

...

...

Suriname

639

941

1 008

779

797

732

665

625

494

515

Trinidad and Tobago

9 070

9 822

9 200

9 987

10 013

10 304

10 119

11 317

10 710

10 659

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Serie corresponding to the harmonized monetary and financial statistics.

b Freely available International reserves.

b Figures as of April.

d Net international reserves.

Table A.21

Latin America and the Caribbean: real effective exchange rates a

(Indices: 2005=100, average values for the period)

2010

2011

2012

2013

2014 b

2015 b

Q1

Q2

Q3

Q4

Q1

Q2 c

Latin America and the Caribbean d

94.7

89.3

88.3

85.6

83.9

83.7

83.1

82.6

82.1

83.2

Barbados

97.3

93.9

88.8

85.8

80.5

80.6

79.2

77.3

77.6

78.1

Bolivia (Plurinational State of)

91.8

79.7

73.7

75.7

64.7

64.5

63.0

60.7

57.4

58.0

Brazil

81.5

77.7

79.5

68.6

82.8

77.3

77.8

83.6

87.4

91.6

Chile

95.0

93.2

98.0

91.4

99.3

99.0

101.9

101.2

101.7

98.9

Colombia

88.5

83.0

86.3

76.2

82.1

78.0

77.2

85.8

92.7

91.8

Costa Rica

95.9

91.4

91.4

80.2

74.9

77.3

74.2

72.7

70.9

71.2

Dominica

102.1

100.2

98.6

97.8

100.8

101.3

100.5

98.9

98.8

100.2

Dominican Republic

103.4

103.4

105.0

103.3

109.8

110.3

110.2

109.6

109.0

110.1

Ecuador

103.5

101.4

95.0

93.5

90.0

90.2

89.1

86.2

82.4

82.2

El Salvador

99.1

97.5

95.9

96.5

96.7

97.8

96.7

95.7

95.2

95.5

Guatemala

95.3

88.9

93.0

90.4

81.4

81.5

80.4

77.2

75.6

76.3

Honduras

96.1

91.2

85.1

83.4

77.5

78.5

81.0

79.5

78.7

79.4

Jamaica

101.8

93.1

100.6

90.5

91.3

93.8

92.2

89.6

89.8

90.1

Mexico

100.2

102.2

116.7

107.5

106.4

105.6

105.8

108.4

113.6

117.0

Nicaragua

98.6

90.5

92.7

94.4

94.4

94.9

94.1

92.3

90.3

91.4

Panama

102.2

99.6

96.0

97.0

87.6

87.4

87.3

85.7

83.7

83.3

Paraguay

76.3

66.7

74.0

70.0

61.9

60.1

58.3

59.7

57.3

61.5

Peru

100.1

95.8

94.6

90.7

89.2

88.3

88.4

89.1

89.0

90.7

Trinidad and Tobago

92.8

87.6

80.6

74.7

65.5

65.5

63.5

60.3

59.3

59.5

Uruguay

92.9

85.2

81.3

69.5

64.4

66.2

66.7

65.5

62.9

67.0

Venezuela (Bolivarian Republic of)

81.7

65.8

51.1

76.7

…

…

…

…

…

…

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Annual averages. A country’s overall real effective exchange rate index is calculated by weighting its real bilateral exchange rate indices with each of its trading partners by each partner’s share in the country’s total trade flows in terms of exports and imports. The extraregional real effective exchange rate index excludes trade with other Latin American and Caribbean countries. A currency depreciates in real effective terms when this index rises and appreciates when it falls.

b Preliminary figures.

c Figures as of May.

d Simple average of the real effective extraregional exchange rate for 21 countries. As from 2014, the Bolivarian Republic of Venezuela is not included.

Table A.22

Latin America and the Caribbean: participation rate

(Average annual rates)

2008

2009

2010

2011

2012

2013

2014 a

2014

2015 a

First quarter

Latin America and the Caribbean b

Total

62.2

62.3

62.1

62.2

62.3

62.2

62.2

…

…

Female

49.6

50.0

49.8

50.1

50.3

50.6

50.6

…

…

Male

75.0

74.9

74.5

74.7

74.5

74.3

74.2

…

…

Argentina

Urban areas

Total

58.8

59.3

58.9

59.5

59.3

58.9

58.3

58.5

57.7

Female

47.2

48.0

47.0

47.4

47.6

47.1

46.9

46.5

46.5

Male

72.0

72.1

72.3

72.9

72.2

72.0

70.9

71.8

70.1

Barbados

Nationwide total

Total

67.6

67.0

66.6

67.6

66.2

66.7

63.8

…

…

Female

62.5

62.2

62.0

63.0

61.1

61.8

60.4

…

…

Male

73.3

72.3

71.7

72.7

72.0

72.3

67.7

…

…

Brazil

Six metropolitan areas

Total

57.0

56.7

57.1

57.1

57.3

57.1

56.0

56.2

55.6

Female

48.7

48.6

49.0

48.9

49.3

49.3

48.2

48.2

48.0

Male

66.5

66.0

66.5

66.5

66.6

66.2

65.2

65.5

64.6

Chile c

Nationwide total

Total

56.0

55.9 l

58.5

59.8

59.5

59.6

59.8

60.1

59.6

Female

40.9

41.3 l

45.3

47.3

47.6

47.7

48.4

48.5

47.7

Male

71.8

71.0 l

72.1

72.7

71.9

71.8

71.6

72.2

71.9

Colombia

Nationwide total

Total

58.5

61.3

62.7

63.7

64.5

64.2

64.2

63.2

63.8

Female

46.5

49.8

51.8

52.8

54.1

53.9

54.0

52.7

53.3

Male

71.1

73.3

74.2

75.1

75.4

74.9

74.9

74.1

74.7

Costa Rica d

Nationwide total

Total

56.7 l

60.4

59.1

60.7

60.1

59.8

59.5

…

…

Female

41.7 l

44.5

43.5

45.7

45.2

45.2

45.2

…

…

Male

72.5 l

77.2

75.9

76.8

76.0

75.7

75.0

…

…

Cuba e

Nationwide total

Total

74.7

75.4

74.9

76.1

74.2

72.9

71.9

…

…

Female

60.2

61.0

60.5

60.5

57.4

57.3

56.3

…

…

Male

87.8

88.4

87.7

90.0

89.5

87.1

86.2

…

…

Dominican Republic

Nationwide total

Total

55.6

53.8

55.0

56.2

56.5

56.1

57.3

…

…

Female

43.5

40.3

42.4

44.0

45.0

44.5

46.1

…

…

Male

67.9

67.4

67.8

68.5

68.1

67.9

68.7

…

…

Ecuador f

Urban total

Total

67.7

66.3

64.2

62.2

62.8

61.8

62.2

61.5

62.8

Female

55.5

54.2

52.3

49.9

50.1

48.9

48.7

47.8

49.5

Male

80.9

79.5

77.4

75.9

76.8

76.0

76.9

76.3

77.3

El Salvador

Nationwide total

Total

62.7

62.8

62.5

62.7

63.2

63.6

63.6

…

…

Female

47.3

47.6

47.3

47.0

47.9

49.3

49.3

…

…

Male

81.4

81.0

80.9

81.2

81.4

80.7

80.7

…

…

Honduras

Nationwide total

Total

51.0

53.1

53.6

51.9

50.8

53.7

56.0

…

…

Female

34.4

35.9

37.4

34.9

33.8

37.2

40.6

…

…

Male

69.3

72.3

71.0

70.4

69.2

72.1

73.6

…

…

Jamaica

Nationwide total

Total

65.4

63.5

62.4

62.3

61.9

63.0

62.8

62.8

63.4 g

Female

57.3

55.7

54.8

54.9

54.9

56.2

55.9

55.6

56.5 g

Male

73.9

71.8

70.4

70.2

69.1

70.0

70.0

70.2

70.4 g

Mexico h

Nationwide total

Total

58.7

58.6

58.4

58.6

59.2 l

60.3

59.8

59.8

59.2

Female

41.5

42.0

41.6

42.0

43.0 l

43.9

43.1

43.1

42.5

Male

78.0

77.1

77.0

76.9

77.1 l

78.5

78.3

78.2

77.6

Nicaragua c

Nationwide total

Total

53.3

51.8 l

71.4

77.0

76.8

75.8

74.2

…

…

Panama

Nationwide total

Total

63.9

64.1

63.5

61.9

63.4

64.1

64.0

64.3

64.9

Female

47.2

48.3

47.5

45.6

48.0

49.2

49.8

50.1

51.2

Male

81.5

80.9

80.4

79.2

80.1

79.7

79.4

79.4

79.5

Paraguay

Nationwide total

Total

61.7

62.9

60.5

60.7

64.3

62.6

61.6

65.9

66.0

Female

47.9

49.7

47.3

48.9

53.8

51.9

49.6

56.7

56.5

Male

75.8

75.9

73.5

72.8

74.7

73.8

74.1

75.7

76.7

Peru

Metropolitan Lima

Total

68.1

68.4

70.0

70.0

69.1

68.9

68.4

69.6

68.5

Female

58.9

60.1

61.7

61.5

60.7

60.6

60.1

61.1

60.7

Male

77.9

77.2

79.0

79.0

78.2

77.9

77.3

78.0

76.7

Trinidad and Tobago

Nationwide total

Total

63.5

62.7

62.1

61.3

61.8

61.3

61.9

…

…

Uruguay

Nationwide total

Total

62.7

63.4

62.9

64.8

64.0

63.6

64.7

65.0

63.8

Female

53.6

54.3

54.0

55.8

55.6

56.4

55.9

56.4

55.6

Male

73.3

74.1

73.1

74.7

73.5

73.9

74.3

74.5

72.8

Venezuela (Bolivarian

Republic of)

Nationwide total

Total

64.9

65.1

64.6

64.4

63.9

64.3

65.3

64.3

64.6 g

Female

50.1

51.0

50.5

50.3

50.1

50.6

52.1

50.0

50.2 g

Male

79.9

79.7

79.2

78.6

77.8

78.1

78.7

78.8

79.4 g

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Preliminary figures.

b The data relating to the different countries are not comparable owing to differences in coverage and in the definition of the working age population. The regional series are simple averages of national data (excluding Nicaragua) and include adjustments for lack of information and changes in methodology.

c New measurements have been used since 2010; the data are not comparable with the previous series.

d New measurements have been used since 2009; the data are not comparable with the previous series.

e The working-age population is measured as follows: for males, 17 to 59 years and for females, 15 to 54 years.

f The series have been changed owing to a rise in the minimum age for work, from 10 to 15 years.

g The figures in the last two columns refer to the measurement of January.

h New measurements have been used since 2013; the data are not comparable with the previous series.

Table A.23

Latin America and the Caribbean: open urban unemployment a

(Average annual rates)

2007

2008

2009

2010

2011

2012

2013

2014

2014

2015 b

First semester

Latin America and the Caribbean c

7.9

7.3

8.1

7.3

6.7

6.4

6.2

6.0

…

…

Argentina

Urban areas

8.5

7.9

8.7

7.7

7.2

7.2

7.1

7.3

7.1

7.1 d

Bahamas e

Nationwide total

7.9

8.7

14.2

…

15.9

14.4

15.8

15.0

…

…

Barbados e

Nationwide total

7.4

8.1

10.0

10.8

11.2

11.6

11.6

12.3

…

…

Belize e

Nationwide total

8.5

8.2

13.1

12.5

…

15.3

13.2

11.6

…

…

Bolivia (Plurinational State of)

Departamental capitals f

7.7

6.7

7.9

6.1

5.8

…

…

...

…

…

Brazil

Six metropolitan areas

9.3

7.9

8.1

6.7

6.0

5.5

5.4

4.8

4.9

6.1 g

Chile h

Nationwide total

7.1

7.8

9.7

8.2

7.1

6.4

5.9

6.4

6.5

6.1 d

Colombia e

Thirteen metropolitan areas

11.4

11.5

13.0

12.4

11.5

11.2

10.6

9.9

10.6

10.4 g

Colombia i

Thirteen metropolitan areas

10.7

11.0

12.4

11.8

10.9

10.6

10.1

9.5

10.1

9.8 g

Costa Rica j

Urban total

4.8

4.8

8.5

7.1

7.7

7.8

8.2

8.5

10.0

10.3 d k

Cuba

Nationwide total

1.8

1.6

1.7

2.5

3.2

3.5

3.3

2.7

…

…

Dominican Republic

Nationwide total

5.1

4.7

5.3

5.0

5.8

6.5

7.0

6.4

…

…

Ecuador e

Urban total

7.4

6.9

8.5

7.6

6.0

4.9

4.7

5.1

5.6

4.8 d

Ecuador i

Urban total

5.5

5.4

6.9

6.1

5.0

4.2

4.0

4.3

4.7

4.3 d

El Salvador

Urban total

5.8

5.5

7.1

6.8

6.6

6.2

5.6

...

…

…

Guatemala l

Urban total

…

…

…

4.8

3.1

4.0

3.8

4.0

…

…

Honduras

Urban total

4.0

4.1

4.9

6.4

6.8

5.6

6.0

7.5

…

…

Jamaica e

Nationwide total

9.8

10.6

11.4

12.4

12.6

13.9

15.2

13.7

13.4

14.2 m

Jamaica i

Nationwide total

6.0

6.9

7.5

8.0

8.4

9.3

10.3

9.5

9.4

10.3 m

Mexico

Urban areas

4.8

4.9

6.7

6.4

5.9

5.8

5.7

5.8

6.0

5.2 g

Nicaragua h

Urban total

5.9

6.1

8.2

7.8

5.9

5.9

5.7

6.8

…

…

Panama e

Urban total

7.8

6.5

7.9

7.7

5.4

4.8

4.7

5.4

5.0

6.0 d

Panama i

Urban total

5.8

5.0

6.3

5.8

3.6

3.6

3.7

4.1

3.7

4.8 d

Paraguay

Asunción and urban areas of the Departamento Central n

7.2

7.4

8.2

7.2

7.1

8.1

8.1

8.0

9.7

8.0 d

Peru

Urban total

8.4

8.4

8.4

7.9

7.7

6.8

5.9

6.0

6.9

7.0 d

Trinidad and Tobago

Nationwide total

5.6

4.6

5.3

5.9

5.1

5.0

3.6

3.3

…

…

Uruguay

Urban total

9.8

8.3

8.2

7.5

6.6

6.7

6.7

6.9

7.1

7.6 o

Venezuela (Bolivarian Republic of)

Nationwide total

8.4

7.3

7.9

8.7

8.3

8.1

7.8

7.0

9.6

7.9 m

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of household surveys.

a Percentage of unemployed population in relation to the total workforce.

b Preliminary figures.

c Weighted average adjusted for lack of information and differences and changes in methodology. The data relating to the different countries are not comparable owing to differences in coverage and in the definition of the working age population.

d The figures in the last two columns refer to the first quarter.

e Includes hidden unemployment.

f Up to 2008, urban areas.

g The figures in the last two columns correspond to the average for January to May.

h New measurements have been used since 2010; the data are not comparable with the previous series.

i Includes an adjustment for workforce figures due to exclusion of hidden unemployment.

j New measurements have been used since 2009; the data are not comparable with the previous series.

k The quarterly figures in the last two columns come from another survey that the annual series and are not comparable with those.

l Owing to methodological changes, as of 2011 the data are not comparable with the previous series.

m The figures in the last two columns refer to the measurement of January.

n Up to 2011, urban total.

o The figures in the last two columns correspond to the average for January to April.

Table A.24

Latin America and the Caribbean: employment rate a

(Average annual rates)

2007

2008

2009

2010

2011

2012

2013

2014 b

2014

2015 b

First semester

Latin America and the Caribbean c

55.0

55.3

55.1

55.7

56.1

56.6

56.5

56.2

…

…

Argentina

Urban areas

54.5

54.2

54.2

54.4

55.2

55.0

54.7

54.0

54.3

53.6 d

Bahamas

Nationwide total

70.2

69.7

63.0

…

60.6

62.1

61.6

62.7

…

…

Barbados

Nationwide total

62.7

62.1

60.3

59.4

60.0

58.5

58.9

56.0

…

…

Bolivia (Plurinational State of)

Departamental capitals e

52.7 l

...

52.4

53.6

…

…

…

…

…

…

Brazil

Six metropolitan areas

51.6

52.5

52.1

53.2

53.7

54.2

54.0

53.3

53.2

52.3 f

Chile g

Nationwide total

51.0

51.7

50.5 l

53.7

55.5

55.7

56.0

56.0

56.2

55.9 d

Colombia

Nationwide total

51.8

51.9

53.9

55.4

56.8

57.9

58.0

58.4

57.2

58.1 f

Costa Rica h

Nationwide total

54.4

53.9 l

55.4

54.8

56.0

55.4

54.7

54.5

…

…

Cuba i

Nationwide total

72.4

73.6

74.2

73.0

73.6

71.6

70.5

70.0

…

…

Dominican Republic

Nationwide total

47.4

47.7

45.8

47.1

48.0

48.2

47.7

49.0

…

…

Ecuador j

Urban total

56.8 l

63.1

60.7

59.3

58.5

59.7

58.9

59.0

58.0

59.7 d

El Salvador

Nationwide total

58.1

59.0

59.2

58.1

58.6

59.4

59.9

…

…

…

Honduras

Nationwide total

49.2

49.4

51.5

51.5

49.7

48.9

51.6

53.1

…

…

Jamaica g

Nationwide total

58.6

58.5

56.3 l

54.6

54.4

53.3

53.4

54.2

54.3

54.4 k

Mexico l

Nationwide total

56.7

56.3

55.4

55.3

55.6

56.3

57.3 l

56.9

59.9

56.8 f

Nicaragua g

Nationwide total

48.6

50.1

47.6 l

65.8

71.1

72.3

71.4

69.2

…

…

Panama

Nationwide total

58.7

60.3

59.9

59.4

59.1

60.8

61.5

60.9

61.5

61.5 d

Paraguay

Nationwide total

57.4

57.0

57.1

57.1

57.3

61.2

59.4

57.9

…

…

Peru

Urban total

63.0

62.4

62.7

64.5

64.5

64.4

64.8

64.3

64.8

63.6 d

Trinidad and Tobago

Nationwide total

59.9

60.6

59.4

58.4

58.2

58.8

59.1

59.9

…

…

Uruguay

Nationwide total

56.7

57.7

58.5

58.4

60.7

59.9

59.5

60.4

60.5

59.3 m

Venezuela (Bolivarian Republic of)

Nationwide total

59.4

60.2

60.0

59.0

59.0

58.7

59.3

60.4

57.8

59.5 k

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Employed population as a percentage of the working-age population.

b Preliminary figures.

c Weighted average adjusted for lack of information and differences and changes in methodology. The data relating to the different countries are not comparable owing to differences in coverage and in the definition of the working age population.

d The figures in the last two columns refer to the first quarter.

e Up to 2007, urban areas.

f The figures in the last two columns correspond to the average for January to May.

g New measurements have been used since 2010; the data are not comparable with the previous series.

h New measurements have been used since 2009; the data are not comparable with the previous series.

i The working-age population is measured as follows: for males, 17 to 59 years and for females, 15 to 54 years.

j New measurements have been used since 2008; the data are not comparable with the previous series.

k The figures in the last two columns refer to the measurement of January.

l New measurements have been used since 2013; the data are not comparable with the previous series.

m The figures in the last two columns correspond to the average for January to April.

Table A.25

Latin America and the Caribbean: registered employment indicators

(Indices 2010=100)

2006

2007

2008

2009

2010

2011

2012

2013

2014 a

2014

2015 a

First semester

Argentina b

84.3

91.3

97.4

97.1

100.0

105.0

107.0

108.6

109.4

109.0

111.5 c

Brazil d

82.5

86.8

92.3

94.2

100.0

105.3

108.6

110.5

112.0

111.6

110.8 e

Chile b

80.1

86.8

93.1

94.2

100.0

105.7

112.1

115.8

117.9

118.5

120.8 f

Costa Rica g

83.8

90.9

97.6

97.0

100.0

103.1

106.7

109.0

110.7

110.9

111.7 f

El Salvador g

93.6

98.4

101.3

98.5

100.0

103.3

105.5

111.0

113.5

…

…

Guatemala g

92.7

97.0

96.9

98.3

100.0

104.3

107.1

110.4

111.8

…

…

Jamaica h

100.6

102.0

104.0

103.0

100.0

99.4

99.0

100.4

…

…

…

Mexico g

93.5

97.4

99.4

96.3

100.0

104.3

109.2

113.0

117.0

116.2

120.4 e

Nicaragua g

78.6

85.8

92.2

94.2

100.0

108.1

116.6

125.9

132.8

130.7

139.6 f

Panama g i

73.3

83.6

96.6

98.5

100.0

110.3

117.8

122.5

125.0

123.4

126.5 c

Peru h

80.9

87.5

94.8

96.0

100.0

105.4

109.6

112.7

114.8

110.8

112.0 c

Uruguay j

78.3

85.1

91.7

94.4

100.0

104.9

108.9

110.9

111.7

112.1

111.7 f

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Preliminary figures.

b Dependent workers paying into pension schemes.

c The figures in the last two columns refer to the first quarter.

d Workers covered by social and labour legislation.

e The figures in the last two columns correspond to the average for January to May.

f The figures in the last two columns correspond to the average for January to April.

g Workers with social security coverage.

h Workers at firms with 10 or more employees.

i The variations between 2012 and 2013, between 2013 and 2014, and between the first quarter of 2014 and the first quarter of 2015 refer to workers in small, medium-sized and large businesses in manufacturing, commerce and services.

j Employement positions generating social security contributions.

Table A.26

Latin America: time-related underemployment

(Percentages of employed workers)

2007

2008

2009

2010

2011

2012

2013

2014 a

Argentina b

Urban areas

10.4

9.5

11.1

9.8

9.1

9.3

9.2

9.6

Brazil c

Six metropolitan areas

3.6

3.1

3.1

2.7

2.3

2.0

1.8

1.5

Chile d

Nationwide total

8.0

9.0

10.8 l

11.5

11.9

11.5

11.6

11.3

Colombia e

Thirteen metropolitan areas

10.0

9.1

9.5

12.0

11.1

11.7

11.9

10.6

Costa Rica f

Nationwide total

11.5

10.5 l

13.5

11.2

13.4 l

11.3

12.5

12.8

Ecuador c

Urban total

11.3

11.9

12.6

12.1

9.8

8.2

8.9

9.3

El Salvador c

Urban total

5.3

6.3

7.7

7.0

3.4

5.8

5.8

…

Honduras g

Urban total

4.3

3.5

4.4

6.7

10.6

10.1

11.6

10.4

Mexico h

Nationwide total

7.2

6.8

8.8

8.7

8.6

8.5

8.3

8.1

Panama c

Urban total

2.7

2.1

2.1

1.8

1.3

1.9

2.0

1.8

Paraguay i

Urban total j

5.8

6.6

8.2 l

7.3

6.3

5.4

5.1

4.9

Peru b

Metropolitan Lima

16.5

15.6

15.4

14.5

12.4

12.0

11.6

11.3

Uruguay c

Urban total

12.9

10.8

9.2

8.9

7.6

7.4

6.9

6.9

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Preliminary figures.

b Employed persons who work less than 35 hours per week and wish to work more hours.

c Employed persons who work less than 40 hours per week and wish to work more hours.

d Employed persons who work less than 30 hours per week and wish to work more hours. Up to 2009, refers to employed persons who work less than 35 hours per week and wish to work more hours. The series 2004-2005, 2006-2009 and 2010-2012 are not comparable owing to a change in sample in the first case and measurement changes in the last two.

e Employed persons who work less than 48 hours per week and wish to work more hours.

f Employed persons wishing to work more than their current job permits. Up to 2008, employed persons who work less than 47 hours per week and wish to work more hours.

g Employed persons who work less than 36 hours per week and wish to work more hours.

h Employed persons wishing to work more than their current job permits.

i Employed persons who work less than 30 hours per week and wish to work more hours.

j As of 2010, the figures relate to Asuncion and urban areas of the Central Department.

Table A.27

Latin America: real average wages a

(Indices 2005=100)

2007

2008

2009

2010

2011

2012

2013

2014 b

2014

2015 b

First semester

Bolivia (Plurinational State of) c

102.2

94.4

96.5

100.0

98.2

99.3

100.3

100.9 d

...

...

Brazil e

94.3

96.3

98.5

100.0

101.4

104.9

107.1

108.8

108.5

106.8 f

Chile g

93.6

93.4

97.9

100.0

102.5

105.8

109.9

111.9

111.6

114.4 h

Colombia i

97.6

96.1

97.3

100.0

100.3

101.3

104.0

104.5

103.7

106.3 h

Costa Rica j

92.8

90.9

97.9

100.0

105.7

107.1

108.5

110.7

...

...

Cuba

92.7

92.8

97.0

100.0

100.2

100.7

101.2

...

...

...

El Salvador k

98.7

95.6

98.9

100.0

97.1

97.3

97.8

98.5

...

...

Guatemala j

99.7

97.1

97.2

100.0

100.4

104.4

104.3

106.8

...

...

Mexico j

101.7

101.9

100.9

100.0

100.8

101.0

100.9

101.3

101.9

103.1 f

Nicaragua j

97.2

93.3

98.8

100.0

100.1

100.5

100.7

102.4

102.6

105.0 h

Panama j l

94.7

90.9

93.3

100.0

100.1

103.5

103.8

109.5

...

...

Paraguay

95.7

95.0

99.4

100.0

102.8

103.5

105.7

107.1

...

...

Peru m

97.9

100.0

103.1

100.0

108.4

111.0

114.7

117.9

115.2

119.4 n

Uruguay

87.1

90.2

96.8

100.0

104.0

108.4

111.7

115.4

114.4

118.0 f

Venezuela (Bolivarian Republic of)

117.4

112.1

105.6

100.0

103.0

109.1

104.3

...

...

...

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Figures deflated by the official consumer price index of each country.

b Preliminary figures.

c Private-sector average wage index.

d Figures as of June.

e Private-sector workers covered by social and labour legislation.

f The figures in the last two columns correspond to the average for January to May.

g General index of hourly remuneration.

h The figures in the last two columns correspond to the average for January to April.

i Manufacturing.

j Average wage declared by workers covered by social security.

k Gross salary.

l The variations between 2012 and 2013, and between 2013 and 2014, corresponds to workers of small, medium and large enterprises in manufacturing, commerce and services.

m Wages of dependent workers in the Lima metropolitan area. Up to 2009, private-sector workers in the Lima metropolitan area.

n The figures in the last two columns refer to the first quarter.

Table A.28

Latin America and the Caribbean: monetary indicators

(Percentage variation with respect to the year-earlier period)

2010

2011

2012

2013

2014

2015

Q1

Q2

Q3

Q4

Q1

Q2 a

Latin America and the Caribbean

Argentina

Monetary base

25.1

37.1

34.9

30.2

20.2

18.1

19.5

20.9

27.2

30.9

Money (M1)

24.1

32.4

33.3

29.5

26.9

23.2

23.3

30.2

26.4

21.2 b

M2

27.6

36.9

32.4

30.9

23.6

22.2

21.6

24.8

29.6

24.9 b

Foreign-currency deposits

35.9

8.7

-22.6

-6.1

57.6

55.2

50.6

44.7

19.2

23.9 b

Bolivia (Plurinational

State of)

Monetary base

32.4

11.6

18.2

10.8

0.7

7.3

9.7

20.0

24.9 c

…

Money (M1)

24.1

27.2

18.3

13.5

16.0

15.6

14.6

15.4

13.8 c

…

M2

34.6

34.0

31.3

22.6

20.0

19.0

17.1

19.0

18.7 c

…

Foreign-currency deposits

4.7

-12.8

-5.0

-4.1

-5.4

-3.0

-2.6

-2.5

0.3 c

…

Brazil

Monetary base

17.5

11.0

9.4

5.5

7.4

5.6

6.7

8.9

6.3

8.5

Money (M1)

17.5

6.1

5.9

10.7

8.2

4.2

3.1

3.5

1.7

-0.5

M2

11.1

21.0

13.4

9.3

13.0

12.3

11.3

10.4

8.7

7.0

Chile

Monetary base

13.8

14.8

13.7

16.3

7.9

5.4

5.9

2.2

10.3

12.0

Money (M1)

27.7

10.9

9.1

10.1

13.0

11.3

11.5

12.8

14.4

16.2

M2

5.1

14.7

14.7

9.7

13.5

6.3

6.6

8.7

7.9

11.5

Foreign-currency deposits

8.5

11.8

8.9

18.7

29.0

32.0

25.5

29.9

28.0

10.9

Colombia

Monetary base

12.4

15.1

9.5

12.5

19.3

18.2

17.0

13.0

11.7

11.9

Money (M1)

14.7

16.2

6.7

14.3

19.0

16.0

12.9

12.6

9.9

7.7

M2

6.9

14.8

16.9

17.5

16.4

14.4

11.9

9.9 d

…

…

Costa Rica

Monetary base

10.0

11.7

12.1

14.1

13.4

12.9

10.2

10.6

11.4

8.2 b

Money (M1)

9.5

19.2

9.4

11.9

14.9

14.6

12.4

10.2

4.2

9.3 b

M2

2.6

11.1

13.8

13.0

14.3

15.1

14.7

13.7

10.7

14.8 b

Foreign-currency deposits

-1.9

-7.1

-1.2

0.1

7.6

12.9

16.7

14.8

5.9

1.8 b

Dominican Republic

Monetary base

6.4

5.8

9.0

3.9

-0.7

-2.5

8.3

8.7

20.9

24.9

Money (M1)

17.5

4.9

7.3

12.1

13.7

13.9

12.9

14.0

12.0

14.2

M2

13.5

8.8

12.1

8.0

10.5

11.2

11.0

12.0

10.5

10.9

Foreign-currency deposits

18.9

17.8

18.4

16.1

18.4

12.3

7.7

8.4

6.6

7.8

Ecuador

Monetary base

24.1

9.9

16.1

23.3

22.0

16.6

15.8

16.0

14.0

18.9 b

Money (M1)

16.1

15.5

14.0

14.8

11.7

12.2

17.0

16.7

15.3

11.8 b

M2

18.6

20.0

17.8

13.4

13.3

13.7

15.7

15.2

12.3

9.0 b

El Salvador

Monetary base

0.4

-1.3

1.8

4.8

3.5

2.8

1.3

3.4

-1.4

0.6 b

Money (M1)

19.8

10.4

4.4

2.9

5.1

5.7

3.2

2.1

1.5

5.2

M2

1.6

-2.1

0.5

1.8

1.2

0.3

0.3

1.2

0.9

3.9

Guatemala

Monetary base

8.0

10.1

5.8

9.2

3.9

5.6

6.5

7.2

11.2

11.9 b

Money (M1)

7.2

9.1

5.8

7.0

3.2

5.2

5.6

6.7

11.1

11.5 b

M2

8.4

10.6

9.4

9.7

7.6

8.1

8.3

8.4

11.2

10.6 b

Foreign-currency deposits

11.6

4.9

3.2

11.2

13.5

8.4

8.9

7.1

5.3

9.0 b

Haiti

Monetary base

34.1

18.1

9.2

0.4

-3.1

-6.9

-0.8

6.6

7.3

…

Money (M1)

26.9

14.4

8.7

11.1

4.9

2.1

9.3

17.2

14.9

…

M2

17.4

11.5

5.7

9.3

6.0

5.7

8.8

12.5

12.3

…

Foreign-currency deposits

22.5

18.4

6.9

8.2

6.0

8.3

9.3

10.2

11.6

…

Honduras

Monetary base

-13.8

10.7

11.3

4.0

3.5

8.6

11.1

15.5

22.6

14.2 b

Money (M1)

5.2

17.7

2.1

-5.0

5.4

8.2

7.3

12.8

18.7

17.9 b

M2

4.7

17.2

8.7

3.6

8.1

8.6

9.3

9.7

12.9

10.7 b

Foreign-currency deposits

5.4

7.8

15.3

12.6

6.4

3.4

7.2

12.0

13.8

13.8 b

Mexico

Monetary base

9.7

9.5

13.9

6.3

9.4

13.6

15.1

15.8

20.2

20.3

Money (M1)

11.2

16.2

13.7

7.5

12.5

13.7

13.7

15.6

16.8

16.9

M2

5.8

12.4

10.7

7.1

10.5

11.9

10.3

11.3

13.6

13.3

Foreign-currency deposits

0.9

3.0

16.8

13.3

28.3

33.1

25.6

20.2

32.9

34.9

Nicaragua

Monetary base

24.0

20.5

18.3

6.3

12.0

17.4

10.3

12.2

19.3

…

Money (M1)

21.4

24.8

17.6

8.5

14.7

17.9

17.9

15.5

19.3 c

23.1 b

M2

21.4

24.8

17.6

8.5

14.7

17.9

17.9

15.5

19.3

23.1 b

Foreign-currency deposits

25.8

7.8

21.2

13.6

21.0

20.2

22.3

18.1

14.6

13.6 b

Panama

Monetary base

7.5

27.1

12.7

16.0

-33.5

-10.4

9.3

26.3

90.4

153.1 b

Money (M1)

19.2

21.5

17.1

6.9

9.9

10.6

13.4

20.9

6.5

-1.2 b

M2

11.3

9.9

10.8

6.3

8.5

9.2

10.2

22.3

8.7

3.9 b

Paraguay

Monetary base

5.2

5.0

11.8

5.1

4.3

8.1

9.3

11.5

14.5

12.4

Money (M1)

28.7

7.8

8.6

15.6

8.0

5.2

12.2

12.9

14.6

16.0

M2

26.4

14.0

13.7

17.4

11.4

7.9

11.7

11.4

13.2

14.7

Foreign-currency deposits

16.4

13.5

14.9

15.8

36.1

31.9

24.6

26.1

19.7

16.5

Peru

Monetary base

24.2

31.3

31.2

21.1

-10.0

-11.4

-7.7

-5.4

-0.2

-1.2

Money (M1)

28.0

19.9

18.9

14.0

4.0

3.3

3.7

6.9

8.0

6.2

M2

27.8

18.8

23.6

18.5

-1.6

-0.8

2.1

4.1

6.9

5.1

Foreign-currency deposits

-0.1

14.1

0.2

16.0

47.7

29.4

7.9

4.7

3.2

12.1

Uruguay

Monetary base

12.9

23.1

21.8

15.3

15.9

6.3

18.9

3.9

7.5

6.7

Money (M1)

24.6

19.6

18.4

11.7

9.0

6.1

6.3

3.0

7.8

7.0

M2

25.8

26.0

17.4

12.4

12.0

8.3

7.9

6.6

9.7

8.6

Foreign-currency deposits

2.3

10.7

19.6

14.8

30.4

27.3

21.0

25.4

21.8

25.7

Venezuela (Bolivarian

Republic of)

Monetary base

24.5

27.0

40.8

61.1

83.0

97.4

91.8

77.7

74.3

…

Money (M1)

27.5

44.8

62.0

66.1

76.8

74.5

67.8

62.7

62.7

…

M2

18.0

37.6

57.5

65.4

75.8

73.9

67.6

62.7

63.1

…

The Caribbean

Antigua and Barbuda

Monetary base

0.9

20.1

29.4

13.2

…

…

…

…

…

…

Money (M1)

-7.3

-6.6

-2.1

3.1

19.6

12.6

6.4

8.0

1.4 c

…

M2

-3.1

-1.1

1.7

2.8

4.3

3.4

2.7

3.4

2.3 c

…

Foreign-currency deposits

-45.2

5.8

-12.8

0.9

29.8

38.1

9.9

4.4

1.9 c

…

Bahamas

Monetary base

2.5

26.8

-7.8

2.2

18.3

11.0

12.3

14.2

…

…

Money (M1)

2.8

6.2

8.6

5.6

3.9

5.4

6.8

17.2

…

…

M2

2.8

2.3

1.1

-0.6

-1.4

-0.6

0.6

2.0

...

…

Foreign-currency deposits

0.1

-2.7

11.6

15.8

23.3

11.2

-12.6

-21.4

...

…

Barbados

Monetary base

3.4

7.7

-0.9

10.6

-5.5

-0.2

10.6

19.2

28.3

31.4

Money (M1)

1.7

-0.5

-20.3

5.5

9.5

11.3

7.2

9.7

6.2

14.1 b

M2

-0.8

0.3

-5.7

3.5

2.6

3.0

-0.1

0.7

-0.3

4.5 b

Belize

Monetary base

-1.2

8.2

17.5

19.2

16.4

16.4

18.1

24.0

24.4

21.8 b

Money (M1)

-0.9

9.1

24.0

13.7

10.3

12.6

14.1

18.8

14.2

11.8 b

Dominica

Monetary base

9.7

8.5

17.8

-0.0

…

…

…

…

…

…

Money (M1)

-1.5

-2.1

9.8

2.5

0.9

0.9

-2.5

9.8

6.6 c

…

M2

3.8

3.2

7.0

4.5

4.9

7.7

6.0

7.6

5.9 c

…

Foreign-currency deposits

30.2

38.8

25.4

-6.1

1.6

12.0

12.3

29.5

31.2 c

…

Grenada

Monetary base

6.0

7.2

4.7

5.4

…

…

…

…

…

…

Money (M1)

3.8

-7.3

2.9

5.4

13.9

28.5

29.9

24.5

24.0 c

…

M2

3.4

0.4

1.8

3.0

3.5

6.0

6.1

5.1

4.4 c

…

Foreign-currency deposits

-3.9

-5.5

5.5

-18.8

9.9

9.9

4.1

7.5

0.7 c

…

Guyana

Monetary base

17.7

17.4

15.2

6.6

-2.9

0.9

4.2

7.7

12.7

13.2 b

Money (M1)

12.9

21.9

16.1

6.7

6.8

8.8

10.5

14.0

10.8

11.0 b

Jamaica

Monetary base

5.5

5.3

6.3

6.3

5.5

5.9

6.3

5.9

8.3

9.0

Money (M1)

7.0

7.8

4.7

5.9

4.4

2.6

2.6

10.4

15.5

…

M2

6.1

5.6

3.3

6.4

4.2

1.8

0.1

4.4

7.5

…

Foreign-currency deposits

-0.9

-4.8

6.8

28.5

12.8

9.1

6.0

9.2

9.1

…

Saint Kitts and Nevis

Monetary base

-3.2

36.1

13.7

22.2

…

…

…

…

…

…

Money (M1)

16.8

28.6

18.2

12.3

4.5

-2.2

-2.8

7.2

4.7 c

…

M2

9.4

10.7

8.8

6.4

9.5

7.9

3.8

4.6

3.2 c

…

Foreign-currency deposits

-9.0

-1.0

6.4

35.6

45.1

51.4

47.7

42.2

34.6 c

…

Saint Lucia

Monetary base

3.6

16.3

4.2

8.0

…

…

…

…

…

…

Money (M1)

-4.3

4.0

3.2

2.2

3.8

5.6

10.5

8.9

7.9 c

…

M2

0.2

4.9

3.7

3.5

1.4

-3.1

-1.6

-0.6

-0.4 c

…

Foreign-currency deposits

-13.2

16.4

14.0

-10.1

14.5

69.6

55.5

39.2

41.3 c

…

Saint Vincent and

the Grenadines

Monetary base

11.9

0.8

11.8

26.2

…

…

…

…

…

…

Money (M1)

-0.5

-3.9

-0.4

9.6

6.8

5.2

3.9

7.1

13.7 c

…

M2

2.2

1.9

1.2

8.6

9.4

8.3

7.3

7.6

8.0 c

…

Foreign-currency deposits

-7.7

30.8

-7.3

29.2

7.4

37.2

1.8

16.4

39.6 c

…

Suriname

Monetary base

13.0

3.2

27.0

13.8

-11.0

-6.1

-5.3

-6.1

-10.2

-15.0

Money (M1)

16.7

5.3

17.0

11.3

1.6

7.3

6.6

6.1

3.4

-8.2 b

M2

18.2

7.0

20.0

17.7

6.9

9.2

9.1

7.2

4.8

-4.6 b

Foreign-currency deposits

7.9

39.1

13.6

10.8

13.8

15.5

10.7

6.4

5.2

5.8 b

Trinidad and Tobago

Monetary base

24.7

14.1

15.4

19.5

12.3

11.8

2.1

6.4

-4.4

-6.0 b

Money (M1)

25.5

17.2

15.4

19.2

22.2

26.0

16.4

15.4

6.1

-0.3 b

M2

17.9

8.4

12.0

11.8

12.4

13.9

9.8

10.4

6.6

3.8 b

Foreign-currency deposits

7.9

-4.0

4.7

12.6

-9.3

-4.3

-7.0 e

…

…

…

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Figures as of May.

b Figures as of April.

c Figures as of February.

d Figures as of October.

e Figures as of July.

Table A.29

Latin America and the Caribbean: domestic credit

(Percentage variation with respect to the year-earlier period)

2010

2011

2012

2013

2014

2015

Q1

Q2

Q3

Q4

Q1

Q2 a

Latin America

Argentina

51.3

59.5

33.0

40.8

29.6

25.4

20.4

25.3

31.0

32.3 b

Bolivia (Plurinational State of)

13.0

18.8

22.7

21.6

19.2

18.6

17.0

16.9

…

…

Brazil

18.0

17.6

16.8

11.9

7.2

7.9

11.0

12.0

12.3

1.1 b

Chile

-0.1

12.1

15.1

9.3

9.7

7.1

6.8

7.6

5.4

…

Colombia

20.6

15.1

14.6

14.1

14.7

13.5

12.8

14.3

…

…

Costa Rica

4.6

12.4

11.7

9.2

18.7

20.6

21.5

20.1

13.0

16.3 b

Dominican Republic

7.5

9.5

12.1

12.4

12.5

10.8

9.4

13.9

10.2

15.2 b

Ecuador

33.6

31.5

21.5

16.7

20.2

19.4

12.1

15.1

14.5

11.7 b

El Salvador

2.2

3.5

9.6

5.5

10.8

12.0

9.2

6.7

6.8

6.2 b

Guatemala

5.6

15.2

11.3

12.6

12.8

13.5

11.1

11.2

12.0

11.5 b

Haiti

-23.0

-17.1

11.4

70.0

31.9

33.7

28.1

31.2

26.2

…

Honduras

10.0

10.8

18.0

9.6

7.2

8.2

6.2

6.3

9.1

8.8 b

Mexico

10.6

11.3

10.7

9.4

9.4

9.9

11.0

10.1

11.6

11.7 b

Nicaragua

-3.7

-6.3

22.5

24.8

14.9

12.4

12.1

8.0

10.6

11.3 b

Panama

9.5

18.8

18.1

12.9

13.9

14.1

11.5

19.0

5.7

6.1 b

Paraguay c

36.3

25.5

28.4

20.8

18.5

12.9

6.1

12.8

21.6

22.6

Peru

24.1

12.0

9.5

6.2

9.9

17.2

20.8

22.0

17.7

18.3

Uruguay

3.9

24.7

19.4

16.5

19.8

22.1

14.4

19.9

4.3

-1.1

Venezuela (Bolivarian Republic of) d

13.7

36.0

56.1

61.9

66.6

65.4

62.2

66.6

63.7 e

…

The Caribbean

Antigua and Barbuda

0.6

-3.8

-3.0

-4.9

1.3

1.9

-1.5

-3.2

-4.2 f

…

Bahamas

3.4

0.8

4.0

1.9

-0.8

-0.1

0.5

0.2

…

…

Barbados

-0.5

-0.9

6.6

8.0

5.7

5.5

0.8

-2.3

-0.8

0.2 b

Belize

-0.4

-1.6

0.4

-2.6

-3.4

-3.0

-0.2

3.9

4.0

5.6 b

Dominica

12.5

13.7

7.6

7.7

4.4

2.6

-0.5

0.4

3.0 f

…

Grenada

3.9

2.6

5.0

-2.1

-8.7

-8.2

-8.9

-10.3

-10.2 f

…

Guyana

-0.8

34.5

40.1

26.3

22.7

18.0

9.7

14.3

12.0

3.7 b

Jamaica

-3.4

-4.1

11.7

16.0

11.8

16.3

13.3

15.6

6.2

…

Saint Kitts and Nevis

6.3

0.2

-9.0

-20.9

-25.4

-21.2

-15.3

-11.3

-8.7 f

…

Saint Lucia

-0.3

2.9

6.6

5.4

0.4

0.2

-4.0

-8.9

-10.4 f

…

Saint Vincent and the Grenadines

1.5

-7.2

-1.0

6.4

3.2

4.0

4.8

2.8

3.3 f

…

Suriname

21.4

20.8

10.3

23.5

24.4

20.5

21.9

20.9

19.9

20.6 b

Trinidad and Tobago

36.6

9.3

7.9

-20.4

-23.4

-30.5

-13.1

-26.2

-32.4

-31.0 b

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Figures as of May.

b Figures as of April.

c Credit granted to the private sector by the banking sector.

d Credit granted by the commercial and universal banks.

e Figures as of January.

f Figures as of February.

Table A.30

Latin America and the Caribbean: monetary policy rates

(Average rates)

2010

2011

2012

2013

2014

2015

Q1

Q2

Q3

Q4

Q1

Q2

Latin America

Argentina

12.3

11.8

12.8

14.6

25.8

27.3

26.7

26.9

26.5

26.2 a

Bolivia (Plurinational State of)

3.0

4.0

4.0

4.0

4.5

5.3

6.0

4.0

3.3

2.9 b

Brazil

9.9

11.8

8.6

8.3

10.6

11.0

11.0

11.3

12.3

13.0 b

Chile

1.5

4.8

5.0

4.9

4.3

4.0

3.5

3.1

3.0

3.0 b

Colombia

3.2

4.0

5.0

3.4

3.3

3.5

4.3

4.5

4.5

4.5 b

Costa Rica

8.1

5.6

5.0

4.5

4.1

5.1

5.3

5.3

4.9

4.1

Dominican Republic

4.2

6.4

5.9

5.2

6.3

6.3

6.3

6.3

6.3

5.5 b

Guatemala

4.5

4.9

5.3

5.1

5.0

4.8

4.5

4.3

3.8

3.5 b

Haiti

5.0

3.2

3.0

3.0

3.0

5.0

5.0

5.3

8.0

...

Honduras

4.5

4.8

6.6

7.0

7.0

7.0

7.0

7.0

6.8

6.5 b

Mexico

4.5

4.5

4.5

4.0

3.5

3.3

3.0

3.0

3.0

3.0 b

Paraguay

2.2

7.9

6.0

5.5

6.6

6.8

6.8

6.8

6.8

6.3

Peru

2.1

4.0

4.3

4.2

4.0

4.0

3.7

3.5

3.3

3.3 a

Uruguay c

6.3

7.5

8.8

9.3

…

…

…

…

…

…

Venezuela (Bolivarian Republic of)

6.3

6.4

6.4

6.2

6.4

6.5

6.4

6.4

6.3 d

...

The Caribbean

Antigua and Barbuda

6.5

6.5

6.5

6.5

6.5

6.5

6.5

6.5

6.5

6.5 a

Bahamas

5.3

4.8

4.5

4.5

4.5

4.5

4.5

4.5

4.5

4.5 a

Barbados

7.0

7.0

7.0

7.0

7.0

7.0

7.0

7.0

7.0

…

Belize

18.0

11.0

11.0

11.0

11.0

11.0

11.0

11.0

11.0 d

…

Dominica

6.5

6.5

6.5

6.5

6.5

6.5

6.5

6.5

6.5

6.5 b

Grenada

6.5

6.5

6.5

6.5

6.5

6.5

6.5

6.5

6.5

…

Guyana

6.4

5.4

5.4

5.0

5.0

5.0

5.0

5.0

5.0

…

Jamaica

9.0

6.6

6.3

5.8

5.8

5.8

5.8

5.8

5.8 e

…

Saint Kitts and Nevis

6.5

6.5

6.5

6.5

6.5

6.5

6.5

6.5

6.5

…

Saint Lucia

6.5

6.5

6.5

6.5

6.5

6.5

6.5

6.5

6.5

…

Saint Vincent and the Grenadines

6.5

6.5

6.5

6.5

6.5

6.5

6.5

6.5

6.5

…

Trinidad and Tobago

4.7

3.2

2.9

2.8

2.8

2.8

2.8

3.1

3.4

3.8 a

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Figures as of April.

b Figures as of May.

c As of June 2013, stop using the interest rate as an instrument of monetary policy.

d Figures as of February.

e Figures as of January.

Table A.31

Latin America and the Caribbean: representative lending rates

(Average rates)

2010

2011

2012

2013

2014

2015

Q1

Q2

Q3

Q4

Q1

Q2

Latin America

Argentina a

15.2

17.7

19.3

21.6

30.9

30.1

28.4

27.8

27.4

27.2 b

Bolivia (Plurinational State of) c

5.2

6.3

6.7

7.0

6.8

6.6

6.4

6.4

6.5

6.4 b

Brazil d

42.9

44.9

39.9

38.8

43.3

44.9

44.9

45.4

46.6

48.3 b

Chile e

11.8

12.4

13.5

13.2

12.1

11.7

10.4

9.0

9.7

10.2

Colombia f

9.4

11.2

12.6

11.0

10.8

10.5

11.3

10.9

11.4

11.2 b

Costa Rica g

19.8

18.1

19.7

17.4

16.4

16.8

16.6

16.7

16.7

16.0 b

Dominican Republic h

8.3

11.7

12.2

10.7

10.8

10.6

10.2

10.8

11.0

11.2 b

Ecuador i

9.0

8.3

8.2

8.2

8.2

8.0

8.1

8.2

7.5

8.3 b

El Salvador j

7.6

6.0

5.6

5.7

6.0

5.9

6.1

6.0

6.0

6.1 b

Guatemala g

13.3

13.4

13.5

13.6

13.8

13.8

13.8

13.7

13.5

13.3 b

Haiti k

20.7

19.8

19.4

18.9

18.5

19.0

18.3

18.5

19.1 l

…

Honduras g

18.9

18.6

18.4

20.1

20.5

20.6

20.6

20.7

20.8

20.7 m

Mexico n

5.3

4.9

4.7

4.3

3.9

3.7

3.3

3.3

3.4

3.5 b

Nicaragua o

13.3

10.8

12.0

15.0

14.6

14.5

13.2

11.8

11.5

12.3 b

Panama p

7.9

7.3

7.0

7.4

7.6

7.7

7.6

7.4

7.7

7.4 m

Paraguay q

12.5

16.9

16.6

16.6

17.6

15.8

14.9

14.4

14.3

14.9 m

Peru r

19.0

18.7

19.2

18.1

15.8

15.7

15.8

15.6

16.1

16.0 b

Uruguay s

12.0

11.0

12.0

13.3

17.5

18.2

16.3

16.7

17.3

16.6 b

Venezuela (Bolivarian Republic of) t

18.0

17.4

16.2

15.6

15.9

16.5

17.6

18.9

18.8

19.5 b

The Caribbean

Antigua and Barbuda u

10.2

10.1

9.4

9.4

9.7

9.6

9.6

9.5

…

…

Bahamas v

11.0

11.0

10.9

11.2

11.1

12.0

12.1

12.1

11.9

12.2 m

Barbados u

9.5

9.3

8.6

8.5

8.6

8.5

8.5

8.6

8.6

8.5 m

Belize v

13.9

13.3

12.3

11.5

11.1

10.9

10.8

10.7

10.5

10.4 m

Dominica u

9.4

8.7

8.9

9.0

8.9

8.9

8.8

8.8

…

…

Grenada u

10.3

10.4

9.5

9.1

9.1

9.0

9.2

9.0

…

…

Guyana h

15.2

14.7

14.0

12.1

11.2

11.2

11.2

11.0

10.9

10.9 m

Jamaica w

20.3

18.3

17.8

16.3

15.6

14.8

14.9

15.0

15.0

15.0 m

Saint Kitts and Nevis u

8.5

9.2

8.5

8.4

8.8

8.9

8.7

8.6

…

…

Saint Lucia u

9.5

9.2

8.6

8.4

8.4

8.4

8.4

8.5

…

…

Saint Vincent and the Grenadines u

9.0

9.0

9.3

9.2

9.4

9.4

9.4

7.9

…

…

Suriname x

11.7

11.8

11.7

12.0

12.2

12.2

12.3

12.4

12.3

12.5 m

Trinidad and Tobago h

9.2

8.0

7.7

7.5

7.5

7.5

7.5

7.6

7.8

8.1

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Local-currency loans to the non-financial private sector, at fixed or renegotiable rates, signature loans of up to 89 days.

b Figures as of May.

c Nominal local-currency rate for 60-91-day operations.

d Interest rate on total consumer credit.

e Non-adjustable 90-360 day operations.

f Weighted average of consumer, prime, ordinary and treasury lending rates for the working days of the month. Owing to the high turnover of treasury credit, its weighting was set at one fifth of the amount disbursed daily.

g Weighted average of the system lending rates in local currency.

h Average of the benchmark lending rate.

i Effective benchmark lending rate for the corporate commercial segment.

j Basic lending rate for up to one year.

k Average of minimum and maximum lending rates.

l Figures as of February.

m Figures as of April.

n Weighted average rate of private debt issues of up to 1 year, expressed as a 28-day curve. Includes only stock certificates.

o Weighted average of short-term lending rates in local currency.

p Interest rate on one-year trade credit.

q Commercial lending rate, local currency.

r Market lending rate, average for transactions conducted in the last 30 business days.

s Business credit, 30-367 days.

t Average rate for loan operations for the six major commercial banks.

u Lending rate, weighted average.

v Weighted average of lending and overdraft rates.

w Rate for personal and business loans, residential and other construction loans; weighted average.

x Average lending rate.

Table A.32

Latin America and the Caribbean: consumer prices

(12-month percentage variation)

2010

2011

2012

2013

2014

2015

March

June

September

December

March

May

Latin America and the Caribbean a

6.5

6.9

5.7

7.6

8.4

8.9

9.3

9.5

…

…

Latin America and the Caribbean b

5.4

5.7

4.9

4.9

5.7

6.1

6.4

6.3

6.1

6.0

Latin America

Argentina

10.9

9.5

10.8

10.9

19.2

21.9

23.8

23.9

16.5

15.3

Bolivia (Plurinational State of)

7.2

6.9

4.5

6.5

6.1

7.3

4.3

5.2

4.8

4.1

Brazil

5.9

6.5

5.8

5.9

6.2

6.5

6.7

6.4

8.1

8.5

Chile

3.0

4.4

1.5

3.0

3.9

4.8

5.1

4.6

4.2

4.0

Colombia

3.2

3.7

2.4

1.9

2.5

2.8

2.9

3.7

4.6

4.4

Costa Rica

5.8

4.7

4.5

3.7

3.3

4.0

5.2

5.1

3.0

1.0

Cuba c

1.5

1.3

2.0

0.0

0.6

0.7

1.6

2.1

…

…

Dominican Republic

6.3

7.8

3.9

3.9

3.0

3.7

2.8

1.6

0.6

0.2

Ecuador

3.3

5.4

4.2

2.7

3.1

3.7

4.2

3.7

3.8

4.5

El Salvador

2.1

5.1

0.8

0.8

0.4

1.1

1.7

0.5

-0.8

-0.4

Guatemala

5.4

6.2

3.4

4.4

3.2

3.1

3.5

2.9

2.4

2.6

Haiti

6.2

8.3

7.6

3.4

3.2

4.2

5.3

6.4

6.4

6.6

Honduras

6.5

5.6

5.4

4.9

5.8

6.2

6.1

5.8

3.7

3.5

Mexico

4.4

3.8

3.6

4.0

3.8

3.8

4.2

4.1

3.1

2.9

Nicaragua

9.1

8.6

7.1

5.4

5.1

6.0

6.5

6.4

5.9

5.1

Panama

4.9

6.3

4.6

3.7

3.3

3.4

2.3

1.0

0.0

0.4

Paraguay

7.7

4.9

4.0

3.7

6.1

6.4

4.1

4.2

2.6

3.3

Peru

2.1

4.7

2.6

2.9

3.4

3.5

2.7

3.2

3.0

3.4

Uruguay

6.9

8.6

7.5

8.5

9.7

9.1

8.4

8.3

7.6

8.4

Venezuela (Bolivarian Republic of)

27.2

27.6

20.1

56.2

59.3

60.5

64.0

68.5

…

…

The Caribbean

Antigua and Barbuda

2.9

4.0

1.8

1.1

0.7

0.8

1.6

1.3

1.4

…

Bahamas

1.4

3.2

0.7

0.8

1.2

1.2

1.3

0.2

1.5

1.6 d

Barbados

6.5

9.6

2.4

1.1

1.2

1.9

2.0

2.3

-0.8

…

Belize

0.0

2.6

0.8

1.6

1.4

1.5

0.9

-0.2

-0.9

-0.9

Dominica

2.3

1.3

3.4

-0.4

0.5

1.9

0.9

0.5

-2.5

…

Grenada

4.2

3.5

1.8

-1.2

-1.7

-1.3

0.1

-0.6

-1.0

…

Guyana

4.4

3.3

3.5

0.9

1.0

0.3

0.3

1.2

-1.0

…

Jamaica

11.7

6.0

8.0

9.7

8.3

8.0

9.0

6.2

4.0

3.9

Saint Kitts and Nevis

5.2

2.9

0.0

0.4

0.4

1.1

1.1

1.2

0.0

…

Saint Lucia

4.2

4.8

5.0

-0.7

3.7

2.5

5.5

3.7

-1.0

…

Saint Vincent and the Grenadines

0.9

4.7

1.0

0.0

-0.4

-0.2

0.3

0.1

-1.8

…

Suriname

10.3

15.3

4.4

0.6

3.0

2.1

3.9

3.9

2.7

2.7 d

Trinidad and Tobago

13.4

5.3

7.2

5.6

4.5

3.0

7.8

8.5

5.4

5.5

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Weighted average.

b Weighted average, the Bolivarian Republic of Venezuela is not included.

c Refers to national-currency markets.

d Twelve-month variation to April 2015.

Table A.33

Latin America and the Caribbean: fiscal balances

(Percentages of GDP)

Primary balance

Overall balance

2011

2012

2013

2014

2011

2012

2013

2014

Latin America and the Caribbean a

0.0

-0.1

-0.7

-0.4

-2.3

-2.1

-2.9

-2.7

Latin America b

0.0

-0.2

-0.7

-1.1

-1.6

-1.9

-2.4

-2.8

Argentina

-0.1

-0.1

-1.4

-2.5

-1.9

-1.9

-2.6

-4.4

Bolivia (Plurinational State of) c

-0.2

2.7

2.0

-1.7

-1.1

1.8

1.4

-2.4

Brazil

2.2

1.9

1.5

-0.3

-2.4

-1.8

-2.7

-5.3

Chile

1.8

1.2

0.0

-1.0

1.3

0.6

-0.6

-1.6

Colombia

-0.3

0.1

-0.1

-0.4

-2.8

-2.3

-2.3

-2.4

Costa Rica

-1.9

-2.3

-2.9

-3.1

-4.1

-4.4

-5.4

-5.6

Cuba

…

…

…

…

3.0

6.7

1.9

0.5 d

Dominican Republic

-0.1

-2.8

-0.4

-0.1

-2.1

-5.2

-2.7

-2.6

Ecuador

-0.7

-1.0

-4.5

-5.0

-1.6

-2.0

-5.8

-6.4

El Salvador

-0.1

0.5

0.6

0.8

-2.3

-1.7

-1.8

-1.6

Guatemala

-1.3

-0.9

-0.6

-0.4

-2.8

-2.4

-2.1

-1.9

Haiti

1.9

2.0

-1.0

-0.5

1.6

1.7

-1.4

-0.9

Honduras

-3.2

-4.3

-5.8

-2.1

-4.6

-6.0

-7.9

-4.4

Mexico

-1.0

-1.1

-0.8

-1.2

-2.5

-2.6

-2.4

-2.9

Nicaragua c

1.5

1.5

1.0

0.6

0.5

0.5

0.1

-0.3

Panama

-1.1

-0.8

-2.0

-2.8

-3.3

-2.7

-4.0

-4.6

Paraguay

1.0

-1.4

-1.4

-0.7

0.7

-1.7

-1.7

-1.1

Peru c

2.1

2.4

1.5

0.6

1.0

1.3

0.5

-0.4

Uruguay

1.8

0.4

0.9

-0.1

-0.6

-1.9

-1.5

-2.3

Venezuela (Bolivarian Republic of)

-1.8

-2.2

1.0

-0.2 d

-4.0

-4.9

-1.9

-2.5 d

The Caribbean e

-0.2

0.1

-0.7

0.6

-3.6

-3.2

-3.9

-2.7

Antigua and Barbuda

-2.7

1.1

-2.4

-0.6

-5.2

-1.3

-4.5

-3.2

Bahamas f

-3.4

-4.2

-1.7

-0.3

-5.7

-6.6

-4.3

-3.3

Barbados g h

1.6

-1.4

-4.0

0.4 d

-4.4

-8.0

-11.2

-7.2 d

Belize g

2.0

1.5

0.9

-1.5 d

-1.4

-0.4

-1.7

-4.1 d

Dominica

-6.5

-7.2

-7.3

-0.3

-8.3

-8.7

-9.3

-2.1

Grenada

-0.7

-2.1

-3.4

-0.4

-3.2

-5.5

-6.6

-4.0

Guyana

-1.6

-3.6

-3.4

-4.3 d

-3.1

-4.7

-4.4

-5.3 d

Jamaica g

3.9

5.5

7.8

7.4

-5.9

-4.2

-0.6

-0.5

Saint Kitts and Nevis

8.9

17.2

17.4

13.3

2.5

11.2

13.5

10.1

Saint Lucia

-1.8

-3.0

-2.9

0.8

-4.6

-6.5

-6.7

-3.1

Saint Vincent and the Grenadines

-0.2

0.3

-3.7

-1.6

-2.7

-2.1

-6.2

-3.9

Suriname

-1.0

-1.8

-4.5

-4.3

-2.0

-2.7

-5.9

-5.1

Trinidad and Tobago i

-0.7

-0.4

-1.5

-1.1

-2.6

-2.4

-3.3

-2.9

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Simple averages of the 33 countries that submitted reports. The coverage corresponds to the central government.

b Simple averages. Does not include Cuba.

c General government.

d Preliminary figures on the basis of official budgets.

e Simple averages.

f Fiscal years, from July 1 to June 30.

g Fiscal years, from April 1 to March 31.

h Non-financial public sector.

i Fiscal years, from October 1 to September 30.

Table A.34

Latin America and the Caribbean: composition of tax revenue

(Percentages of GDP)

Total tax burden

Social security contributions

Direct taxes

Indirect taxes

Other taxes

2013

2014

2013

2014

2013

2014

2013

2014

2013

2014

Latin America and the Caribbean a

20.4

…

2.2

…

6.6

…

11.3

…

0.3

…

Latin America b

19.0

…

3.6

…

5.9

…

9.3

…

0.3

…

Argentina c

30.6

32.5

6.9

7.0

8.6

9.4

14.9

15.8

0.2

0.3

Bolivia (Plurinational State of) c

23.8

23.7

2.0

2.0

6.6

6.5

14.5

14.2

0.7

0.9

Brazil c

33.4

…

8.6

…

9.7

…

14.8

…

0.2

…

Chile

18.2

18.1

1.4

1.4

6.8

6.5

9.8

10.0

0.1

0.2

Colombia

16.5

16.9

2.3

2.5

8.2

8.0

6.0

6.3

0.0

0.0

Costa Rica c

23.2

23.1

8.6

8.7

5.5

5.5

8.8

8.7

0.2

0.2

Cuba c

37.3

…

4.0

…

11.3

…

20.2

…

1.8

…

Dominican Republic

13.9

14.1

0.1

0.1

5.2

5.1

8.7

8.9

0.0

0.0

Ecuador

19.3

19.1

4.8

4.7

4.3

4.4

10.0

9.9

0.1

0.1

El Salvador

17.1

16.8

1.7

1.8

6.2

6.1

8.8

8.4

0.4

0.4

Guatemala c

13.0

12.8

2.0

1.9

4.0

4.1

6.9

6.7

0.1

0.1

Haiti d

12.2

12.1

…

…

2.6

2.9

7.8

7.3

1.8

1.9

Honduras

18.1

19.6

3.3

3.3

5.3

5.4

9.5

10.9

0.0

0.0

Mexico

11.4

12.3

1.7

1.7

5.9

5.6

3.6

4.8

0.2

0.2

Nicaragua

20.0

20.4

4.8

4.9

5.5

5.9

9.6

9.5

0.0

0.0

Panama

17.7

16.4

6.3

6.0

6.2

5.3

5.1

5.0

0.1

0.1

Paraguay

13.1

14.7

1.3

1.7

2.5

2.7

9.3

10.1

0.1

0.1

Peru

18.6

18.7

2.0

2.1

7.4

7.7

8.1

8.2

1.0

0.7

Uruguay

27.4

27.3

8.7

9.1

7.2

6.9

11.5

11.4

0.0

0.0

Venezuela (Bolivarian Republic of)

13.9

16.2

1.0

1.0

4.0

5.4

8.9

9.8

0.0

0.0

The Caribbean e f

21.1

21.7

…

…

7.3

7.4

13.6

14.1

0.2

0.2

Antigua and Barbuda

17.1

16.7

…

…

3.2

2.8

14.0

13.9

0.0

0.0

Bahamas g

14.4

14.7

…

…

1.4

1.2

11.3

11.3

1.7

2.2

Barbados h i

23.9

30.6

…

…

8.8

9.2

14.9

21.1

0.2

0.3

Belize h

23.2

23.1

…

…

7.8

7.6

15.4

15.6

0.0

0.0

Dominica

21.7

21.5

…

…

4.8

4.4

17.0

17.1

0.0

0.0

Grenada

18.6

20.1

…

…

3.6

4.7

15.0

15.4

0.0

0.0

Guyana

20.6

20.1

…

…

8.0

8.3

12.6

11.8

0.0

0.0

Jamaica h

24.0

23.6

…

…

9.8

9.7

14.3

13.9

0.0

0.0

Saint Kitts and Nevis

20.2

21.2

…

…

4.6

5.0

15.5

16.2

0.0

0.0

Saint Lucia

22.6

23.2

…

…

6.4

6.2

16.2

17.1

0.0

0.0

Saint Vincent and the Grenadines

21.7

23.7

…

…

5.9

7.2

15.7

16.6

0.0

0.0

Suriname

17.9

15.3

…

…

9.6

7.7

8.3

7.5

0.0

0.0

Trinidad and Tobago j

28.4

28.4

…

…

21.4

22.6

6.9

5.7

0.0

0.0

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Simple averages of the 33 countries that submitted reports. The coverage corresponds to the central government.

b Simple averages. Does not include Cuba.

c General government.

d Fiscal years, from October 1 to September 30. Does not include social security contributions.

e Simple averages.

f Does not include social security contributions.

g Fiscal years, from July 1 to June 30.

h Fiscal years, from April 1 to March 31.

i Non-financial public sector.

j Fiscal years, from October 1 to September 30.

Table A.35

Latin America and the Caribbean: public income and expenditure

(Percentages of GDP)

Total income

Current expenditure

Interest payments

on public debt

Capital expenditure

Primary expenditure

2013

2014

2013

2014

2013

2014

2013

2014

2013

2014

Latin America and the Caribbean a

22.7

22.2

25.5

24.8

20.3

20.1

2.3

2.4

5.1

4.9

Latin America b

18.9

18.6

21.3

21.4

16.7

16.9

1.7

1.8

4.5

4.5

Argentina

19.3

21.4

21.9

25.8

19.1

21.5

1.2

1.9

2.8

4.3

Bolivia (Plurinational State of) c

36.8

36.5

35.4

38.9

21.9

22.9

0.6

0.7

13.6

16.1

Brazil

22.8

22.1

25.6

27.4

24.0

25.6

4.2

5.0

1.6

1.7

Chile

21.1

20.7

21.7

22.3

18.0

18.5

0.6

0.6

3.7

3.8

Colombia

16.9

16.7

19.2

19.1

16.1

16.1

2.2

2.1

3.1

3.0 d

Costa Rica

14.4

13.9

19.8

19.6

18.2

17.8

2.6

2.6

1.6

1.7

Cuba

43.1

30.6

41.1

30.0 d

32.6

26.8 d

…

…

7.4

3.0

Dominican Republic

14.6

15.1

17.3

17.7

14.0

14.9

2.3

2.5

3.3

2.7

Ecuador

21.6

20.3

27.4

26.6

15.1

14.9

1.2

1.4

12.3

11.7

El Salvador

16.3

15.8

18.1

17.3

15.0

14.6

2.3

2.4

3.0

2.8

Guatemala

11.6

11.5

13.8

13.4

10.8

10.5

1.6

1.4

3.0

2.9

Haiti

13.3

13.2

14.5

13.5

10.8

11.6

0.4

0.4

3.7

1.9

Honduras

17.0

18.7

24.9

23.1

19.8

17.9

2.1

2.3

5.2

5.2

Mexico

16.8

16.9

19.3

19.8

16.1

16.9

1.6

1.6

3.1

2.9

Nicaragua c

17.4

17.5

17.3

17.8

13.5

13.8

0.9

0.9

3.8

4.0

Panama

16.2

15.0

20.2

19.6

11.3

11.8

1.9

1.8

8.9

7.8

Paraguay

17.2

17.9

18.9

19.0

16.5

16.6

0.3

0.4

2.3

2.4

Peru c

19.2

18.8

18.7

19.3

14.0

14.6

1.1

1.0

4.7

4.7

Uruguay

20.7

19.9

22.2

22.2

20.8

20.8

2.4

2.3

1.4

1.4

Venezuela (Bolivarian Republic of)

25.8

21.1

27.8

23.6 d

23.0

19.2 d

3.0

2.4 d

4.7

4.4 d

The Caribbean e

26.7

26.9

30.5

29.5

24.6

24.3

3.2

3.3

5.7

5.6

Antigua and Barbuda

18.5

18.1

22.9

21.4

21.6

19.7

2.0

2.6

1.3

1.6

Bahamas f

17.2

20.7

21.5

24.0

17.9

20.1

2.5

3.0

2.7

3.2

Barbados g h

26.9

28.0

37.9

35.1 d

35.9

33.0 d

7.0

7.5 d

1.4

1.8 d

Belize

29.0

27.9

30.8

32.1 d

23.9

24.5 d

2.6

2.7 d

6.8

7.5 d

Dominica

27.5

28.6

36.8

30.7

25.3

24.3

2.0

1.8

11.5

11.5

Grenada

20.8

25.8

27.3

29.8

20.5

20.4

3.1

3.6

6.8

9.4

Guyana

23.6

22.6

28.0

27.9 d

19.9

20.2 d

1.0

1.0 d

8.2

7.7 d

Jamaica g

28.5

26.1

29.0

26.6

25.9

25.1

8.4

7.9

3.1

1.5

Saint Kitts and Nevis

47.1

42.0

33.6

31.9

26.8

26.2

3.9

3.2

6.8

5.7

Saint Lucia

24.5

26.1

31.2

29.1

23.5

23.2

3.7

3.9

7.7

5.9

Saint Vincent and the Grenadines

26.9

28.1

33.1

32.0

25.3

26.1

2.5

2.3

7.8

5.8

Suriname

22.6

20.0

27.0

24.3

22.7

19.6

1.3

1.3

4.3

4.8

Trinidad and Tobago i

33.5

35.6

36.8

38.5

31.0

32.7

1.8

1.6

5.8

5.8

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Simple averages of the 33 countries that submitted reports. The coverage corresponds to the central government.

b Simple averages. Does not include Cuba.

c General government.

d Preliminary figures on the basis of official budgets.

e Simple averages.

f Fiscal years, from July 1 to June 30.

g Fiscal years, from April 1 to March 31.

h Non-financial public sector.

i Fiscal years, from October 1 to September 30.

Table A.36

Latin America and the Caribbean: non-financial public sector gross public debt

(Percentages of GDP)

2007

2008

2009

2010

2011

2012

2013

2014

Latin America and the Caribbean a

47.9

46.8

50.9

50.8

50.0

51.3

53.0

53.2

Latin America a

32.9

31.4

33.0

31.7

31.3

32.9

34.4

35.7

Argentina

52.9

46.4

43.8

36.3

33.8

34.9

38.8

43.0

Bolivia (Plurinational State of) b

40.7

37.2

39.5

38.1

33.7

31.3

30.4

29.5

Brazil c

57.2

57.5

60.9

53.6

50.8

56.4

56.7

58.9

Chile

8.7

11.6

12.1

14.7

17.8

19.0

20.5

24.0

Colombia d

44.3

43.7

45.1

46.2

42.8

40.5

43.1

46.0

Costa Rica

31.8

29.7

34.0

35.7

37.7

41.8

44.4

48.9

Dominican Republic e

17.0

23.2

27.2

27.7

28.7

32.3

37.7

37.0

Ecuador

27.0

22.1

16.3

19.6

18.3

21.2

24.2

30.0

El Salvador

37.0

36.9

45.2

45.1

44.1

47.9

46.3

46.5

Guatemala

21.6

20.1

23.3

24.4

23.9

24.5

24.8

24.5

Haiti e f

33.6

42.3

34.3

22.8

23.9

28.0

30.5

32.1

Honduras e

17.4

20.1

23.9

29.2

31.5

35.0

42.7

45.0

Mexico g

22.4

26.5

34.3

31.7

34.4

33.9

36.8

39.8

Nicaragua

32.9

29.4

34.2

34.8

32.6

32.2

32.2

31.5

Panama

49.6

41.9

45.4

43.0

38.5

37.6

37.3

39.2

Paraguay

19.0

17.3

16.8

14.9

11.5

14.2

15.2

18.6

Peru

29.9

26.9

23.7

23.5

22.1

20.4

19.6

20.1

Uruguay

62.5

48.9

49.4

43.5

43.4

45.7

41.5

42.6

Venezuela (Bolivarian Republic of) e

19.2

14.0

18.2

18.4

25.2

27.5

31.1

21.3 h

The Caribbean a

69.8

69.4

76.9

78.6

77.4

78.3

80.1

78.8

Antigua and Barbuda

81.1

81.5

95.7

87.1

86.7

89.4

95.1

95.4

Bahamas e

36.9

37.4

44.1

45.7

50.2

54.5

59.1

65.8

Barbados

62.4

67.2

76.0

87.7

93.0

96.2

105.2

108.7

Belize

83.6

79.4

82.2

72.3

70.7

72.8

78.5

77.6

Dominica

81.2

72.0

66.4

73.1

70.7

72.7

75.5

74.1

Grenada

82.9

79.1

90.0

91.8

86.8

88.6

103.3

99.1

Guyana

61.2

62.9

67.0

68.0

66.7

63.6

58.1

50.1

Jamaica

110.9

112.3

126.3

131.7

131.4

133.9

135.5

132.7

Saint Kitts and Nevis

134.6

127.6

142.0

151.4

141.1

129.3

102.1

78.0

Saint Lucia

64.7

61.9

64.0

65.5

66.3

71.0

76.4

78.4

Saint Vincent and the Grenadines

55.5

58.4

64.7

66.7

65.5

67.0

64.9

72.2

Suriname e

23.0

27.8

27.7

27.5

26.8

27.1

34.5

33.1

Trinidad and Tobago g

28.8

34.5

54.4

53.8

50.1

52.4

52.9

58.6

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Simple averages.

b Refers to the external debt of the non-financial public-sector and central-government domestic debt.

c General government.

d Consolidated non-financial public sector.

e Central government.

f Does not include public sector commitments to commercial banks.

g Public sector.

h Preliminary figures.

Table A.37

Latin America and the Caribbean: central government gross public debt

(Percentages of GDP)

2007

2008

2009

2010

2011

2012

2013

2014

Latin America a

30.6

29.1

30.7

29.0

29.0

30.6

32.0

33.0

Argentina

52.9

46.4

43.8

36.3

33.8

34.9

38.8

43.0

Bolivia (Plurinational State of)

37.2

34.0

36.3

34.6

34.5

29.1

28.4

26.9

Brazil b

57.2

57.5

59.7

52.0

50.8

56.4

56.7

58.9

Chile

3.9

5.1

5.8

8.7

11.1

12.0

12.8

15.1

Colombia

33.3

34.1

34.6

33.7

33.4

32.7

35.4

38.7

Costa Rica

27.6

24.8

27.4

28.8

30.3

35.2

36.2

38.8

Dominican Republic

17.0

23.2

27.2

27.7

28.7

32.3

37.7

37.0

Ecuador

25.2

20.6

14.9

17.8

17.3

20.2

23.1

27.8

El Salvador

34.9

34.4

42.6

42.6

41.7

45.7

44.0

44.2

Guatemala

21.4

19.9

22.8

24.0

23.7

24.3

24.6

24.4

Haiti c

33.6

42.3

34.3

22.8

23.9

28.0

30.5

32.1

Honduras

17.4

20.1

23.9

29.2

31.5

35.0

42.7

45.0

Mexico

20.6

24.0

27.2

27.2

27.5

28.2

29.8

32.0

Nicaragua

32.3

28.6

32.3

33.3

31.9

31.5

31.5

30.9

Panama

49.0

41.4

41.7

39.7

37.9

37.0

36.8

38.9

Paraguay

15.9

14.3

14.6

14.1

12.1

12.6

13.6

16.6

Peru

25.8

23.1

22.8

20.7

18.4

18.2

17.3

17.9

Uruguay

57.2

44.5

53.3

39.9

38.4

40.2

36.9

37.4

Venezuela (Bolivarian Republic of)

19.2

14.0

18.2

18.4

25.2

27.5

31.1

21.3 b

Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures.

a Simple averages.

b General government.

c Does not include public sector commitments to commercial banks.

d Preliminary figures.

Table of Contents

Maintitle

Copyright

Foreword and executive summary

Part I

The economic situation in Latin America and the Caribbean in 2014 and 2015

Chapter I

Regional overview

Part II

Challenges in boosting the investment cycle to reinvigorate growth

Chapter II

Gross fixed capital formation in Latin America and the Caribbean: stylized facts and long-term growth implications

Chapter III

A bridge to the future: boosting investment in the public sphere

Chapter IV

Economic infrastructure in Latin America: a persistent challenge for progress towards sustainable development

Chapter V

Financing investment in Latin America and the Caribbean: the issues and main challenges

Statistical annex