The Latin American Economic Climate Index, better known as El Indice de Clima Económico (ICE) en América Latina, a survey published by Fundación Getulio Vargas from the Brazilian Center for Economic Studies in association with the University of Munich published some interesting as well as heartening findings for business prospects in Latin America.
According to their last quarterly study the economy improved from 4.4 to 5 points in January 2012 over the tendency back in October of 2011- a difference of .6 of a point. The apparent recovery ended a downward tendency that started in July, 2010 just as it had arrived at its best level in an entire decade (6 points), and when it started reflecting a general decline as a result of the effects of the global economic crisis.
While still far from the 2.9 points reported in January 2009, its lowest level in history and a result of the global crisis of the day, the indicator was below its ten year average last month (5.2 points) and at a level that FGV qualifies as in a declining phase of the economic cycle.
The improvement in the climate for business in Latin America in January was driven by a recovery of the economy in Brazil, Colombia, Peru and Uruguay, countries that struggled above the effects of the declining phase arriving at a level of expansion in their economic cycle.
Bolivia maintained itself at the recession level where it was in October, Mexico shifted from recession phase to the declining phase, and Venezuela went from declining to the recovery phase. According to the study, Latin America followed the global trend because the ICE around the world also improved, from 4.4 points in October to 4.6 points in January, after two consecutive periods of decline.
While the economic indicators for United States improved from 3.9 points in October 2011 to 5.3 in January 2012, in the Eurozone which is still in a phase of recession, remained practically stable going from 4.1 to 4.2 points.
Generally speaking, however, according to FGV, the business environment improved in eight of the eleven Latin American countries studied, while remaining stable in Chile but worsening for Argentina and Paraguay.
In Brazil, the indicator rose from 4.8 to 6.2 points, in Colombia 5.5 to 6.7, while in Peru it varied from 6.2 to 6.4 and in Uruguay from 5.9 to 6.3. Ecuador’s economic climate index rose from 5 points in October 2011 to 6 in January 2012, in Chile it remained at 4.9, in Venezuela it rose from 3.6 to 4.5, in Bolivia it went from 4.1 to 4.3, and for Mexico it rose from 3.6 to 4.1. The two countries that stumbled somewhat were Argentina whose indicator fell from 5.2 to 4.7 points and Paraguay with a decline from 5.7 to 4.2 points.
According to the report the main problems for the Latin American countries are its lack of competitiveness, deficit of qualified manpower, lack of confidence in government policies, as well as the rise of inflation and unemployment.
Of course, we don’t see Panama’s touted 10.5% economic growth reading anywhere in this study as it seems to be a purely internal measure and it will be interesting to see if it will be a sustainable trend as the present government recurs to significant financial indebtedness to fund its ambitious projects, among which are the Metro (public rapid rail transit), Metrobus, and the Third set of Locks/ Panama Canal Expansion, etc. This new and sharp increase in the public debt towers over past years.
The general increase in personal/ consumer debt will also be an interesting indicator to look out for as Panamanians struggle to cope with the rising costs of food, transportation, services and just about everything else.