The Chilean economy is prepared to cope with the financial crisis and could prove attractive for investment in the future, according to the sentiments of a leading Chilean economist, speaking at the gasworld South & Central America Conference 2009.
As a leading economist, Michele Labbe was presenting The Latin America Economy and sharing her experienced view of the market in this region.
Opening her presentation, Labbe explained, “Thank you very much for the invitation. This is the worst moment in many years and many decades to talk about the future of the economy, we are in an uncertain time at the moment.”
“What do we come from, is a very important factor to find out. What do we have to expect for the next months and years?”
“We have had a global growth much bigger than what we expected, the world had a boom in growth that had high levels of 3.5% during the 2007 period. The boom in the global economy also translated into a boom in the Latin American economy.”
Describing the successes of the Latin American region and its economy in recent years, Labbe enthused, “In addition we experienced a stage of great success for the Latin American economies because we were able to recover from high inflation rates. We went down to 3.8% inflation and in the 1990s the inflation rate was much higher than it is now.”
“In the past five year the monetary authorities in Latin America were very successful in reducing inflation.”
Challenges and responses
Rapid growth has been seen in the South American gases industry in recent years, but as the full impact of the global economic crisis takes effect, there are thought to be challenging times ahead.
John Raquet, Managing Director of Spiritus Consulting, alluded to this when officially opening the conference and said, “The past 2-3 months has shocked the world and great uncertainty hangs over many industries, including our own. So, may I take the liberty of suggesting that we send a strong and optimistic message out from this conference - there is still opportunity and we will roll-up our sleeves and work our way out of recession.”
Labbe appears to share this view and reflected, “The growth rate had been around 5% and now in 2008 we are talking about 3.5-4%. By 2009 projections, there will be projections of around 2% in the global market. There could be a dramatic fall in the market growth in emerging countries, a change in emerging markets which is also affecting Latin America.”
“We try to be really close to the international situation, however despite the problems Latin America is very well prepared right now.”
“Why so?” Labbe continued, “Because the growth in the last five years has provided us with resources to face the crisis we are facing now. Some countries, such as Chile, have tried to build up reserves to deal with the crisis. In Latin America nowadays, there is a capacity to lower inflation which is something really positive.”
As positive as the outlook may be and even though the region appears ‘prepared’ to deal with the economic turbulence, Latin America will inevitably face up to the impact of the global situation.
This was evident as Labbe explained, “This world recession will have an effect on Latin America. First of all, we will have lower demand for exports from Latin America. We will have smaller prices for exports and the volumes will be lower.”
$quot;What will happen in the following years, we will rely on the US, probably. After 2009 there could be a great rebound in the growth rates and also a rebound in inflation. This rebound in inflation should lead, in the short term, to high interest rates in the US.”
$quot;If interest rates increase very rapidly, then in Latin America, at a time when it needs resources most, this could complicate the situation and lead to a difficult scenario in 2010.”
Concluding her thoughts on the subject, Labbe said, “Another avenue is that if the US has a slower recovery, then there will be a slower increase in interest rates. We do not know which possibility the situation will take.”
“The presidency of Mr Obama could lead to an economic boom, if this doesn’t happen it could be quite fatal for Latin America.”
Michele Labbe is Chief Economist of Econsult and has been with the company since 2003, having previously worked at leading economic and financial consulting company Fontaine y Paul.
Since 2003, Labbe has also been an economics professor at the Andres Bello University, where she has dictated courses concerning Macroeconomics, Industrial Organisation, Economic Development, and International Economics.