The ‘think tank’ Gate Center has warned about the risk of a new debt crisis in Latin America if Brazil and Mexicothe two main economies in the region, raise their interest rates.
This is indicated in its Gravity Center Index Latin America (GCG Index), an indicator that determines the variations of the Economic and Commercial Center of Gravity in Latin America, between 1960 and 2020.
After analyzing the trends shown by the indicator and taking into account the current macroeconomic situation due to the hangover from the pandemic -which caused the price of raw materials to collapse- and the conflict in Ukraine -which has caused a “huge” supply shock and has increased the prices of energy and agricultural raw materials – analysts at the Gate Center have emphasized the risk that a rise in interest rates would represent in Brazil, Mexico, Chile and Argentinasince “it could cause a debt crisis like the one in the 1980s, which led to the so-called lost decade.”
“From that moment on, with the debt crisis of the 1980s, the region began to lose weight in the global economy, losing almost 2 percentage points of the world total, up to 7%”, adds the center
Coinciding with the forecasts of the International Monetary Fund (IMF) for 2022 and 2023, the index points to GDP growth rates of between 2% and 4% for five of the main Latin American economies (Brazil, Argentina, Mexico, Peru and Chili). Colombia, with 7.6%, will be the one with the greatest push during this exercise to slow down to 2.2% next year.
Another noteworthy fact of the indicator is that related to Venezuela, whose exports will skyrocket to 27.2% and 18.5% in the next two years, which will make the country the one with the highest accumulated growth during the 2022-2023 biennium. In relation to exports from Mexico and Chile, the indicator indicates that they will enter negative territory during the year of 2023, contracting to -0.5% and -0.8%, respectively. In this regard, it should be noted that Chile will close this year with a drop in sales to third parties of -1.6%.
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