Latin America, faced with the challenge of consolidating its growth in 2022

Latin America in 2022 faces the challenge of consolidating its economy, currently in recovery after the crisis caused by the coronavirus, with a minefield mined by inflation, social and political instability and the impact of a pandemic still unchecked.

To a greater or lesser degree, but always present, these three issues are transversal in all the large economies of the region, as well as the rise in the dollar and trade tensions, which add turbulence to a very complex panorama.

Juan Carlos Martínez, professor at IE Business School summarized the situation as follows: “The main challenge facing Latin America in 2022 is the consolidation of growth. An economic growth that has been important in 2021, above 6%, but that will be much lower in 2022 ″.

These are some of the particular challenges that the main Latin American economies will face.

Argentina

Argentina’s main challenge for 2022 will be to reach an agreement with the International Monetary Fund (IMF) to refinance debts for some US $ 43.3 billion, an essential pact for the country to defer the heavy maturities that it must face since March and not be left again. on the verge of default.

Without an agreement, Argentina’s greatest challenge will be to deal with a worsening of its already unbalanced macroeconomic variables, mainly the fiscal deficit, exchange rate tensions and high inflation, a gloomy outlook that would strongly condition the economic recovery process that began in 2021. after three years of severe recession.

Brazil

Brazil has all the ingredients to complicate its economic reactivation, with all that that implies for the region as a whole.

It has a stagflation scenario, with inflation and unemployment in double digits, and enormous political uncertainty in 2022 that will be marked by polarized presidential, legislative and regional elections.

Thus, the projections for 2022 are for weak growth (0.5%), weighed down by fragile macroeconomic data, rising interest, the dollar through the roof and investors’ misgivings about the more than likely paralysis of the agenda reforms in Congress during the electoral campaign.

Colombia

Colombia must maintain in 2022 the good economic reactivation rhythm that caused it to grow in 2021 close to 10%, in a context marked by high inflation, unemployment that does not recover the preCOVID levels and electoral appointments.

By 2022, the Organization for Economic Cooperation and Development (OECD) projects an expansion of the economy of 5.5%, similar to that forecast by the financial sector.

Inflation, which at the end of November stood at 5.26%, one of the highest in recent years, is the enemy to beat for the country’s authorities, and thus the Banco de la República began a gradual rise in September. of the rates that took him last Friday to raise them half a point to 3%.

Another challenge is unemployment, which remains above double digits and has not yet returned to pre-pandemic levels.

Added to this is a political context marked by the presidential elections scheduled for May, with a second round in June.

Chile

After suffering the largest economic setback in four decades in 2020, the Chilean economy will end 2021 with a rise of between 10.5% and 11.5%, according to estimates by the Central Bank, supported by international organizations such as the OECD.

However, for 2022 the scenario is expected to be much more difficult, with growth of around 2% that will continue until 2023, according to the OECD, as fiscal support for aid in the face of the pandemic is reduced and savings run out and liquidity accumulated by citizens.

From the outset, Chile will have to address the overheating of the economy that raised inflation in November to 6.7%, the highest since the 2008 financial crisis and well above the Central Bank’s target range of between 2% and 4%.

A particular Chilean feature is the uncertainty about its pension system, which has been undercapitalized after the outflow of more than US $ 50,000 million in withdrawals authorized by the authorities to tackle the COVID-19 crisis.

This issue will be the subject of debate both with regard to the drafting of the new Constitution and the policies of the new government of the leftist Gabriel Boric, winner of the presidential elections and who will assume power in March 2022.

This constituent process that is being carried out in Chile will predictably culminate in 2022 with a proposal for a new Magna Carta, another question that will weigh on the Chilean economy.

The “extreme” and “historical” inequality of the country, the origin of the social protests of 2019, may once again generate a citizen outbreak depending on the development of the constitutional discussion and the practices of the new Executive.

Mexico

Mexico expects to grow around 6% in 2021, driven by consumption and by the renewed Agreement between Mexico, the United States and Canada (T-MEC), in force since the middle of last year.

But factors such as high inflation – which will close this year over 8% – and initiatives such as the energy reform, which seeks to strengthen the state power company to the detriment of private ones, have generated uncertainty among businessmen, who fear that it will affect investments.

But Mexican concerns are more about the trade issue and the disturbances in global flows, which, for example, affect its important automotive industry.

Peru

Peru’s challenges are also very great and affect almost every aspect of its economy, with the notable nuance of political instability that can derail initially promising prospects.

Growth projections are in a healthy range of between 8.5% and 12.7% and inflation alone, at highs for decades (5.83% in November) almost double the estimated target range of 3%, is a visible macroeconomic problem and evident.

However, the tension and political uncertainties surrounding the Pedro Castillo government will mark the passage of next year.

The specter of nationalizing economic sectors has not yet been exorcised, and that will weigh in in 2022.

In addition, Castillo will have to deal with the serious structural problems in Peru, such as health, education and informality, which were left naked with the onslaught of COVID-19.