The countries of Latin America are often among the hardest hit when a financial crisis is holding the world in its grip — even if its root cause is far away. This time, though, the region is faring much better. We wonder: Which of these Latin American countries is expected to have the fastest economic growth in 2009?
A. Bolivia is correct.
The economy of Bolivia — where President Evo Morales was just reelected — will grow the fastest among all of Latin America's economies in 2009, at 2.8%. This growth is putting the country on the path to losing its status as South America's poorest country — and comes as a surprise to many who are concerned about Morales' moves to nationalize mining and energy production.
A key reason for Bolivia's good performance is increased social spending supporting the economic fortunes of the country's indigenous people, who account for roughly 55% of Bolivia's 9.8 million population.
In contrast, the economies of other members of the so-called Bolivarian axis have not performed so well, with Hugo Chavez's Venezuela shrinking by 2% and Rafael Correa's Ecuador registering a 1% decline in its GDP.
B. Mexico is not correct.
Mexico had long been one of the top economic performers in Latin America, growing 3.1% on average from 2000-2007.
However, much of what supported that growth has now gone into reverse. For example, the U.S. economy has shrunk significantly, limiting the potential for Mexican exports. In addition, tourism has stalled, while oil prices have declined. Worse, there are serious questions about Mexico's rapidly depleting oil reserves. As a result, Mexico's GDP is expected to shrink by 7.3% in 2009 — by far the sharpest economic contraction in the entire region.
C. Brazil is not correct.
Like Chile, Brazil has long benefited from the commodities boom — with its plentiful oil, iron and agricultural exports helping the country attain average annual GDP growth of 3.8% since 2004.
For 2009, it is expected to register a slight 0.7% decline in its GDP — but, as in Chile's case, this is likely a temporary interruption of its impressive growth path. Brazil's future economic prospects are further boosted by recent oil discoveries, which promise to expand its economic wealth and export potential even further.
D. Chile is not correct.
Chile has long been among the best-performing economies in Latin America. Since 2000, it has racked up an impressive record of 3.6% average annual GDP growth. That has helped the country, with its 16.6 million people, reach a per capita income of $14,300 as of 2009 — and has propelled it onto the track toward OECD membership.
In addition to solid macroeconomic policies, Chile's economic fortunes were buoyed by the prolonged boom in commodities. Copper is Chile's main export, with the country accounting for 35% of the world's supply of the metal. However, after the long boom, commodity prices fell rather significantly. As a result, Chile's GDP in 2009 is expected to decline by 1.7%, according to the IMF, before recovering next year to growth of 4%.