Transcript Economic Evolution

The Global Crisis and its Impact on
Latin America
April 24th, 2009
International Economic Outlook
The economic crisis has developed gradually from a mortgage
and credit problem in industrial countries into a systemic
financial crisis and a generalized collapse of confidence which
has affected the world economy.
•
•
The international crisis is the deepest in the post-war period and is characterized
by the following:
•
A global recession and financial crisis.
•
A process of deleveraging in the international financial system.
•
A run in favor of more liquid and less risky financial instruments leading to a
generalized contagion of emerging markets.
•
A generalized lack of confidence.
•
An adjustment in households’ balance sheets, with an increase in savings and
lower consumption.
The most important economies of the world are in a recession, and a slow
recovery is expected given the weakness in the balance sheets of households
and financial intermediaries.
2
Perspectives for 2009
The latest expectations for the United States are of a fall of 2.6% and
9.0% in GDP and industrial production in 2009, with a recession in other
industrial countries and a marked deceleration in Emerging Markets.
4.0
Lehman’s
Bankruptcy
Growth Expectations of
Emerging Economies for 2009
(%)
Brazil
China
Mexico
Chile
India
Czech Rep.
16
14
2.0
12
0.0
10
8
-2.0
-8.0
4
2
0
-2
Lehman’s
Bankruptcy
-4
Feb-08
Mar-08
Abr-08
May-08
Jun-08
Jul-08
Ago-08
Sep-08
Oct-08
Nov-08
Dic-08
Ene-09
Feb-09
Mar-09
Abr-09
-6.0
UK
Eurozone
Canada
Japan
US
Feb-08
Mar-08
Apr-08
May-08
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
Mar-09
Apr-09
-4.0
6
International Trade Volume
of Goods and Services
(annual change, %)
14
12
10
8
6
4
2
0
-2
-4
-6
-8
-10
-12
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010e
Growth Expectations of
Industrial Economies for 2009
(%)
3
Perspectives for 2009
The deterioration in global growth perspectives has also
led to lower commodity prices, even though these seem
to have stabilized.
8
World Growth
(annual change, %)
UBS-Bloomberg Commodity Price Index
(Index)
7
6
1,750
5
1,650
1,550
4
1,450
3
1,350
2
1,250
1
1,150
0
1,050
-1
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
-2
Jan-08
Feb-08
Mar-08
Apr-08
May-08
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
Mar-09
Apr-09
950
4
Economic Evolution
All emerging markets, including Latin America, have been
affected through the following channels:
Real
Effects of the
International
Crisis
Financial
Confidence
External Demand
Exports
Remittances
Consumption
Commodity
Prices
National Income &
Public Revenues
Tourism
Services
FDI
Investment
International Financing and
Markets
Investment
Higher Risk Perception:
Markets and Domestic
Intermediaries
Consumption
& Investment
Consumption
& Investment
5
Economic Evolution
Even though the importance of each channel may differ, all
countries in the region have been affected.
External Demand
Industrial
Terms of
Exports
Production
Trade
(latest data
available, %)
Mexico
Argentina
Brasil
Chile
Colombia
Peru
Venezuela
-13.2 3_/
-14.0 3_/
-17.0 3_/
-11.5 3_/
-10.7 2_/
-2.7 2_/
-25.4 1_/
Financing
EMBI+
(jul-08 - latest
(latest data (2008-2009,
data available,
available, %)
%)
bp)
-26.9 3_/
-24.0 3_/
-20.1 3_/
-44.5 4_/
-13.2 2_/
-30.8 1_/
-
-6.3
-7.2
-5.4
-19.1
-21.4
-5.2
-46.5
169
1226
173
n.a
212
174
708
Consumer
Confidence
(jul-08 - latest
data available,
%)
-12.5
-3.7
-2.6
0.3
-107.4
n.a
n.a
1_/ December 2008
2_/ January 2009
3_/ February 2009
4_/ March 2009
6
Effect on Latin America
Overall, all countries in the region will experience a sharp
slowdown in growth and a deterioration of the external
accounts.
10
-6
0
-8
-2
-10
-12
Venezuela
2
Uruguay
-4
Peru
4
Colombia
-2
Chile
6
Brazil
0
Argentina
8
Mexico
Venezuela
Difference in Current Account Deficit
2007-2009
(% of GDP)
Uruguay
Peru
Colombia
Chile
Brazil
Argentina
Mexico
Difference in GDP Growth
2007-2009
(%)
7
Mexico’s Economic Evolution
In the case of Mexico, the collapse in international confidence
and demand at the end of 2008 led to a sharp contraction in
exports and production. However, activity has started to stabilize.
Industrial Production
(Index, Jan-08=100)
Non-Oil Exports
(billion dollars)
Industrial
22
105
21
Construction
Manufacturing
20
100
19
95
18
17
90
16
85
15
14
Jan-08
Feb-08
Mar-08
Apr-08
May-08
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
Sep-07
Oct-07
Nov-07
Dec-07
Jan-08
Feb-08
Mar-08
Apr-08
May-08
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
80
8
Mexico’s Economic Evolution
Domestic sales have started to increase and the
monthly job loss has moderated significantly.
Employment
(monthly change, thousand persons)
ANTAD and Wal-Mart Total Sales
(Index)
Wal-Mart
99
Mar-09
Jan-09
Nov-08
Sep-08
Jul-08
May-08
Mar-08
Jan-08
Nov-07
Sep-07
98
Mar-09
100
Ene-09
101
Nov-08
102
Sep-08
103
Jul-08
104
May-08
105
Mar-08
106
Ene-08
80
60
40
20
0
-20
-40
-60
-80
-100
-120
-140
Nov-07
ANTAD
Sep-07
107
9
Mexico’s Economic Evolution
The trend in inflation has reverted due to non-core and services
inflation. Given that the last one is more rigid, its reduction is very
positive in the convergence to the medium-term inflation target.
Inflation
(annual change, %)
7.5
7.0
6.5
CPI
Merchandises
Services
13
11
6.0
Non Core
Primary Sector
Administered Prices
9
5.5
7
5.0
4.5
5
4.0
3
3.5
3.0
Jan-08
Feb-08
Mar-08
Apr-08
May-08
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
Mar-09
Jan-08
Feb-08
Mar-08
Apr-08
May-08
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
Mar-09
1
10
Monetary Policy
The exchange rate has stabilized and long term domestic
rates are at the levels observed before Lehman’s
bankruptcy.
Exchange Rate
(pesos per dollar)
Government Bonds
(%)
11.5
16
Announcement
of daily auction
15
10.5
9.5
14
13
12
1Year
5 Years
20 Years
30 Years
8.5
Lehman’s
Bankruptcy
7.5
11
6.5
Announcement
of FCL request
10
Apr-09
Feb-09
Dec-08
Oct-08
Aug-08
Jun-08
Apr-08
Apr-09
Mar-09
Feb-09
Jan-09
Dec-08
Nov-08
Oct-08
Sep-08
Aug-08
Jul-08
Jun-08
Feb-08
5.5
9
11
Mexico’s Economic Evolution
The effect of the global recession has been partially
mitigated by the implementation of fiscal, financial
and structural measures.
Counter-cyclical measures to
sustain aggregate demand
Real
2
Measures to promote financing
and orderly conditions in
financial markets
Financial
3
Structural Reforms
1
1
Confidence
12
Perspectives for 2009
A conservative estimation implies an effect on aggregate demand of
the countercyclical measures of 1.8% of GDP (229 bn pesos), with a
direct effect on domestic aggregate demand of 1.4% of GDP (171
billion pesos).
Impact of Countercyclical Measures
(billion pesos)
250
46
200
15
-17
100
48
10
Nat. Supp. of
PEMEX, Emp.
and Health
150
Prices and
tariffs
30
171
-41
80
50
Total Effect
Imports
Savings
Effect of
Development
Bank Credit
Unemployment
Benefits
Investment by
PEMEX and
States
PICE
0
13
Economic Evolution in 2009
The approved budget together with the counter-cyclical
measures imply that fostered investment will be the
highest in the last 30 years.
Fostered Investment
(% of GDP)
5.0
4.5
4.0
3.5
3.0
2.5
2009
Approved
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
2.0
14
Programmable Expenditure Paid by Entities
Up to March and consistent with the counter-cyclical
strategy, programmable expenditures and investment by
the Federal Government were 49.5% and 116.5% higher,
in real terms, relative to the same period of 2008.
Programmable Expenditures 2009 vs 2008
(billion pesos, accumulated January-March)
180
160
169.0
25
21.0
Real expansion
of 49.5%
20
140
120
Investment Expenditure 2009 vs 2008
(billion pesos, accumulated January-March)
Real expansion
of 116.5%
113.1
15
100
80
10
9.7
60
40
5
20
0
0
2008
2009
2008
2009
15
Monetary Policy
Stable inflation expectations in an environment of lower
growth have allowed Banco de Mexico to reduce its
reference interest rate.
Reference Interest Rate
(%)
Inflation
(%)
8.5
14
CPI
8.0
12
Core Inflation
10
7.5
8
7.0
6
6.5
Dic-09
Mar-10
Dic-10
Mar-09
Mar-08
Mar-07
Mar-06
Mar-05
Mar-04
Mar-03
Mar-02
Mar-01
Feb-09
Mar-09
Nov-08
Dec-08
Jan-09
0
Aug-08
Sep-08
Oct-08
5.5
Feb-08
Mar-08
Apr-08
May-08
Jun-08
Jul-08
2
Jan-08
6.0
Mar-00
4
16
Economic Evolution in 2009
In contrast to the period before 2003, total commercial bank
credit is expected to increase by 6.0% – 8.0% during 2009,
sustained in high capital levels.
Commercial Bank
Capitalization Index
(%)
Credit by Commercial Banks
(annual change, %)
100
80
60
Housing
16
15.3
Business
15
Total
40
14
13.7
20
13
0
-20
12
11.6
-40
11
-60
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
-80
10
1994
2000
2008
17
Economic Evolution in 2009
In addition, commercial bank credit is being
complemented by a very ambitious expansion in
credit by development banks.
Sector
Business
Infrastructure
Housing
Rural
Others
Total
Portfolio of Direct Credit and Induced by Development Banks
(billion pesos, feb 09 =100)
Change Jan 08/09
Change Feb 08/09
Jan-08 Feb-08
Jan-09 Feb-09
(bp)
(%)
(bp)
(%)
98.3
97.9
136.5
146.3
38.1
38.8
48.4
49.4
69.2
68.9
103.0
102.6
33.8
48.8
33.7
49.0
132.1
116.5
231.6
202.2
99.5
75.4
85.8
73.7
67.6
66.9
86.2
88.5
18.6
27.5
21.6
32.2
6.2
6.4
8.1
8.4
1.9
30.3
2.0
32.0
373.5
356.5
565.4
548.0
191.9
51.4
191.5
53.7
18
Mexico’s Economic Evolution
Regarding financial markets, actions were implemented
in all markets to promote the restoration of orderly
conditions. In terms of bond markets:
• Modifications to the program of auctions of government
and IPAB bonds, as well as the buy back of
government and IPAB bonds.
• Auctions of interest rate swaps.
• Changes in pension and mutual funds regulations.
• The establishment of partial guarantees
refinancing windows in development banks.
and
19
Use of International Reserves
In addition, to further promote normal operating
conditions in the exchange rate market and
reinforce confidence on the balance of payments,
the following actions have been taken:
•
A daily auction of 100 million dollars, providing the market with
the positive net reserve flows expected for the year.
•
Establish the FCL with the IMF by 47 billion dollars to reinforce
confidence.
•
Use the 30 billion dollar swap line with the Federal Reserve to
provide dollar liquidity to corporations. The initial auction of 4
billion was undersubscribed (3.2 bn) and the rate was 0.7%.
This confirms that corporates don’t have significant dollar
liquidity requirements.
•
Resources from the FCL, the swap and current reserves (80bn)
imply close to 157 billion dollars in available foreign exchange.
20
The G-20 Process
In the context of the G-20, some positive steps have
been taken but important challenges remain.
•
We have focused our efforts in the G-20 to preserve the
macroeconomic stability of emerging markets.
•
It is necessary to prevent further impacts from the retrenchment of
international financial flows, derived from:
i. Indiscriminate increase in risk aversion by investors and
ii. Increasing demand for financial resources in developed
economies due to large fiscal stimulus packages.
•
This is expected to represent a flow of around 6 trillion US dollars to
developed economies and a reduction in 2009 of around 82% in
flows to emerging markets with respect to 2007.
•
In addition, protectionism in the real and financial sectors must be
avoided.
21
The G-20 Process
IFIs can play a significant role to help countries to face the
current credit crunch and an environment of lower financing in
the medium term by providing the necessary resources and
adequate tools.
•
In this regard, the recent approval of the Flexible Credit Line by
the IMF is very positive and will help ease this transition.
•
We need an increase in Multilateral Development Banks’
resources not only in the short, but also in the medium and long
terms. In addition, credit must be provided in a more expedite way.
•
In particular we need to increase the IADB’s and IFC’s resources
as soon as possible given that they are already facing restrictions
and review the capital needs of the WB.
22
Conclusions
Concluding Remarks
• There is no doubt that the Latin American region will be affected by
the current negative environment.
• The impact will be mitigated by:
 Stronger macroeconomic fundamentals.
 Sound financial systems.
 Countercyclical fiscal and monetary policies.
 Support by IFI’s for which important reforms need to be made.
• Structural reforms are of the essence to reinforce confidence.
23