In this piece, we will take a look at the twelve fastest growing countries in Latin America. For more countries, head on over to 5 Fastest Growing Countries In Latin America.
Whether it’s the developed Western world or the developing continents, the last couple of years have been full of nothing but turmoil. 2019 was the last normal year that anyone in the world witnessed, and since then, it’s been one crisis or the other. The onset of the coronavirus pandemic pummeled economies as lockdowns and industrial shutdowns cut gross domestic product (GDP) outputs, and just as things were starting to recover, the Russian invasion of Ukraine shook energy and food supply chains and placed burdens on nearly every country.
Against this backdrop, 2023 is an important year as it will be the first when populations and economies will have had time to normalize the economic shock of the Ukraine invasion. For the U.S., it’s a constant tussle between high inflation and low growth, or roaring stock markets and low interest rates. Right across the American southern border, Latin American countries face their own set of problems.
When compared to other regions of the world, such as Asia, Latin America fared better in 2022. According to Deloitte, the region as a whole surpasses pre-pandemic levels of GDP growth in 2021, as a global reopening increased commodity prices and spurred economic development. In 2021, the Latin American GDP grew by 6.8%, and Deloitte believes that the region will stay on the growth trend in 2022 as well, with growth tapering down to 3.4% last year. At the same time, it points out that the region’s three largest economies are underperforming the world economically, and that the tough economic conditions in the U.S. and Europe will also have a spillover effect into Latin America.
The region’s primary exports are commodities, as countries such as Brazil known to be the world’s breadbasket for goods such as coffee, and others such as Mexico rely heavily on U.S. demand for manufactured and assembled goods like vehicles and electric appliances. Therefore, Latin America swings with the world, and as economic conditions tighten in America, Latin America’s growth also slows down. This conclusion is also mirrored by Deloitte’s estimates, with the firm reducing its GDP growth estimate for the region in January 2023 to bring it down to 1.7%.
Like in the U.S., inflation in Latin America is also causing problems, and the Federal Reserve’s aggressive monetary policy tightening is creating trouble for local currencies. Data from the Economic Commission for Latin America and the Caribbean shows that by the end of the first quarter of last year, the trailing twelve month capital inflow into the region had dropped by 13% from the prior three month period. At the same time, all kinds of debt issuances in Latin America, whether these were corporate, sovereign, or others, were down in the first four months of the year. However, since by then the aggressive U.S. interest rate hikes had not changed capital market structures, these debt issuances were enthusiastically subscribed.
Estimates from S&P Global Market Intelligence also concur with the assessments that the Latin American economy will slow down this year. It adds that currency volatility will continue for the region as well, with low commodity prices and tight financial conditions making it harder for countries to raise capital on the financial markets. S&P Global explains that there are significant risks for protests in the region as well, since high inflation, unemployment, and low economic growth will aggravate populations – which when combined with potential subsidy removals from governments creates the perfect storm. These protests are economically damaging too, such as the protests in Mexico in 2021 which caused almost $4 billion in damages. However, the S&P is also positive for investment growth in the region, believing that increased competition between the U.S. and China and growth in renewable energy will unlock business opportunities in the area.
Speaking of which, the Organization for Economic Co-operation and Development believes that Latin America is also one of the most vulnerable regions in the world to climate change, with a 2.5 degree rise in temperature having the potential to cost the region as much as 5% of GDP. The OECD estimates that renewable energy production is already quite strong in the area, as 33% of all Latin American energy comes from renewable sources, more than double the global average of 13%. By investing in renewable energy, Latin America can create 10.5% more jobs by 2030 – a crucial addition especially since not only is 14.9% of the Latin American population expected to be in extreme poverty by 2022 end but also since the inflation experienced by them is often 3.6% higher than the average rate of inflation.
Today we will take a look at which Latin American countries are the fastest growing, a surprising compilation that leaves the region’s heavy lifters – Brazil and Mexico – out of the picture. But, as is also the case with companies, the biggest aren’t always the fastest growing, and the same appears to be true for countries too.
Pixabay/Public Domain
Our Methodology
We used estimates from the International Monetary Fund (IMF) to compile our list. The IMF has some of the most accurate data on the global economy since its responsibility is to primarily aid distressed nations to manage their fiscal pressures before a potential implosion with painful consequences. The growth estimates come from the IMF’s World Economic Outlook report published in October 2022, and all GDP estimates are provided in purchasing power parity estimates.
Fastest Growing Countries In Latin America
12. Republic of Peru
2023 Projected Real GDP Growth Rate According to IMF: 2.6%
The Republic of Peru is a South American country with a $513 billion GDP in purchasing power parity. Like some other Latin American countries, Peru also relies significantly on commodities for its foreign exchange earnings. The country’s biggest exports are of copper, zinc, lead, iron, and petroleum products. It also produces significant amounts of food commodities such as avocado, asparagus, rice, fish, and chicken meat. Peru’s largest trading partner is China, highlighting the growing competition between the U.S. and China in the region particularly since America is the second largest importer of Peruvian products.
11. Republic of Ecuador
2023 Projected Real GDP Growth Rate According to IMF: 2.7%
The Republic of Ecuador is a South American coastal nation with a GDP of $229 billion and a per capita income of $12,763. Petroleum products are its largest export, alongside considerable sales of refined petroleum. Additionally, Ecuador also exports bananas, flowers, fish, and other seafood. The U.S. is Ecuador’s largest trading partner and buys and sells a significant proportion of products from and to it.
10. Republic of Costa Rica
2023 Projected Real GDP Growth Rate According to IMF: 2.9%
The Republic of Costa Rica is a Central American country. Its GDP is $129 billion, ranking at the bottom of the first hundred countries, and the country has a per capita income of $24,837 which ranks higher than the economy. Unlike some other Latin American countries, Costa Rica exports manufactured products such as medical instruments alongside considerable exports of agricultural products such as bananas, coffee, and fruits. The U.S. is Costa Rica’s largest trading partner, accounting for close to half of its exports.
9. Republic of Nicaragua
2023 Projected Real GDP Growth Rate According to IMF: 3%
The Republic of Nicaragua is the largest Central American country, located smack in the middle of the region joining South America to North America. The country has a GDP per capita of $5,683 which is one of the lowest in the world. Nicaragua relies primarily on the textile industry for its exports, as it sells a variety of products such as shirts, sweaters, and suits on the global market. At the same time, it also exports significant amounts of gold, coffee, and beef.
8. Republic of Guatemala
2023 Projected Real GDP Growth Rate According to IMF: 3.2%
The Republic of Guatemala is another Central American country and one that shares a land border with Mexico. The country has a $185 billion GDP and a per capita income of $4,880. It is primarily a food products exporter, with products such as bananas, coffee, sugar, and palm oil accounting for large portions of its exports. The U.S. is its largest trading partner, and as a whole, agriculture also accounts for more than half of Guatemalan exports.
7. Plurinational State of Bolivia
2023 Projected Real GDP Growth Rate According to IMF: 3.2%
The Plurinational State of Bolivia, or Bolivia, is a central South American country with a $118 billion GDP. Mining plays a crucial role in its economy, with more than half of its products extracted from the ground. These include gold, oil, zinc, and lead among other products. Brazil and China are Bolivia’s largest trading partners.
6. Republic of Honduras
2023 Projected Real GDP Growth Rate According to IMF: 3.5%
The Republic of Honduras is a Central American nation that is one of the poorest in the world since it has a small GDP of $30.5 billion. Textiles play a crucial role in its exports, as they represent more than one third of the total products. The U.S. is Honduras’ largest import and export partner.
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Disclosure: None. 12 Fastest Growing Countries in Latin America is originally published on Insider Monkey.