Is the rapid recovery of Latin America’s economy sustainable?

Economic activity in some key Latin American markets is picking up at a pace that did not seem possible recently. But forecasts remain difficult: With two exceptions, the population is still poorly vaccinated, and new virus variants can spread quickly. Political tensions also persist.

by Alexander Busch, Latin America correspondent for Handelsblatt and Neue Zürcher Zeitung


Investment bank JP Morgan expects “not a swoosh, but a V” for Latin America’s recovery this year: After -6.6% (2020), its economists now expect +6.4% (2021) growth. This is surprising, because Latin America is still the region worldwide that is most affected by the pandemic. Although infections and deaths are falling in all countries, the level remains high by global standards.

In terms of vaccinations, the countries have recently made good progress. However, they lag well behind in an international comparison. No country has vaccinated more than one-fifth of its population twice – with the exception of Uruguay and Chile. There, around 60% of people are fully immunized. The delta virus variant is only now beginning to spread in Latin America.

Overall, the growth forecasts are positive but varied. The most positive surprises come from the renewed improvement in forecasts for the region’s two largest economies: Mexico (+6.8%) and Brazil (+5.5%) are likely to see such a strong upturn that economic strength could reach pre-pandemic levels in the coming months.

The recovery is also underway in the Andean countries, but the further course is uncertain: Above all, the political unrest in Colombia (expected growth for this year: +7.5%) caused a break in the processing chains there in May. In Peru, the election of left-wing president Pedro Castillo is unsettling companies. There, despite the high forecast of +10.8% this year, activity is not expected to recover to pre-pandemic levels until early next year.

In Chile, too, the unclear prospects in politics (elections in November and Constituent Assembly) are causing expected growth of only +8%. Argentina, even with a forecast recovery of +6.3%, will not recover in the foreseeable future from its economic crisis, which the pandemic has exacerbated. Argentina’s GDP shrank by almost -10% last year, after several years of recession already.

An additional factor of uncertainty is the increasing inflation in most economies. Will it weaken again toward the end of the year – as some economists expect – and thus remain temporary? Or will the high energy, raw material and food prices continue, the price-increasing effects of which will be exacerbated by the weak exchange rates in Latin America?

COVID-19 in Latin America

Development of case numbers in the region

Currently reported cases in the countries

COVID-19 vaccine doses administered

Share of people vaccinated by country

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