Magazine article UN Chronicle

'Worst Year in Half a Century' for Latin America's Economy

Magazine article UN Chronicle

'Worst Year in Half a Century' for Latin America's Economy

Article excerpt

The economic evolution of Latin America in 1983 was characterized by two main features, according to a recent report of the Economic Commission for Latin America (ECLA). The first was the aggravation of the crisis which began in 1981 and which by 1982 had become the most serious one experienced since the Great Depression of the 1930s. The second was the remarkable effort made by most of the countries of the region to reduce the serious imbalances that had been building up in the external sector over the last few years.

Following are excerpts from the ECLA report, "Prelimanary Balance of the Latin America Economy in 1983".

In 1983, as in 1982, the crisis affected almost every country of the region and was evident in the deterioration of the main economic indicators. Thus, according to the preliminary estimates available to ECLA:

1. The gross domestic product of Latin America as a whole dropped by 3.3 per cent, after having already declined by 1 per cent in 1982.

2. As a result of this drop and of the increase in population, the per capita product fell by 5.6 per cent in the region as a whole; it fell in 17 of the 19 countries for which comparable information is available.

3. As a result of this decline and of the fact that it had also fallen during the two preceding years, the per capita product of Latin America was almost 10 per cent lower in 1983 than in 1980 and was back at the level the region had reached in 1977.

4. The national per capita income fell even more sharply (-5.9 per cent), as 1983 brought a further deterioration of the terms of trade for the region as a whole. It was the sixth year in a row of declining terms of trade for the non-oil-exporting Latin American countries.

5. The slow-down of economic activity was accompanied by a new rise in urban unemployment rates in almost every country for which relatively reliable data are available.

6. In spite of this, inflation accelerated spectacularly, as it had over the last three years, reaching record highs. The simple average rate in increase of consumer prices rose from 47 per cent in 1982 to 68 per cent in 1983.

At the same time, the extraordinary effort made by the region to adjust to these problems was reflected in profound changes in the external sector. Thus in 1983:

. Latin America achieved a record merchandise trade surplus. Merchandise trade, which up to 1981 had regularly shown a negative balance, but which by 1982 had recorded a surplus of over $9.7 billion, generated a surplus of almost $31.3 billion in 1983.

. This surplus was due, however, to a new and spectacular drop in the value of imports of goods, which went down by close to 29 per cent after having fallen by 20 per cent in 1982. This unusual reduction in foreign purchases was both an effect and a cause of the shrinkage of domestic economic activity and a reflection of the exceptionally strict adjustment policies applied in many countries.

. The value of exports of goods, on the other hand, fell slightly, even though the volume of exports rose by 7 per cent in the region as a whole and by 9 per cent in the non-oil-exporting countries.

. Net remittances for profits and interest also went down, so that the exceptionally high rate of growth of previous years was halted. These payments, which between 1977 and 1982 had risen more than fourfold, from $8.6 billion to $36.8 billion, fell to somewhat under $34 billion in 1983. Nevertheless, since the value of exports fell at the same time, payments for interest and profits were still equivalent to almost 39 per cent of exports. …

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