A View from Latin America

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Alberto Ramos, co-head of Latin America research in our Global Investment Research Division, talks about investment in Brazil, commodities, China's impact in the region, and more.

• For 2012, there are two main drivers determining the outlook for the Brazilian economy. The first driver is a tougher global economic outlook, marked by lower growth and tighter external financing conditions. The second driver is the determination by the Brazilian authorities to pursue countercyclical macroeconomic policies. We believe that in 2012, the government will continue to ease monetary policy, boost fiscal spending and stimulate credit growth from official banks to mitigate the adverse effects of the global contractionary shock to the economy.
   
• Latin America has made significant progress since the 1990s in fostering a more supportive growth environment. The region has surpassed other emerging markets in the area of macroeconomic stability (lowering its public debt and fiscal deficit), school enrolment, life expectancy, and access to technology, especially mobile phones penetration. However, these developments, while favorable, have not been enough to allow the region to increase its limited long-run growth potential. One factor hindering progress in this regard is attributed to the inadequate availability and poor quality of the domestic infrastructure. . . .
  
  . . . Brazil is a good example for the prioritization of infrastructure spending, with the launching of the Growth Acceleration Program in 2007 during the Lula administration. The program is essentially an infrastructure investment package that aims to accelerate the country’s economic growth through investments in housing, transportation, utilities, and sanitation. The program involves new investment for the development of six different areas during 2011-14. The areas include (1) sanitation, paving, and urban mobility of cities; (2) nurseries/pre-schools, police and health; (3) a government housing program; (4) universal water and electricity coverage; (5) transportation; and (6) power and renewable energy generation. Overall, the PAC program is an encouraging sign of the commitment of the Brazilian government to increase its competitiveness via infrastructure development.