Economic Climate Index for Latin America
After the increase from the 4th quarter of 2023 to the 1st quarter of 2024, the Economic Climate Index for Latin America fell 14 points in the 2nd quarter of 2024 in relation to the previous period, returning to the adverse zone of the indicator (91.7 points). Between the first two quarters of 2024, both the indicators that make up the Economic Climate Index also decreased. The Present Situation Index fell by 8.8 points to 89.2 points, while the Expectations Index dropped 19.4 points, to reach 94.3 points.
In recent years, the Expectations Index for Latin America has had higher values than the Present Situation Index, as shown in Graph 1. This difference reached over 100 points between the 3rd quarter of 2020 and the 2nd quarter of 2021, reflecting expectations of improvement in the economic climate that contrasted with the perception of the specialists regarding the present situation at the height of the COVID-19 pandemic. There was a brief period between the 2nd quarter of 2022 and the 1st quarter of 2023 in which the Present Situation Index overtook the Expectations Index, albeit with a difference of less than 10 points. Since this period, the Expectations Index has returned to a higher level than the Present Situation Index, although the differences have diminished over time. In the 2nd quarter of 2024, the difference between the Expectations Index and the Present Situation Index was only 5.1 points, indicating a greater convergence of expectations with evaluations on the present situation for Latin America as a whole.
Economic Climate Index for Latin America by country
The Economic Climate Index increased in five countries – Paraguay, Peru, Ecuador, Argentina, and Bolivia. Of these countries, only Paraguay is in the favorable zone of the Economic Climate Index. Five countries recorded a loss on the Economic Climate Index — Uruguay, Brazil, Mexico, Chile, and Colombia — with only Uruguay and Brazil in the favorable zone. In the 1st quarter Survey, with the exception of Mexico and Chile, all the countries had recorded an improvement in the Economic Climate Index in relation to the 4th quarter of 2023.
Regarding the Present Situation Index, there was a rise in eight countries — Paraguay, Brazil, Peru, Ecuador, Chile, Argentina, Colombia, and Bolivia — with Paraguay and Brazil in the favorable zone. Uruguay and Mexico recorded losses on the Present Situation Index, with the former in the neutral zone (100 points) and the latter in the favorable zone. On the previous Survey, five countries had recorded a decrease on the index
In the case of the Expectations Index, seven countries recorded a decrease — Mexico, Brazil, Peru, Chile, Uruguay, Colombia, and Bolivia. Brazil and Chile are in the neutral zone of evaluation and Peru and Uruguay are in the favorable zone. Three countries showed an improvement in the result of the Expectations Index — Paraguay, Ecuador, and Argentina, with Ecuador in the neutral zone of evaluation and Paraguay and Argentina in the favorable zone. On the previous Survey, seven countries had recorded an increase on the index.
While improvements on the Expectations Index predominated in the 1st quarter, in the current quarter, the largest gains are in the evaluation of the Present Situation, which would confirm the role of the Expectations Index as a leading indicator of the present situation. However, the worsening of the Expectations Index in seven countries suggests the possibility of a fall in the Present Situation Index in certain countries.
The results of the largest economies stand out among the set of countries analyzed by the Survey. In Brazil, the fall of 10.1 points on the Economic Climate Index is associated with a 30-point decrease on the Expectations Index, which dropped to the neutral zone (100 points). The Present Situation Index increased 9.1 points and the country moved into the favorable zone. It should be noted that the survey was carried out prior to the floods in Rio Grande do Sul.
In Mexico, the Economic Climate Index decreased 31.4 points, the Present Situation Index, 19.5 points, and the Expectations Index, 41.7 points. All the indicators are in the adverse zone except for the Present Situation Index. It should be noted that the responses were collected in the period prior to the presidential election on June 02. The pre-election period was marked by a turbulent climate with the assassination of various candidates for mayor and other positions.
In Argentina, despite the controversial climate in relation to the measures of the president elected at the end of 2023, the Economic Climate Index increased 25.2 points to 66.9 points in the 2nd quarter. The Present Situation Index improved by 2.9 points to a value of 15.4 points. However, the biggest gain was in the Expectations Index, which increased 55.8 points, ensuring a position in the favorable zone.
Graphs 2, 3, and 4 show the results for each country’s indicators in the 1st quarter of 2024 and the 2nd quarter of 2024. In addition to Argentina, also standing out is Ecuador’s improvement of 29.6 points on the Economic Climate Index, 35.1 points on the Present Situation Index, and 22.2 points on the Expectations Index. The current government was elected in October 2023.
The main problems
Table 2 shows the degree of consensus among the specialists regarding the issues presented as barriers to the economic growth of their respective countries. Scores vary from 0 to 100 points: above 50% indicates that the issue is relevant for most of the specialists, and the higher the percentage, the greater the consensus. For percentages below 50%, the theme is not that relevant at the moment. The table is ordered according to the degree of consensus on the impact of the problems for Latin America.
In the region, of the 15 problems listed, 10 had scores above 50%. Among the problems indicated by the specialists, those that most stood out were: Inadequate infrastructure; Lack of innovation; Lack of confidence in the government's economic policy; Corruption; and Legal and administrative barriers for investors. The lowest score refers to the Lack of credible central bank policy, with 6 percentage points.
The change in the perception of the specialists from Argentina stands out. In the Survey of the 4th quarter of 2023, 92% of the experts consulted signaled that the credibility of central bank policy was an obstacle to the country’s economic development, compared to 17% in the current Survey. In the same vein, the lack of confidence in the government's economic policy fell from 92% to 50%. The improvement in the evaluation of the specialists indicates a decrease in the uncertainty related to the economic policy of Milei’s government.
The specialists were also questioned as to which of the listed problems they considered the three most relevant for their country’s economy. From the perspective of Latin America, the aggregate results identified Lack of confidence in the government's economic policy (55%), Corruption (43%), and Inadequate Infrastructure (42%) as the main bottlenecks.
Special poll – The impact of a slowdown in Chinese economic growth on the region’s economies
A special poll with two questions was carried out for this edition of the Survey. The first refers to the expectations in relation to the Chinese economic slowdown. With the exception of Colombia, the percentage of those that foresee a slowdown is over 50% in all the countries (Table 4).
Table 5 shows the responses on the expected impact of the Chinese slowdown for the country’s economy. Responses indicating a medium impact predominate (above 50%) in all the countries, except Bolivia, Brazil, and Mexico. In the case of Brazil, the percentage is 25% for those that consider a medium impact and 25% for those that expect a high impact, with 50% of those interviewed minimizing the impact. There is, therefore, a clear division, with half of the Brazilian specialists expecting medium/high impacts and the other half expecting the impact to be low.
If the high and medium percentages are added, Chile, Colombia, and Uruguay reach 100%, Peru - 83.4%, Paraguay and Ecuador - 75%, Bolivia - 71.5%, and Argentina - 66.7%. In Mexico the percentage for a low impact is 66.7%, as would be expected, given that the country’s trade is geared towards the United States.