Economy: Latin America’s five fastest-growing economies
Latin America’s five fastest-growing economies; Cubans to pay taxes for first time since 1959; Guatemala named one of Latin America’s most unequal countries; São Paulo, Rio de Janeiro lead Brazilian states in economic competitiveness
Latin America’s five fastest-growing economies
In spite of the European economic crisis and the uncertain future of the United States economy, Panama, Peru, Chile, Colombia, and Bolivia continued to grow at a solid rate in 2012, with Gross Domestic Product (GDP) increasing between 5 and 10 percent in each country. This growth persisted even as Brazil, Mexico, and Argentina encountered difficulties maintaining sustained growth.
‘Peru and Chile have accomplished significant gains in their fiscal, monetary, and exchange rate policies while Colombia has demonstrated great advancements in becoming a magnet for foreign investment,’ according to economist Julio Escobar.
Only Panama, Peru, Chile, Colombia, and Bolivia achieved expansion rates in 2012 that exceeded the regional average of 3.5 percent GDP growth.
Colombia achieved growth rates of 5 percent, largely due to increased investment and rapidly growing mining, construction, and agricultural industries. This growth was accompanied by a 25 percent decrease in unemployment and a very tolerable rate of inflation (2.5 percent).
Panama remains one of the fastest growing Latin American countries. The Economic Commission for Latin America (CEPAL) estimates that the country achieved a growth rate of 9.5 percent in 2012, a rate similar to growth rates in India and China. This growth has largely been attributed to an expansion in the banking and commercial sectors, along with million-dollar investments in the expansion of the Panama Canal.
Peru’s economy is increasingly considered the modern ‘Latin American miracle,’ expanding at a rate of 7 percent in 2012. The construction sector, which grew at a rate of 20.5 percent in 2012, along with the commercial and services sectors, have powered this rapid growth. Additionally, favorable fiscal policies and a rapidly-expanding mining sector have increased investment in the country.
Chile’s economy grew at a modest rate of 5.5 percent, largely due to its status as one of the largest exporters in the world. With over 30 trade agreements, Chile has diversified its risk and become the most competitive Latin American country.
Little by little, Bolivia has also risen to become one of the stars of economic growth in Latin America. With GDP growth of 5.1 percent in 2012, the country is transforming its image, largely on the back of an expansion in hydrocarbons, construction, manufacturing, and the export of primary materials.
Cubans to pay taxes for first time since 1959
The majority of Cubans have not paid taxes in fifty years, but that will change with the new fiscal plan which will be implemented in January 2013.
The recently-published law constitutes the first comprehensive tax increase since the 1959 revolution abolished nearly all taxes.
In 1990, the Cuban government imposed a limited collection of new taxes to make up for the fall of the country’s principal benefactor—the Soviet Union. For the most part, however, the government has preferred to keep salaries low to finance free social services rather than increase taxes.
The new tax code will levy 19 new duties which include taxes on inheritance, sales, agriculture, transportation, and the environment. Cubans will also now be required to pay specific taxes for social security and other major governmental programs.
‘This [new tax law] will radically change the government’s relationship with the people,’ noted Domingo Amuchastegui, a former Cuban intelligence analyst currently residing in Miami.
This is the latest move by the Cuban government in an attempt to introduce free market reforms to a country that has been ruled by a communist regime for over half a century. In the last two years, the administration of President Raúl Castro has promoted the privatization of agriculture and the viability of small, independently-owned Cuban businesses.
Guatemala named one of Latin America’s most unequal countries
Guatemala possesses one of the most unequal income distributions in all of Latin America, according to a recently-released report by the Economic Commission for Latin America (CEPAL).
The study found that the wealthiest 10 percent of the Guatemalan population controlled 32 percent of the wealth while the poorest 40 percent only received 15 percent of total income.
Guatemala’s levels of inequality rival those of other highly unequal countries in the region like Brazil, Chile, Colombia, Honduras, Paraguay, and the Dominican Republic. In these countries, the wealthiest 10 percent own approximately 40 percent of the wealth while the poorest 40 percent own 11 to 15 percent of total income.
In Bolivia, Costa Rica, and Panama, the amount of income controlled by the poorest is similar to the aforementioned countries, but a smaller percentage of wealth is concentrated in the hands of the wealthiest 10 percent.
In Argentina, Ecuador, El Salvador, Mexico, Nicaragua, and Peru, the poorest segment of the population owns 16 to 17 percent of wealth while the wealthiest 10 percent controls only 30 percent of income.
São Paulo, Rio de Janeiro lead Brazilian states in economic competitiveness
The states of São Paulo, Rio de Janeiro, and Minas Gerais have been named Brazil’s most competitive, according to a report by the Economist Intelligence Unit.
Data for the report was collected by Brazil’s Center for Public Leadership.
With 77.1 points, São Paulo, the most populous and industrialized Brazilian state, led the country in economic competiveness for the second straight year. Rio de Janeiro and Minas Gerais, which are also located in the southeast of Brazil, finished with 71.8 and 62.8 points respectively.
Despite the relative success of these three regions, Brazil continues to face difficulties which impede its attractiveness for economic investment. The report pointed to significant challenges including ‘heavy administrative regulations, bureaucratic processes, declining infrastructure, and problems in education.’
According to Luis Felipe d’Avila, the president of the Brazilian Center for Public Leadership, ‘the objective of these rankings is to stimulate debate about the factors that affect businesses and to promote public policies that can create more productive regional economies.’