Some Latin American economies returning to slow growth

Argentina: Argentina’s new Economy Minister, Amado Bodou, promised to improve the data produced by the National Statistics Institute. For about two years now, numbers coming from the agency have been viewed with extreme skepticism. Official numbers for July show inflation rising 0.6% from June and 5.5% from a year ago. This is still in stark contrast to private estimates of 1.2% for the month and 14.0% for the year. The government also wants to extend the controversial tax on agricultural exports. The bill is pending in Congress which is no longer controlled by President Christina Kirchner and her party so it will be tough to retain this vital revenue source for the government. Furthermore, an ongoing drought does not help and will adversely affect the wheat harvest. Estimates show the 2009/2010 harvest at only six million tons or 29% under the previous harvest. It is even possible that Argentina will not be able to export wheat at all.

Steel Production: 311,000 mt in June or -36.9% from last year. In the first six months of 2009, 1.659 million mt were produced or -42.0% below last year.

Brazil: The recession in Brazil is relatively mild. The contraction in Q1 was only -0.8% from Q4 and Finance Minister Mantega insists that Q2 numbers, due to be published in September, will show a growth over Q1. Still, there is still some weakness in the system. Industrial utilization of capacity fell to 79.3% in June from 79.8% in May and 83.1% in June 2008.

Steel Production: 1.942 million mt in June or -33.9% compared to last year. In the first six months of the year, 10.565 million mt produced or -39.5% from last year.

Chile: The government’s stimulus package seems to be working. Preliminary numbers show that in June the economy grew 0.6% from May -- the first monthly expansion since January. Consumer prices fell six out of the last eight months and the central bank cut the benchmark interest rate to 0.5%. Officials hope that this might reactivate the mortgage and consumer market. Imports of durable consumer goods fell 43.0% in June. By August 14 the copper price had increased to $6,399 per mt for a three-month forward contract on the London Metal Exchange.

Steel Production: 90,000 mt (e) in June (-34.9% compared to last year). In the first six months of the year 521,000 mt were produced or -40.0% to last year.

Venezuela: Venezuela has received loans from China to replenish infrastructure funds and the government also transferred US$12.0 billion from dollar reserves to off-budget development funds. The ongoing political crisis with neighboring Colombia has had an adverse impact on both countries’ economy, as Venezuela has suspended imports from Colombia for the time being. At the same time, Argentina and Venezuela have signed a trade agreement. Under its terms, 10,000 cars and US$1.0 billion in agricultural machinery will be imported from Argentina.

Steel Production: 360,000 mt (e) in June (-6.7% compared to last year). In the first six months of the year, 2.182 million mt were produced or 6.0% more than last year.