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UN predicts slower growth in Latin America because of sharp US downturn

UN predicts slower growth in Latin America because of sharp US downturn

The sharp decline in the economy of the United States will slow growth rates in Latin America this year, according to a just-released report produced by the United Nations Economic Commission for Latin America and the Caribbean (ECLAC).

The report, entitled Latin America's Prospects in the New International Context 2001, says that the US crisis will spawn a lower demand for Latin America's products. It also warns that this trend could be aggravated by domestic conditions in some countries.

Overall, current projections from ECLAC indicate that annual regional growth will reach 3 per cent this year, or one percentage point less than in 2000. As a result, the report cautions, Latin America's unemployment rates will remain at relatively high levels and could rise even further in certain States.

At the same time, the report predicts that if conditions in the US economy turn around, Latin America could see growth rates climb to 4 per cent in 2002.

Latin American exports are projected to rise by 5 per cent this year, down from almost 20 per cent in 2000. A slowdown in export growth rates is already apparent in several of the region's economies, the report states.

In terms of capital flows, foreign direct investment is expected to fall by some $10 billion, according to the report. The region's average fiscal deficit will likely increase from 2.6 per cent of gross domestic product (GDP) in 2000 to 3 per cent in 2001. Domestic credit, reflecting expectations of slow growth and the fragility of several countries' financial structures, has generally remained restrictive.

ECLAC, which is headquartered in Santiago, Chile, is one of the five UN regional commissions. It was founded in 1948 to contribute to economic development in Latin America, coordinate actions directed towards this end, and reinforce economic relationships among the region's countries and with the other nations of the world.