Changes at the top ...  While the regional growth projections remain stable, this month’s survey saw significant changes in the assessment of the seven major Latin American economies, with changes both at the top and the bottom end of the range.  Chile, which has led the pack in terms of projected economic growth since the beginning of the year, lost the top spot to Mexico.  In Chile, high volatility of industrial production and retail sales have led the panellists to adopt a more cautious assessment of this year’s growth outlook.  As a result, the Consensus for this year has fallen.  Meanwhile, data releases in Mexico continued to surprise on the upside as healthy investment, strong consumption and a buoyant external sector fuel the economic engine.  Consequently, panellists have further revised their 2000 growth projections.  While panellists also upgraded the outlook for the coming year, Mexico will be the only country among those surveyed in the Consensus Forecast that will see its growth rate drop in 2001. 

… and bottom.  At the bottom end, Colombia passed the red lantern on to Argentina.  In Argentina, businesses and consumers lack confidence in the incipient recovery from last year’s recession.  Disappointing unemployment data underlines that the slow recovery of economic growth will be more protracted than envisioned.  Meanwhile, panellists upgraded the outlook for Colombia a notch amid more positive signs from the external sector that is benefiting from a more competitive currency.  In the mid range, Brazil also gained a percentage point over last month’s forecast whereas Peru and Venezuela remained unchanged.

Inflation seen dropping further.  The efforts of driving inflation down to international levels are bearing fruits.  The regional average forecast for consumer price increases has dropped yet again.  According to this month’s forecast, Argentina will again experience deflation this year, although far less than last year.  The downward adjustment in Argentine inflation follows the more pessimistic outlook for economic growth.  In neighbouring Brazil, inflation is also seen on a downward trajectory.  Panellists have adjusted their forecasts and now forecast inflation below the Central Bank’s own inflation target.  Brazilian monetary authorities have reacted to the improved inflationary expectations by implementing the fourth interest rate cut this year.

Fujimori and Chávez confirmed.  In Peru, President Fujimori disappointed with an inaugural speech that left observers wondering over the direction of economic policy under his third five-year presidential term.  Concerns that the Fujimori government would seek a more accentuated role of the state in the economy were offset with the nomination of renowned free market economist Carlos Boloña, who steered the country free of economic crisis in the early 1990s.  In Venezuela, incumbent President Hugo Chávez secured an overwhelming victory at the 30 July elections.  Next to winning his second term as President, Chávez gained a comfortable majority in Congress and his political allies performed strongly in regional elections.  The favourable election outcome and continued high oil prices will enable Chávez to fully implement his populist electoral promises and to spend the oil wealth that is currently filling Venezuelan coffers.

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