Preliminary Overview of the Economies of Latin America and the Caribbean 1999

In 1999 Latin America was once again influenced by the adverse international economic environment, which had a decisive impact on the countries' economic policies and performance. As a consequence of the continuing decline in the prices of non-fuel commodities, together with unstable and deteriorating terms and conditions for external financing, the net transfer of resources for the region as a whole was negative for the first time since 1990, and the previous trend towards a widening deficit in the current account of the balance of payments became untenable. The corresponding correction was associated with a downturn in domestic demand and imports that translated into the virtual stagnation of the region's gross domestic product. The region also witnessed a further deterioration in the employment situation. Nonetheless, inflation held steady at around 10% for the region as a whole despite more flexible foreign-exchange policies and the resulting devaluation of many countries' currencies. The South American countries were the hardest hit by external problems, and intraregional trade (mainly of manufactures) fell sharply. In contrast, Mexico and the Central American and Caribbean countries were able to take advantage of the burgeoning United States market to boost their exports and their levels of economic activity, thereby counteracting the detrimental effects of the international financial crisis. As the year proceeded, the growth of the world economy, the progressive normalization of capital flows, improving commodity prices and the adoption of macroeconomic policies that were more conducive to economic reactivation combined to produce the first glimmers of an upswing in economic activity which is expected to take firm hold in the year 2000.