Brazil and LatAm in Boom Phase. Caution Is Recommended Though

Brazilian store In Latin America the business climate in July reached its highest level in a decade according to the joint report from Brazil’s Getúlio Vargas Foundation and Germany’s Economic Research Institute (IFO) from the University of Munich. 

The so-called Economic Climate Index, ICE, for Latin America which the two institutions jointly estimate and release every quarter, last July soared to 6.0 points, the highest since April 2000 and only short of the October 1997 record rate of 6.3.

The ICE has been growing steadily since January 2009 (2.9 points) when it dropped to its lowest because of the world crisis and last April had already climbed to 5.6 points.

According to the joint report, July’s level is “most favorable” and significantly high for Latin America taking into account the average for the last ten years has been 5.1 points.

In spite of the fact that the report insists that Latin America has entered an economic cycle “boom” phase for the first time since July 2007, it also cautions that expectations are less optimistic than in the immediate previous quarter.

“The Latin American situation calls for caution. In the analyzed countries, expectations have begun to show a negative trend since October 2009, but an assessment of the current situation has shown the opposite path”, points out the report.

This means that while the Current Situation Index, ISA climbed from 4.7 points in April to 5.8 in July, the Expectations Index, IE, dropped from 6.4 to 6.2 points in the same period.

The ICE is the average assessment from 149 experts in 17 countries of the region, on the current economic situation, ISA and future expectations, IE. According to the report while ICE for Latin America climbed to 6.0 points in July, in the world overall, including developed and developing countries, it was down from 5,9 points in April to 5.7 points in July.

The IFO/Getúlio Vargas report points out that Argentina, Mexico and Paraguay experienced a jump in their ICE during the last quarter and are in a zone considered positive which includes Brazil, Chile, Colombia, Peru and Uruguay. The best performance was from Mexico, up from 4.8 to 6.2 points in July.

Countries with the best climate for business in July were Uruguay, 7.6 points; Peru, 7.5; Brazil, 7.3; Colombia, 7; Chile, 7; Paraguay, 6.9; Mexico, 6.3 and Argentina, 5.6. Countries that in July were out of the zone considered positive include Bolivia, which dropped from 5.4 in April to 4.6 points in July; Ecuador, 4.2 and Venezuela, 1.8.

Mercopress

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