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Economic Survey of Latin America and the Caribbean 2009-2010

The Distributive Impact of Public Policies

image of Economic Survey of Latin America and the Caribbean 2009-2010

In 2009, the countries of Latin America and the Caribbean experienced the brunt of the global financial crisis on their levels of activity. However, since the second half of the that year, most countries in the region just begun a vigorous recovery that should strengthen with a regional GDP expansion of approximately 5.2 per cent. The factors behind a more positive performance are both external and internal in nature. Amongst the former can be included the continued dynamism of some key Asian economies, whose sustained demand for products from this region has created important conditions for a recovery in exports, especially in the case of South America.

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Argentina

The Argentine economy slowed sharply in 2009. Towards the end of the year, however, signs of a pick-up in activity could be observed, and a strong macroeconomic upturn is accordingly expected in 2010. According to official statistics, aggregate GDP rose slightly in 2009. Goodsproducing sectors contracted significantly, however (3.5%). This result was mainly due to a decline in agricultural output and a contraction in demand, affecting exports, durable goods consumption and investment. The gross domestic investment rate was about 21.2% of GDP and this, while a lower figure than in 2008, translated into a substantial increase in real assets. Exports fell considerably and imports by even more, the result being an increase in the trade surplus. Declining external trade flows and weakened domestic economic activity affected tax revenues, even though public resources were boosted by the unification of the pensions system under the unfunded State pay-as-you-go scheme. In consequence of this and of strong growth in government spending, the country’s fiscal performance worsened. The national public sector registered a financial deficit of 0.8% of GDP and provincial governments one of 0.4%, with some of the latter struggling to meet their spending commitments. Average inflation for the year was lower in 2009 than 2008. According to national statistics, real wages rose considerably and poverty indices declined substantially despite weaker demand for labour, especially in manufacturing. Towards the end of the year, provision was made for families not covered by the formal benefits regime to receive a subsidy for each of their children provided these attended school. This measure will have a large impact on groups in extreme poverty.

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