Latin America begins spiraling into depression


We strongly suspect that the world is heading rapidly into yet another depression.

Much of the world’s economic growth has been fueled by debt, the debt of consumers who are increasingly stressed by frozen incomes, shrinking benefits, and the sense that something is deeply wrong with the global economy — factors which have fueled the rise of populism in most of the world’s developed nations.

When debt levels become intolerable folks will stop buying all that stuff, and recession, followed by depression, become inevitable.

Now comes a strong indication from Latin America that the economic downturn has already begun.

From MercoPress:

Following two years in a downward trend the value of Latin American exports fell 14.8% in 2015, and 8.5% in the first seven months of 2016, according to the Trade and Integration Monitor 2016 of the Inter-American Development Bank. Services exports, which had partially compensated the fall in merchandise trade in previous years, contracted 2.4% in 2015, the first time since the 2009 financial crisis.

The report shows that the export slowdown in Latin America and the Caribbean, which is even more intense than in the rest of the world, resulted from significant price reductions, particularly of commodities and oil, coupled with the most severe recession in recent decades.

The contraction in the value of regional exports in 2015 was due to declines in the external sales of virtually all countries and sub-regions, although with different intensities. South American and Caribbean countries were the most affected, both registering reductions of 22.8%, while the rate for Mesoamerica was 4.2%, driven by a fall of 5% in Central America and of 4.1% in Mexico.

According to Paolo Giordano, Principal Economist of the IDB Integration and Trade Sector and the report’s coordinator, “the intensity and the duration of the export decline indicate that global trade has entered a new normal characterized by low growth. This, in turn, will require a change of gear in the policies that support the international insertion of Latin American and Caribbean countries.”

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