Brazil leads worsening in economic climate in Latin America, study says
In the Economic Survey of Latin America for the month of January 2019 and released in February, Brazil’s leadership in improving the region’s economic climate was highlighted. The scenario has changed. The Ifo/FGV Economic Climate Indicator (ICE) for Latin America – prepared in partnership between the German Institute Ifo and FGV – after two consecutive quarters of recovery, shifted from 9.1 points to 21.1 points in January and April 2019. The deterioration of the index was influenced by the decrease in the Current Situation Indicator (ISA) and the Expectations Indicator (IE). The Expectations Indicator (IE) fell by 15.8 points, from 25.0 to 9.2 points in the same period, still remaining in the favorable zone. In turn, the Current Situation Indicator (ISA) presented a smaller decrease – 9.0 points – remaining with a negative response balance.
The decrease in the ICE for Latin America was influenced by the worsening of the indicators in Brazil and Mexico, considering that the result of the indicators is weighted by each country's GDP (gross domestic product), which together account for 63% of the aggregate result Latin America. Brazil’s ICE fell from 3.6 points to 21.1 points between January and April 2019. This return is explained by the deterioration in expectations, considering that the IE dropped by 31.7 points, but still remains positive, as well as the ISA, which presented a 19.0 point drop. The ICE level in Mexico is lower, although the decrease between January and April was smaller when compared to Brazil, from negative 41.9 to negative 43.7.
The ICE improved only in Colombia and Peru, which reported in both cases a recovery of expectations and assessment of the current situation. In other countries, there was worsening of the economic climate, with the exception of Ecuador, which did not report any change. It should be noted that, despite the worsening in the ICE, Chile and Paraguay, along with Colombia and Peru, are the only countries in the favorable evaluation zone.
The full study in Portuguese is available on the website.