Economic Climate Indicator improves in Latin America, but presents a decrease in Brazil

28 February 2013

Latin America and the global economic climate improved, but Brazil presented a slight worsening. That's what the Economic Climate in Latin America (ICE-AL) survey indicates - developed in partnership between the German Institute Ifo and IBRE, and the Ifo World Economic Survey (WES) as a data source. The indicator continues its improvement trajectory from October 2012, rising from 5.2 in October 2012 to 5.5 points in January 2013, surpassing the average of the last ten years by 0.2 points. The advance was influenced by the results of Ifo/FGV's Indicator of Expectations (IE-AL), which increased from 5.3 to 6.0 points, while the Ifo/FGV Indicator of Current Situation (ISA-AL) registered a slight worsening (from 5.1 to 4.9 points), going into an unfavorable zone. Worldwide, after two straight quarters of decline in the economic climate assessment, ICE registered progress, moving into a favorable zone. The two Ifo indicators that make up the economic climate had an evident improvement: the current situation changed from 4.1 to 5.0 points and the expectations from 5.0 to 6.3 points. The improvement was stimulated by Asia, especially China, where the ICE went up from 4.7 to 6.1 points, driven by the improvement in expectations. According to the latest projections from the International Monetary Fund, the country is expected to grow 8.2% in 2013, which removes the fear of a slowdown toward rates of 7%. Additionally, improvements in the economic climate were also observed in the United States and the European Union. It is possible to notice, however, that in the latter, the climate remained in the zone with an unfavorable evaluation. Results in Latin America In Latin America, the economic climate indicator improved in Chile, Mexico, Uruguay, Peru and Paraguay, remaining in the zone of favorable evaluation. On the other hand, Bolivia, Brazil, Ecuador and Venezuela presented a decrease in their indicators of economic climate, but Bolivia and Brazil remained with favorable evaluations. In Bolivia, the expectations have not changed, but worsened the evaluation of the current situation. In Brazil, ISA went from 4.9 to 4.6 points and the IE, from 7.3 to 7.2 points. The worsening in the evaluation of the current situation was associated with consumption, while the expectations were associated with a slight worsening in the evaluation of investments. The prospects of the trade balance are also worsening, and consequently, Brazil remained in the recovery phase, without advancing to the boom phase of the economic cycle. Lastly, Argentina recorded an improvement in ICE, led by expectations, but the evaluation of the current situation is still bad. In Colombia, the improvement of ICE was followed by deterioration in the current assessment and improvement in expectations, but remained in the negative zone.