THE UN’s regional body maintains that Latin America and the Caribbean will grow by 3.7 per cent in 2012.

There was less of a slowdown in economic activity in the region’s countries during the first few months of this year when compared to the second half of 2011, despite considerable uncertainty and volatility in the external climate, according to a new report published by the Economic Commission for Latin America and the Caribbean (ECLAC), yesterday.

This United Nations commission predicts that the current European financial crisis, the slowdown in China and the positive but low-level growth in the United States will have differing impacts on this region’s countries, depending on the relative size of their export-destination markets and their export structure.

ECLAC predicts that the fastest-growing economies will be Panama at eight per cent and Haiti at six per cent, followed by Peru (5.7 per cent), Bolivia (5.2 per cent) and Costa Rica (five per cent).

Venezuela is also expected to grow by five per cent, while growth for Chile is projected to be 4.9 per cent, followed by Mexico at four per cent, Argentina (3.5 per cent) and Brazil (2.7 per cent).

In the first quarter of this year, there was a pause and a partial reversal in the slowdown observed in many countries during 2011. In comparison with the same period last year, in 2012 the growth rate has risen significantly in Peru, Chile and Venezuela and climbed slightly in Mexico, while there was a break in the slowdown observed in Brazil’s economy during 2011.

Growth was slower than in early 2011 for Argentina, Colombia and Guatemala, but only Paraguay posted negative growth during the first quarter of 2012.

Available information for Caribbean countries suggests the slow recovery following the 2008-2009 crisis began to be reflected in modest growth rates in 2011, although they have shown an upward trend in the first quarter of 2012.

In the first quarter of 2012, growth was associated with increased internal demand.

Services, and particularly trade, remained one of the most buoyant sectors. Private consumption was responsible for the bulk of the rise in regional gross domestic product (GDP), thanks to a rise in employment and wages, the ongoing credit expansion and, in some countries, increased remittances mainly from the United States.

ECLAC predicts that the relative slowdown in world economic growth expected for 2012 will result in the region’s international trade growing more slowly than in 2011.

Exports is projected to grow by 6.3 per cent this year, while buoyant internal demand will fuel stronger growth (10.2 per cent) for imports. As a result, the trade surplus will fall from 1.3 per cent of GDP in 2011 to 0.7 per cent in 2012.

The report states that the possibility of a worse external scenario in 2012-2013 should not be ruled out.

Were this to happen, it could halt financial inflows to the region and suspend bank credit lines abroad, which would in turn bring about stock market falls and currency depreciation, as well as a reduction in exports and investment.

According to the report, although in most countries this is less true than before the 2008-2009 crisis, the region generally has the fiscal room for manoeuvre to implement a countercyclical policy that would contain the immediate effects of the crisis on its economies, except in several Caribbean countries.

The report concludes that, should the external climate worsen, many countries are in a position to take action without affecting the sustainability of public and external finances, thereby moderating the effects on growth. Other countries may require external financial support from regional and multilateral organisations in order to avoid a deepening of unemployment and poverty.