Home » Report: Latin American Production Growth to Decelerate in 2009
Report: Latin American Production Growth to Decelerate in 2009
August 18, 2008
Maintaining momentum from a strong 2007 and first quarter 2008, particularly in Brazil and Argentina, a new report projects Latin American-based manufacturers will continue to increase output this year and in 2009. According to the Manufacturers Alliance/MAPI Latin America Outlook: 2008-2009, a bi-annual analysis that examines the latest trends and provides a near-term forecast for 16 major industries, manufacturing production growth will decelerate in 2009.
The report focuses on Latin America's three largest economies — Brazil, Argentina, and Mexico — as these countries are responsible for more than 80% of the region's manufacturing output. MAPI raised its forecast for overall manufacturing output in Latin America in 2008 to 4.9% from its 3.8% forecast in the December 2007 report, slightly above the 4.6% expansion of 2007.
The forecast also indicates that manufacturing production growth will ease to 4.4% in 2009, with deceleration in Brazil and Argentina, but slight improvement in Mexico.
In developing its forecast, MAPI utilizes data from national statistical agencies, assigning weighted average annual production indexes for each industry. The weights are determined by a country's sector value added in U.S. dollar terms.
Brazil's manufacturing production is expected to expand 6.8% in 2008 and is a key element in MAPI's higher forecast for the current year. The manufacturers of motor vehicles, other transport equipment, machinery and equipment, and electrical machinery and apparatus — all expanding at double-digit rates — are the most important contributors to output growth in Brazil. Mexico is expected to increase a modest 2% and Argentina 7.5% in 2008, a deceleration from 9% in 2007. The outlook is cautiously optimistic as well.
For 2009, we see all industries analyzed in our report showing gains, although we expect a moderation of overall industrial growth,"said Fernando Sedano, Manufacturers Alliance/MAPI economic consultant and author of the analysis. "Rising inflation, coupled with currency appreciation, will slow Brazilian-based manufacturers; higher interest rates and weak U.S. demand will put a ceiling on Mexico's manufacturing activity; and Argentina's rising costs — among other macroeconomic concerns — will likely curb the strong expansion of the past five years."
The report envisions growth in 14 of 16 industries in 2008 and growth in all 16 industries in 2009. Three industries account for roughly 40% to 45% of the region's manufacturing and, therefore, are keys to the forecast: food and beverages; motor vehicles; and machinery and equipment.
Food and beverages production, the largest industry in the region, should expand 4.5% in 2008 and 4.1% in 2009. Growth in the automotive sector is forecast at 10% in 2008 and 7.6% in 2009. The machinery and equipment industry should increase production 11% in 2008 and 9.7% in 2009.
According to the report, the most significant growth drivers in the region are the automotive, other transport equipment, and the machinery and equipment industries. Suppliers to these sectors, such as manufacturers of basic metals and fabricated metal products are expanding output to keep up with the rising demand.
The report is available at no charge for MAPI members while other purchasers may order the publication for $50 at www.mapi.net. Orders also may be placed by contacting Mary Pearson, Publications and Accounting Assistant at (703) 647-5139 or via email [email protected]