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Manufacturing production plummeted in Latin America during the first quarter of 2009, accelerating a freefall that began in late 2008, and will remain weak throughout the year before improving in 2010, according to the Manufacturers Alliance/MAPI Latin America Manufacturing Outlook, a bi-annual analysis that examines the latest trends and provides a near-term forecast for 16 major industries.
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 manufacturing output in the region. MAPI forecasts that overall manufacturing output in Latin America will decline 7.7% in 2009, a significant drop from 0.9% growth forecast in the December 2008 report. The report anticipates, however, that improvement should come with 3.6% growth in 2010.
Brazil's manufacturing production is expected to decline 6% in 2009, influenced by sharp contractions in the automotive, machinery and equipment, and electrical machinery and apparatus industries. In Mexico, manufacturing production will drop 9.9% in 2009, dragged down by the tumbling car manufacturing sector, machinery and equipment, and basic metals. Argentina's manufacturers are expected to reduce their output levels by 7.7% in 2009, hurt by severe weakness in the motor vehicles, electrical machinery and apparatus, and the non-metallic minerals sectors.
Economic recovery, though, is in sight next year.
"We expect a rebound in overall industrial production during 2010 as our forecast envisions that all manufacturing sectors, with the exception of the wood products industry, will see production gains," said Fernando Sedano, Ph.D., Manufacturers Alliance/MAPI economic consultant and author of the analysis. "Latin America is better prepared to face the current global economic debacle than it was in previous episodes as the abundance of the past five years has not generated the type of macroeconomic vulnerabilities common in past cycles. Latin American countries reduced debt levels, increased foreign exchange reserves, and avoided the typical twin deficits.
"The region is also weathering the crisis with no major financial distress as the credit-to-GDP ratio remains far below the levels of developed countries," he added.
The report sees growth in only two of 16 industries in 2009 but growth in 15 of 16 industries in 2010. 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 and one of the most stable, should decline by 0.5% in 2009 and grow by 2.5% in 2010. The automotive sector will see wide fluctuation in the next 18 months, forecast to decline by 27.8% in 2009 preceding 7% growth in 2010. The machinery and equipment industry should decrease production 14.8% in 2009 but rebound to 7% growth in 2010.
More information is available at www.mapi.net