The economies of the Dominican Republic, Panama, and Honduras lead the growth rankings this year and in 2024, according to a recent report by Moody’s Analytics that examines the economic outlook for Latin America.

For 2023 and 2024, the outlook for real GDP growth rates for the Dominican Republic will be 4.3 and 4.9; Panama, 4.4 and 3.7; and Honduras, 3.4 and 3.6, respectively.

These projections coincide with those recently issued by the Central Bank of Honduras (BCH) within the framework of the review or adjustment of figures of the Monetary Program for the years in question.

Honduran economic growth exceeds the Latin American average

The projected behavior for the Honduran economy is slightly above the Latin American average. According to Moody’s Analytics, the outlook for Central America will be marked by lower growth this year due to a less favorable global environment.

Income from tourism and remittances continues to drive the growth of the Honduran economy as inflation continues to decline. Some countries are already in the target inflation range. Although some central banks have begun to reduce their monetary policy rates, they are expected to remain high, affecting domestic demand.

Regarding remittance flows, it is expected that they will continue to benefit from the strength of the US labor market, but its cooling will prevent anticipated growth. Moody’s regional report states, “The region’s economy will see greater growth in 2024.”

The Honduran economy has the potential to grow more, believes the National Association of Industrialists (ANDI) executive director, Fernando García. However, “the review carried out by the Central Bank is positive. It seems that what we projected at the beginning of the year was very ambitious.”

The projection of 3.0 and 3.5 is more realistic. “We hope this goal is met, but as a country, we should grow at 8 and 10 percent to overcome underdevelopment.” But “legal security is needed, in contracts and stability in legislation,” and of course, we must avoid permanent conflicts between politicians because they weaken the investment climate, he mentioned.

Based on a summary of the Monetary Program, the business leadership considers that the moderation of economic growth of the Honduran economy is consistent with a less favorable international context, characterized by a global slowdown and inflation that remains high.

Behavior of the Honduran Economy

According to the Economic Policy Department of the Honduran Council of Private Enterprise (Cohep), the downward revision of the economic growth in the country would be influenced by a drop in exports, explained by the lower external demand for Goods for Processing (textile garments), particularly from the USA – the leading destination of Honduran textile exports.

Likewise, lower growth in private consumption is expected. This situation will be primarily impacted by a lower flow of family remittances than initially expected in response to the slowdown in US economic activity. In addition, lower income for companies is anticipated due to a decreased dynamism of the main economic activities of the Honduran economy.

Moreover, a lower contribution from public investment is estimated in 2024. However, it would continue to be higher than the previous year’s investment in public works and improvements in road infrastructure and the energy sector.

Steps to take to promote economic growth

A comprehensive and multi-faceted approach is necessary to maximize economic growth in Honduras from a policy perspective. Firstly, addressing political instability is crucial. Implementing policies that promote political stability, continuity, and transparency can instill confidence in investors and create an environment conducive to long-term economic planning. Strengthening institutions to ensure effective governance and combating corruption are paramount, as they contribute to a stable and predictable business climate.

Social development policies should focus on reducing poverty and inequality, enhancing education and healthcare, and empowering the workforce. Investing in human capital will not only improve the standard of living for Honduran citizens. Still, it will also create a skilled and productive labor force, vital for attracting and retaining investments in a globalized economy. Additionally, targeted infrastructure development, including transportation and communication networks, is imperative to facilitate the movement of goods and services, reducing transaction costs and promoting overall economic efficiency.

Diversifying the economy by promoting sectors beyond traditional agriculture is essential for resilience against external shocks affecting the Honduran economy. Encouraging innovation and technology-driven industries can contribute to higher productivity and competitiveness on the global stage. Moreover, given Honduras’ vulnerability to natural disasters, formulating climate-resilient agricultural policies and disaster management strategies is crucial.

Trade policies that foster international partnerships and market access are vital for Honduran economic growth. Negotiating favorable trade agreements and participating in regional economic integration can open up new opportunities for Honduran businesses and enhance export potential. Simultaneously, policies supporting small and medium-sized enterprises (SMEs) can stimulate entrepreneurship and generate employment.

Incentivizing foreign direct investment through clear and consistent regulations, tax incentives, and creating special economic zones in Honduras can attract capital and technology transfer. However, such initiatives should be accompanied by measures to ensure responsible and sustainable business practices.

Overall, a holistic and coordinated policy framework addressing political, social, economic, and environmental dimensions is necessary to maximize the growth of the Honduran economy. The success of these policies requires sustained commitment from both the government and the international community, fostering a collaborative effort to unlock the nation’s economic potential.

Gabriel Boric, president of Chile,  recently announced that the Chile – Mexico Free Trade Agreement (CMFTA) will be reviewed in March of 2024, 25 years after it was signed.

Chile and Mexico seek to deepen economic collaboration

In a message to the media on the occasion of the official visit of President Andrés Manuel López Obrador to Chile within the framework of the 50 years of the coup d’état in that country, and after a private meeting at the La Moneda Palace, the Chilean president expressed that the coming update of the trade agreement will strengthen economic collaboration between the two nations.

“Next year, in March, when we celebrate 25 years of the Chile – Mexico free trade agreement, we will once again reinforce and update, precisely, the instances of collaboration that we have put in place for two countries, ” expressed the Chilean head of state.

Gabriel Boric pointed out that Chile and Mexico are united by their history and that although they are geographically distant countries, they have a special closeness, “a rich past together and a challenging present and future that is built in democracy, with justice and freedom.”

The particulars of the Chile – Mexico Free Trade Agreement

The Chile – Mexico Free Trade Agreement (CMFTA) represents a strategic alliance between two dynamic economies in the Latin American region. Signed in 1998, this landmark agreement has significantly transformed the trade landscape between Chile and Mexico, fostering economic growth, enhancing market access, and strengthening diplomatic ties. This essay delves into the critical provisions of the CMFTA, examining how it has propelled bilateral trade, encouraged investment, and laid the foundation for a resilient economic partnership.

Tariff Elimination and Market Access:

At the heart of the CMFTA lies the commitment to eliminate tariffs on a broad spectrum of goods and services. This provision has been instrumental in expanding market access for businesses in both nations. The gradual reduction and elimination of tariffs have facilitated the flow of goods across borders, creating a more competitive and conducive environment for trade. From agricultural products to manufactured goods, the CMFTA has effectively dismantled financial barriers, encouraging diverse industries to thrive.

Beyond tariff elimination, the agreement addresses non-tariff barriers, streamlining customs procedures and simplifying regulatory processes. This reduces transaction costs for businesses and ensures a smoother and more efficient trade flow. The result is a more seamless exchange of goods and services, benefiting businesses and consumers.

Investment Protection and Facilitation:

The CMFTA extends its impact beyond trade in goods, emphasizing investment protection and facilitation. Investors from both Chile and Mexico enjoy a secure and predictable environment, shielded from discriminatory practices and expropriation. This provision has been pivotal in encouraging cross-border investment, fostering economic growth, and diversifying both nations’ economies.

Moreover, the agreement establishes mechanisms for dispute resolution, ensuring a transparent framework for addressing any investment-related issues that may arise. This builds trust between investors and host countries and guarantees the stability necessary for long-term investment planning.

Services and Intellectual Property:

Recognizing the evolving nature of the global economy, the Chile – Mexico Free Trade Agreement goes beyond traditional trade agreements by incorporating services and intellectual property provisions by facilitating the cross-border provision of services, Chile and Mexico benefit from the exchange of expertise and innovation in sectors such as technology, finance, and education.

Additionally, the agreement provides robust protection for intellectual property rights, acknowledging the critical role of innovation in economic development. This ensures that the creative and intellectual works of individuals and businesses are safeguarded, encouraging investment in research and development and fostering a culture of innovation in both nations.

Sustainable Development and Social Responsibility:

The CMFTA takes a progressive stance by incorporating sustainable development and social responsibility provisions. Both nations commit to promoting environmentally friendly practices and fostering social inclusivity in their economic activities. This forward-thinking approach enhances the image of Chilean and Mexican products in the global market and positions both nations as responsible participants in the international trade community.

The CMFTA sets a precedent for trade agreements that prioritize sustainable development by aligning economic growth with environmental and social considerations. This benefits the present generation and lays the groundwork for a more resilient and responsible economic future.

The Chile – Mexico Free Trade Agreement created an economic partnership

The Chile-Mexico Free Trade Agreement is a testament to the transformative power of bilateral collaboration. This agreement has elevated the economic partnership between Chile and Mexico to new heights by eliminating trade barriers, protecting investments, and fostering innovation. As businesses and consumers continue to reap the rewards of this alliance, the CMFTA serves as an example of how nations can forge mutual prosperity through open dialogue, cooperation, and a commitment to shared economic growth. The Chile-Mexico Free Trade Agreement exemplifies successful economic diplomacy as both nations navigate an ever-changing global landscape. It offers valuable lessons for nations aspiring to deepen their economic ties to pursue shared prosperity.

Soon, Argentina will face a crucial election for its future. The US -Argentina Business Council ( USABC ) of the United States Chamber of Commerce, based in Washington DC, believes that a solid and close economic-trade relationship between both countries is fundamental so that Argentina can get out of its current crisis. The organization believes that the US can be a strategic ally for sustained economic growth in Argentina.

The US and Argentina have a long history of commercial relations

This year, the United States and Argentina celebrate two hundred years of diplomatic relations, and the private sector has made a vital contribution to developing a prosperous and mutually beneficial relationship. More than three hundred American companies are based in Argentina, some of which have been in the South American nation for over one hundred years. The United States has historically been the primary source of foreign direct investment in Argentina, with an investment stock estimated at 16 billion dollars. The United States is also Argentina’s third trading partner – after Brazil and China – which in 2022 represented almost $30 billion in trade in goods and services.

However, the bilateral economic relationship has yet to reach its full potential. With an increasingly complex business environment marked by record annual inflation, increasingly strict controls, and trade barriers, trade is declining. Restrictions have increased through mandatory import permits and increasingly limited access to the foreign exchange market. These circumstances can be detrimental to continuing economic growth in Argentina.

The USABC has identified a series of initiatives and reforms in areas linked to trade, energy, and innovation that it believes, regardless of who is elected president in the upcoming contest, the future government of Argentina should promote to achieve its enormous potential, and with which the Council is fully committed to collaborating.

On the part of the United States, the USABC believes that a Critical Minerals Agreement (CMA) should be promoted with Argentina. This country’s lithium carbonate production is estimated to triple to 120,000 tons by 2024. However, without a free trade agreement or CMA with the United States, American companies will not be able to benefit from the inflation reduction law and will not see Argentina as a competitive supplier of lithium.

A Critical Minerals Agreement will fortify economic growth in Argentina

That is why the USABC proposes to develop an ambitious work agenda that mobilizes the Argentine and US diplomacies to take concrete steps toward signing a CMA. Furthermore, the organization firmly supports the IMF agreement with Argentina. With inflation above 150%, a growing fiscal deficit, and a significant contraction in economic activity, the USABC urges the United States government to continue supporting the IMF program to promote economic growth in Argentina.

Likewise, the United States – Argentina Business Council believes including Argentina in the Alliance for Economic Prosperity in the Americas (APEP) is essential. At the 2022 Summit of the Americas, APEP was launched to address inequality, foster integration, generate high-quality employment, and foster democratic values. The USABC proposes that the US authorities invite Argentina to join APEP at this initial stage.

The Council believes that the Argentine government should implement an open and transparent consultation process to address trade obstacles. It is evident that the economy is in a critical situation, but current trade restrictions discourage investment and growth. Mandatory import licenses generate unnecessary costs, bureaucracy, and uncertainty, which harms economic activity and job creation, affects competitiveness, and discourages investment in promoting Argentina’s economic growth.

Access to foreign exchange markets is critical to sustained growth

Furthermore, the country must lift exchange restrictions. Companies that cannot access the foreign exchange market practically cannot operate, and by limiting their ability to repatriate dividends, the incentives to invest in Argentina are blurred and constitute a further impediment to the country’s sustained growth.

Finally, Argentina must unleash its full export potential by eliminating duties and restrictions on exports. To consolidate its profile as a reliable global supplier of food, minerals, and energy, the country must thoroughly review measures that discourage exports, starting with eliminating or reducing export duties and prohibiting the export of certain products.

The United States – Argentina Business Council invites the next government to deepen its relationship with the US private sector and actively work on a joint agenda in strategic sectors for both countries, such as agribusiness, biotechnology, energy, and aerospace.

US trade and investment can grow significantly in the right business climate and contribute considerably to Argentina’s economic growth. In that sense, the USABC believes and shares the perspective of Argentine political leaders that a structural change is necessary that allows Argentina to achieve its promising future. The USABC appreciates that each of the leading candidates for the country’s presidency recognizes, in their own way, this reality, and the organization has a firm commitment to helping Argentina emerge from the current crisis and resume sustained economic growth, the elimination of poverty, and the prosperity of its people.

The United States Chamber of Commerce and its member companies want to be key partners that support positive steps on this new path for economic growth in Argentina.

According to the Central Reserve Bank of Peru, Peru maintains solid macroeconomic fundamentals that give it the capacity to respond to economic shocks.

At the recent Investor Day 2023, organized by the Lima Stock Exchange Group (BVL), Adrián Armas, Central Manager of Economic Studies of the Central Reserve Bank of Peru (BCRP), presented the economic perspectives of the Peruvian market and the current situation of the global economy.

Below is a summary of his presentation:

Global economic growth and risks

The International Monetary Fund (IMF) has revised its global growth forecasts for this year, going from a modest 2.8% to a more optimistic 3%. This improvement is primarily due to the moderation of some risks, such as the banking crisis.

The economic indicators of the United States have exceeded some expectations, which influences the outlook for inflation rates and control. However, there is a lagging effect of the measures taken, and it is essential to highlight that the risk of banking crises in the United States has been reduced if The IMF has identified several risks that could affect global economic activity:

– High Inflation: Inflation could remain high or even increase due to events such as an escalation of the war in Ukraine and extreme weather events.

– Turbulence in the Financial System: The tightening policies of central banks could generate turmoil in the financial system.

– China’s Slow Recovery: Despite the IMF’s projection of 5.2% growth in China, more recent data suggests a slower economic recovery.

– Fiscal Debt Overhang: Tensions related to fiscal debt could spread to other economies.

The terms of trade remain favorable at levels above the average of the last two decades. This leads to having a strong trade balance.

Outlook for Peru

In the global context of favorable terms of trade, leading to a surplus trade balance, Peru has faced political challenges in recent years, which has led to the rotation of presidents and authorities. 2021, in particular, experienced the largest short-term capital outflow in decades due to political uncertainties.

However,  according to the Central Reserve Bank of Peru, the country maintains solid macroeconomic fundamentals that give it the ability to respond to economic shocks. Stability is one of the best assets of the Peruvian economy, and its currency, the Sol, has proven to be one of the most stable in the region, with limited depreciation.

Peru has international reserves equivalent to 29% of GDP, the highest in the region and comparable with Far Eastern economies.

National Economic Activity

While Peru has maintained solid average economic growth of 4.3% annually over the past two decades, it has recently faced obstacles, such as the anchovy fishing ban, social conflicts, and adverse weather conditions. In the first half of the year, GDP experienced a drop of -0.5%.

Business expectations were affected, and although there was a slight recovery in July, challenges remain in private investment and consumption, according to the Central Reserve Bank of Peru.

Monetary Policy and Inflation Projection

The BCRP has maintained the reference interest rate at 7.75%, with an inflation rate decreasing significantly. Unlike other countries in the region, Peru registers one of the lowest and most stable inflation rates in the current century, around 3%. Inflation decreased to 5.88% in July after reaching a maximum of 8.81% in June 2022, partly due to climatic factors and rising food prices.

The same has yet to happen in neighboring countries where their rates have risen to double digits, such as Brazil and Colombia, which are at 13.25%, Mexico at 11.25%, and Chile at 10.25%. (Data as of August 17, 2023).

The Central Reserve Bank of Peru is working with a scenario of relative political stability. The markets are attributing growth for this year of 1.3%, and for next year, it is projected to be 2.7%, with Peru becoming the country in the region with the highest growth in 2024.

Solid fundamentals, according to the Central Reserve Bank of Peru

Peru stands out for its solid macroeconomic fundamentals: low inflation rates, high international reserves, low financing costs, and orderly public finances. Economic recovery is linked to socio-political stability and a favorable environment for doing business.

The country is projected to be one of the fastest-growing countries in 2024, and inflation is expected to enter the target range as the effects of adverse weather events on food prices dissipate.

Peru is a good choice for foreign direct investment

Peru is an attractive destination for foreign direct investment (FDI) due to its robust economic fundamentals, strategic geographic location, and commitment to fostering a business-friendly environment. With a consistently growing economy, Peru has demonstrated resilience and stability, offering investors a predictable landscape. The country’s strategic positioning as a gateway to the Pacific provides access to key Asian and American markets, enhancing trade opportunities. Additionally, Peru has actively engaged in trade liberalization, signing numerous free trade agreements that facilitate market access and reduce trade barriers. The government’s dedication to economic reforms, such as streamlining bureaucratic processes and improving infrastructure, further enhances the ease of doing business.

Natural resource abundance, including significant mineral and agricultural wealth, presents lucrative investment prospects, particularly in the mining, agriculture, and renewable energy sectors. Peru’s diverse and dynamic economy and skilled workforce make it an ideal investment destination. Moreover, ongoing efforts to promote sustainability and responsible business practices align with global trends, fostering a positive image for environmentally conscious investors. In conclusion, Peru’s stable economic growth, strategic location, commitment to reforms, and abundant natural resources collectively make it an enticing option for foreign direct investment.