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Latin American, Caribbean Growth in 2004 Strongest in 24 Years

World Bank reports economic growth rate of 5.7 percent. substantial recovery in Argentina, Uruguay and Venezuela

Posted: April 8, 2005

Guillermo Perry
Washington -- The World Bank reports that economic growth in Latin America and the Caribbean rose 5.7 percent in 2004, the region's strongest growth in 24 years.

The bank said in an April 6 statement that the increase resulted from strong world demand for the region's exports, high commodity prices and low international interest rates that contributed to large gains in output in Mexico, Chile and, to a lesser extent, Brazil.

A substantial recovery in Argentina, Uruguay and Venezuela, following economic crises in those countries in previous years, also contributed to the strong regional performance.

Global economic growth was 3.8 percent in 2004, with much of this increase led by the United States and China.

In keeping with economic trends elsewhere, the region's growth is expected to moderate to a rate of 4.3 percent in 2005, and 3.7 percent in 2006.

Guillermo Perry, the World Bank's chief economist for Latin America and the Caribbean, hailed the figures for 2004. But he warned that the region must "follow a prudent policy to reduce vulnerabilities to higher interest rates and a global growth slowdown."

Perry said Latin American and Caribbean nations should take advantage of "these favorable times to prepare for the future by being prudent with public social spending, building fiscal surpluses and reducing the public debt."

The economic news was announced in a new World Bank report, Global Development Finance 2005. The report identifies a sharp depreciation of the U.S. dollar as a particular risk to the region's current favorable climate. This depreciation could result, said the report, in major capital losses for developing countries with large dollar reserves, and higher global interest rates "that could contribute to wider emerging-market bond spreads."

The report also highlights the growing importance of remittances (money transfers) to developing countries, which totaled $125.8 billion in 2004, more than double the 1996 figure of $61.2 billion.

Latin America and the Caribbean receive the most remittances of any region in the world. In 2004, remittances to this region increased to an estimated $37 billion, up from $34 billion in 2003.

In a country-by-country breakdown, Mexico is the world's second-largest recipient of remittances, receiving $14.6 billion in 2003, second only to India, with $17.4 billion. Brazil received $2.8 billion in that year, ranking eighth in the world as a destination for remittances.

The full text of the World Bank's report is available online.



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