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2017 Latin American Business Environment Report

2017 Latin American Business Environment Report

Center for
Latin American Studies
Brian C. Gendreau
Timothy E. McLendon
Brian C. Gendreau
Timothy E. McLendon

February 2017
January 2016
1
January 2016
1
MASTER OF
MASTERS OF ARTS INLATIN
ARTS IN LATIN AMERICAN
AMERICAN STUDIES
STUDIES

The Center
The Center for
for Latin
Latin American Studiesisisuniquely
American Studies uniquelypoised
poisedtotohelp
helpstudents
studentsachieve
achieve their
their educational and career goals with a Master of Arts in Latin American Studies
educational and career goals with a MALAS degree. With over 160 experts on the region,
(MALAS)
the Center degree. With
is recogni over
zed 160asexperts
today on the
one of the region, the
top-ranked Center
centers is recognized
internationally today
and has
been
as onecontinuousl y designated
of the top-ranked as ainternationally
centers National Resource Center
and has beenbycontinuously
the U.S. Department
designatedof
Education since 1961.
as a National Resource Center by the U.S. Department of Education since 1961.
LATIN AMERICAN BUSINESS ENVIRONMENT PROGRAM
LATIN AMERICAN BUSINESS ENVIRONMENT PROGRAM
The Latin American Business Environment (LABE) specialization is for MALAS students
The Latin
with a keenAmerican Business
interest in Environment
Latin America who seek (LABE) specialization
to acquire is forskills
the analytical MALAS for careers in
students with a keen interest in Latin America who seek to
business, non-government organizations, and government. The programacquire the analytical
also serves the
skills for public
general careers in business
and business,communi
non-government
ty throughorganizations, and government.
speaking engagements The
and publications,
program also
including servesLatin
the annual the general
Americanpublic and business
Business community
Environment report.through speaking
engagements and publications, including the annual Latin American Business
Environment report.

The contents of this report were developed under a National Resource Center grant from the U.S. Department
of Education. Those contents, however, do not necessarily represent the policy of the U.S. Department of
Education, and you should not assume endorsement by the Federal Government.
The contents of this report were developed under a National Resource Center grant from the U.S. Department of Education.
Those contents, however, do not necessarily represent the policy of the U.S. Department of Education, and you should not assume
endorsement by the Federal Government.
P R E FA C E

This is the 18th edition of the Latin American Business Environment Report (LABER). Following the decision last year
to include Cuba among the countries reviewed, we have added both Haiti and Puerto Rico as well. This rounds out
the coverage of LABER so that it now includes a full review of the business, investment and legal environments in all
of the Latin American states. Although these and other changes have been made to the Report over the years, the
goal remains the same: to provide an accessible, balanced evaluation of the economic, social, political, policy and legal
developments in Latin America that affect the regions business and investment climate.

LABER is a publication of the Latin American Business Environment Program (LABEP) in the Center for Latin
American Studies in collaboration with the Center for Governmental Responsibility (CGR) in the Levin College of
Law at the University of Florida. Through graduate degree concentrations, courses and study abroad opportunities,
LABEP (http://www.latam.ufl.edu/research-training/la-business-environment) draws on the diverse expertise and
considerable resources of the University to prepare students for careers related to Latin American business. It also
organizes conferences, supports the publication of scholarly research and provides professional consulting services.

CGR is a legal and public policy research institute at the Levin College of Law with research programs and grant
projects in environmental law, social policy, international trade law, and democracy and governance. CGR provides
academic and clinical instruction for law students, and public extension and information services through conferences
and publications. CGR has a long history of collaborative work throughout Latin America, in Haiti, Europe and
Africa. CGR (http://www.law.ufl.edu/academics/centers/cgr) hosts an annual Legal & Policy Issues in the Americas
Conference, now in its 18th year.

Samantha Soffici helped with economic research, while Lauren Samuels assisted with background research for the
legal environment section. We thank them for their valuable assistance, but we alone are responsible for the content
and analysis.

Brian Gendreau, Timothy E. McLendon,


Clinical Professor of Finance & Director Staff Attorney
Latin American Business Environment Program Center for Governmental Responsibility
Center for Latin American Studies Levin College of Law
University of Florida University of Florida
brian.gendreau@warrington.ufl.edu mclendon@law.ufl.edu

*
Electronic versions of all 17 previous reports can be accessed at http://www.latam.ufl.edu/research-training/la-business-
environment/publications. The report may be cited without permission, but users are asked to acknowledge the source.
i
CONTENTS

PREFACE i

ABBREVIATIONS AND DEFINITIONS iii

EXECUTIVE SUMMARY 1

OVERVIEW 3

COUNTRY PROFILES

NAFTA REGION
Mexico 12

THE CARIBBEAN
Cuba 14
Dominican Republic 16
Haiti 16
Puerto Rico 17

CENTRAL AMERICA
Costa Rica 18
El Salvador 19
Guatemala 19
Honduras 20
Nicaragua 20
Panama 21

ANDEAN SOUTH AMERICA


Bolivia 22
Colombia 23
Ecuador 25
Peru 26
Venezuela 28

BRAZIL AND THE SOUTHERN CONE


Argentina 30
Brazil 32
Chile 35
Paraguay 37
Uruguay 37

ii
A B B R E V I AT I O N S A N D D E F I N I T I O N S

ALBA: Alianza Bolivariana para los Pueblos de Nuestra Amrica (Boliviarian Alliance for the Peoples of our
America), an organization founded by Cuba and Venezuela in 2004 to foster regional economic,
political, social integration. Its member states, which are socialist or populist in orientation, are
Antigua and Barbuda, Bolivia, Cuba, Dominica, Ecuador, Grenada, Nicaragua, Saint Kitts and Nevis,
Saint Lucia, Saint Vincent, and Venezuela.

Latin America: The states in the Americas in which romance languages are spoken. This definition includes the
Caribbean nations of Cuba, the Dominican Republic, and Haiti. For cultural reasons, we include
Puerto Rico as well.

LA7: The seven largest countries in Latin America by GDP, in 2015 PPP prices. These are, in order
of size, Brazil, Mexico, Argentina, Colombia, Venezuela, Chile, and Peru.

Mercosur: (Mercosul in Portuguese.) A customs union and trading bloc of countries established in 1991
to promote free trade. Its full members are Argentina, Brazil, Paraguay, and Uruguay.
Venezuelas membership was suspended on December 1, 2016.

Pacific Alliance: A trade bloc founded in 2011 with the goal of promoting economic integration and free trade
with a clear orientation toward Asia. Its members are Chile, Colombia, Mexico, and Peru.
Costa Rica and Panama are in the process of becoming full members. Its governments tend to
be market-oriented.

Sources for the data, forecasts, and rankings used in this publication are listed in the footnotes to
Tables 1 through 15.

iii
iv
20172 LATIN
0 1 7 L AMERICAN
AT I N A M E BUSINESS
RICAN BU ENVIRONMENT
SINESS REPOREPORT
RT
Brian
Brian C.Gendreau
Gendreauand
andTimothy
TimothyE.E.McLendon
McLendon

E XEXECUTIVE
E C U T I V E SUMMARY
SUMMARY

Political turmoil
Political combined
turmoil combined withwith
continued lowlow
continued commodity prices
commodity toto
prices make 2016
make 2016ananespecially
especiallydifficult
difficultyear
yearfor
forLatin
Latin
America. Corruption scandals brought down a government in Brazil, and weakened governments
America. Corruption scandals brought down a government in Brazil, and weakened governments in many other in many other
countries, inhibiting
countries, their
inhibiting ability
their to respond
ability to to
to respond economic challenges
economic challenges and implement
and implementnecessary
necessaryreforms.
reforms.

WeWeclassify thethe
classify regions 20 economies
regions 20 economies intointo
three broad
three categories
broad categoriesattractive,
attractive, problematic,
problematic,and andmixed
mixed according
according
thethe
overall character
overall of their
character business
of their environments.
business environments. The
Thetable
tablebelow
belowfurther
further indicates
indicatesif ifthe
theyearly
yearlyperformance
performancehas has
improved
improved deteriorated
(),(), deteriorated(),(),
no no
significant change
significant change(=)(=)
oror
uncertain
uncertain().().
In 2016,
In 2016,nine
nineenvironments
environmentsimproved
improvedand
andsix
deteriorated, while the
six deteriorated, remaining
while were
the remaini ngunchanged. NoneNone
were unchanged. of theofchanges
the changeswas ofwasthe
ofmagnitude
the magnitude to justify reclassifying an
to justify
reclassifying an environment nor did any country abandon its basic orientation. However,
environment nor did any country abandon its basic orientation. However, new governments in Argentina and Brazil new governments in may
wellArgentina andenvironments
change their Brazil may wellinchange
futuretheir environments
years. The outlookinfor future
2017years.
remains Theguarded
outlook because
for 2017 of remains guardedglobal
the uncertain
because
political of the uncertain
environment and theglobal poliongoing
regions tical environment
fiscal andand the regi
external ons ongoing fiscal and external imbalances.
imbalances.

Latin American Business Environments

2015 2016
2017
Environment Environment
Attractive Problematic Mixed Attractive Problematic Mixed Outlook
NAFTA REGION
Mexico =

ANDEAN SOUTH AMERICA


Bolivia
Colombia
Ecuador
Peru =
Venezuela

BRAZIL & SOUTHERN CONE


Argentina =
Brazil
Chile = = =
Paraguay =
Uruguay =

CENTRAL AMERICA & CARIBBEAN


Costa Rica = = =
Cuba
Dominican Republic =
El Salvador =
Guatemala = = =
Haiti = =
Honduras =
Nicaragua = = =
Panama =
Total 9 4 5 7 8 5
1
NAFTA

Caribbean
PUERTO
RICO

Central
America

Andean
South
America

Brazil and
Southern Cone

2
OVERVIEW
OVERV
ECONOMIC I EPOLITICAL
AND W OUTLOOK Figure 1. U.S. Trade
Exports plus imports, 2015

ECON
Politics O MI C Athe
dominated NDheadlines
POL ITIC AL OU
in Latin AmericaTLOOK last
year, and promise to do so again in 2017. In Brazil,
Politics
the dominated
turmoil surrounding the headlines in Latin America
the impeachment last year,
of President
and promise
Dilma Rousseff to made
do so again in 2017.
it all but In Brazil,forthe
impossible theturmoil
surroundingtothe
government impeachment
address of President
the countrys recession DilmaandRousseff
made it all but impossible for the government to address
deteriorating fiscal condition for much of the year. In
Venezuela, the opposition clashed repeatedly
the countrys recession and deteriorating fiscal condition with
President
for muchNicols Maduro
of the year. as the economy
In Venezuela, the oppositionspiraledclashed
downward. Colombias government and
repeatedly with President Nicols Maduro as the economy the
Revolutionary ArmedColombias
spiraled downward. Forces ofgovernment
Colombia, or andFARC,
the
signed a new peace deal in November,
Revolutionary Armed Forces of Colombia, or FARC, signedjust two
months after voters
a new peace deal in rejected
November, thejust
original peace after
two months
agreement. In state and local elections, both the
voters rejected the original peace agreement. In state and
PMDB party of President Michel Temer of Brazil and
local elections, both the PMDB party of President Michel
PRI party of President Pea Nieto of Mexico suffered
Temer of Brazil and PRI party of President Enrique Pea
sharp losses, pointing to further challenges to the
Nieto of Mexico suffered sharp losses, pointing to further
ruling parties in the year ahead. Protests about
challenges to the ruling parties in the year ahead. Protests Figure 2. U.S. foreign direct investment in
corruption arose in several countries in 2016, and
about corruption
corruption is likely arose
to be in a several
politicalcountries
issue across in 2016,
theand Latin America
corruption is likely to
region in the year ahead. . be a political issue across the region in
the year ahead.
Then there was the election of Donald Trump. During
Then
the there was
campaign, Mr. the election
Trump didofnot
Donald
propose Trump. During the
a detailed
campaign, Mr. Trump did not propose
foreign economic policy toward Latin America. But a detailed foreign
economic
trade policy toward
with Mexico Latin America.
and immigration wereBut trade with
centerpieces
ofMexico and immigration
Mr. Trumps campaign,were centerpieces
making Mexico the of Mr. Trumps
country
campaign,
most making
vulnerable Mexico the
to changes incountry
U.S. policy. mostMr. vulnerable
Trump to
changes
has in U.S.to
threatened policy.
placeMr.a Trump has on
35% tariff threatened
automotive to place
a 35% tariff
imports from on automotive
Mexico, imports
has been from
critical ofMexico,
U.S. and has
been critical
Japanese firmsof U.S. firms forormoving
for moving planning or planning
to moveto move
productiontotoMexico,
production Mexico,and and has
has promised
promisedto torenegotiate
NAFTA. More
renegotiate than 80%
NAFTA. More ofthan
Mexicos
80%exports
of Mexicos go to its
neighbor
exports goto tothe north, andtoMexicos
its neighbor the north, economy is closely
and Mexicos
linked to is
economy that of thelinked
closely UnitedtoStates
that of through
the United industrial
States
supply chains.
through industrial It issupply
not clear, however,
chains. It is how far President
not clear how far
Trump willTrump
President go in seeking
will go to restrict trade
in seeking and investment
to restrict trade in
Mexico. Congress is controlled by a Republican partybythat
and investment in Mexico. Congress is controlled a Figure 3. Major export destinations
Republican partysupported
has traditionally that has traditionally
free trade and supported free of
the free flow 1
United States China Americas
trade andand
capital, thethe free flow of capital,
incoming economic and teamthe isincoming
reportedly split
economic team is reportedly split on trade issues. Argentina 6% 9% 33%
on trade issues. Nonetheless, 2017 appears destined to be
Nonetheless,
the start of four2017 appears
years destinedand
of uncertainty to be
tensetherelations
start of Brazil 12% 19% 20%
four years of uncertainty and tense
between Mexico and the United States, and a darker relations between Chile 13% 28% 18%
Mexico
businessand the United
climate southStates, and a Mexico
of the border. darker business
is already Colombia 31% 6% 32%
climate south of the border. Mexico is already feeling
feeling the effects: The peso fell 10% in the two days Mexico 82% 1% 5%
the effects: The peso fell 10% in the two days
following November 8, and since the election economists Peru 15% 23% 17%
following November 8, and since the election
have pared back their consensus forecast for 2017 GDP
economists have pared back their consensus forecast Venezuela 29% 13% 18%
growth in Mexico from 2.2% to 1.5%.
for 2017 GDP growth in Mexico from 2.2% to 1.7%.
1
Theother
The otherLatin
LatinAmerican
Americancountry
country likely
likely to
to be
beaffected
affectedthe
ex. United States and Canada

the most by the regime change in Washington is After


most by the regime change in Washington is Cuba. Source: IMF Direction of Trade Statistics.
seeming toseeming
favor a normalization of relations with Shares with largest trading partner are in boldface .
Cuba. After to favor a normalization of Cuba,
relations with Cuba, late in the campaign Donald some
late in the campaign Donald Trump vowed to reverse
of the executive orders Barack Obama issued to relax
restrictions on finance, trade and travel.
3
Initially,
Initially, the new the new administration
administration is likelytototake
is likely take aa hard
hardline Figure 4. U.S. exports to Cuba
line ononCuba,
Cuba, although
althougha acomplete complete reversal
reversal of theof opening
the with $ millions
openingCuba withwouldCuba be would
difficult.be Diplomatic relations have been
difficult. Diplomatic
reestablished.
relations have beenMajor U.S. airlines Major
reestablished. have initiated regular
U.S. airlines
have flights
initiated to Cuba, and cruise lines now leave U.S. ports
regular flights to Cuba, and cruise linesfor
Havana.
now leave U.S. Theports
United forStates
Havana. has The
exported United an estimated
States $5.5
billion to Cuba
has exported since 2001,
an estimated $5.5 mostly
billion in agricultural
to Cuba since products.
2001,U.S.
mostlybusinesses have lobbied
in agricultural for anU.S.
products. end to the embargo,
businesses
have and
lobbiedpollsfor show anaend majority
to the ofembargo,
Americansand favorpolls
normalization
show
of relations.
a majority of AmericansMoreover, U.S. normalization
favor efforts to re-isolate Cuba would
of relations.
discourage
Moreover, the economic
U.S. efforts awakening
to re-isolate Cuba that has occurred
would
in Cubathe
discourage in recent
economic years.awakening
Eventually, rather that has than continuing
occurred
in Cubato seek
in recentto isolate
years. Cuba, President rather
Eventually, Trump than may try to get a
bettertodeal
continuing seekwith Cuba, seeking
to isolate Cuba, improvements
President Trump in human
may tryrights
to get andareparations
better deal for with
nationalized
Cuba, seeking property in return for
further normalization
improvements in human rights of relations. At this point,for
and reparations however,
any suchproperty
nationalized negotiations appear
in return foryears
further away. normalization
of relations. At this point, however, any such
On his fourth
negotiations appear dayyears
in office,
away. President Trump cancelled U.S.
participation in the Trans-Pacific Partnership (TPP), a free Figure 5. Remittances to Latin American
On histrade
fourth agreement
day in office, among 12 countries,
President Trump including
cancelledCanada, Countries with the most transfers from the United States
Chile, Japan, Mexico, and Peru. The TPP would have
U.S. participation in the Trans-Pacific Partnership
(TPP),resulted
a free in greater
trade trade volumes
agreement among for12 its countries,
member states,
increasing
including Canada, potential
Chile,GDP Japan,growth rates. and
Mexico, The Latin
Peru.American
The
countries
TPP would have that were parties
resulted to TPPtrade
in greater are likely explore
volumes forcloser
trade relationships
its member states, increasing with onepotential
another, GDP and also with China.
growth
rates.During
The Latin Chinese President
American Xi Jinpings
countries thatmid-November
were parties tovisit
TPP areto Ecuador,
likely explorePeru, and Chile,trade
closer he received
relationshipsa warm with welcome
for Chinas proposed new relationship with the region
one another, and also with China. During Chinese
whichXipromises
President Jinpings expanded trade and investment.
visit to Ecuador, Peru, and Chile
in mid-November, he received a warm welcome for
ChinasWith the possible
proposed new exception
relationshipof Costa with Rica,
themembers
region
whichofisthe Dominican
to involve Republic-Central
increased trade and America Free Trade
investment.
Association (CAFTA) are unlikely to be the focus of changes
With the possible
in U.S. trade policyexception
because of Costa
they areRica, not majormembersexporters of
the Dominican Republic-Central America
of manufactured goods. These countries and Mexico, Free Trade
Association
however, (CAFTA)
could beare unlikely
affected deeplyto be by athe focusborder
general of tax
changesand in byU.S. trade policy
immigration reform. because
In 2016,they are notfrom
remittances
majormigrants
exporters to of
Latinmanufactured
America amounted goods.toHowever, an estimated Figure 6. Commodity prices are off their
these$72countries and Mexico
billion according to the World could beBank,
affectedmostly deeply
coming by lows though not by much
a general
fromborder
immigrants tax andworking by immigration
in the United reform. In
States. Funds
2016,sent
remittances from migrants to
home from abroad are an important source of Latin America
amounted
income to for
an many
estimatedcountries $72inbillion
the region.according to the
For example,
Worldremittances
Bank, mostly comingtofrom
amounted 17%immigrants
of El Salvadors working
GDP last in
the United
year, and States.
18% Funds
of GDP sent home from
of neighboring abroad (Figure
Honduras. are an
4). Mexico
important source received
of income a record $28.1 billion
for many countries remittances
in the in
region.2016, $800 million more than in the previous peak year of
Remittances to El Salvador, for example,
2007.to
amounted Concerns
about 17% that of theGDPnew administration
last year, andwill 18% impose
in
restrictions on remittances appear to be the main factor
neighboring Honduras (Figure 4). Mexico received a
recorddriving the increase.
$27 billion remittances in 2016, $800 million
more than in the previous peak year of 2007. A fear
that the
The new administration
beginnings will impose
of a recovery. In 2016, restrictions
Latin America on
remittances appears to be the main factor
struggled to cope with a challenging external environment driving the
increase.
that included slow growth in Europe and the United States,
deceleratingof
The beginnings growth in China, and
a recovery. low commodity
In 2016, Latin prices.
4
A i t l dt ith h ll i t l
In general,
general, the Figure 7. Terms of trade and GDP growth
In thesharper
sharperthe thedecline
decline in aincountrys
a countrys terms of Figure
10 largest7.Latin
Terms of trade
American and GDP
economies, growth
2013-16
Intrade
general, the sharper the decline in a countrys
terms since of trade thesinceglobalthe commodity
global commodity supercycle came to an 10 largest Latin American economies, 2013-16
terms
end inof trade since
2013-14, the global decline commodity
supercycle camethe todeeper
an endthe in 2013-14, in GDP
the deeper growth
supercycle
(seedecline
Figure 7). came to
(The terms an end in
of(see 2013-14,
tradeFigure are the7). the
ratio deeper
of the
the in GDP growth (The
the decline in GDP growth (see Figure 7). (The
pricesof
terms a country
trade are gets thefor its exports
ratio of the prices relativeato the prices
country
terms of trade are the ratio of the prices a country
it pays
gets forforitsits imports.)
exports But countries
relative to the prices have responded
it pays for
gets for its exports relative to the prices it pays for
differently
its imports.)toBut the countries
external shocks, have respondedand the policy choices
its imports.) But countries have responded
have affected
differently to the outcomes.
externalThe shocks,Pacificand Alliance countries
the policy
differently to the external shocks, and the policy
in particular
choices
choices havehave
have fared better
affected
affected
outcomes.
outcomes. than countries
The Pacific
The Pacific that are
members
Alliance of the
countries regions other
in particular
Alliance countries in particular have fared better twohave tradefaredagreements,
better
than countries
especially the ALBA that are members
countries (Figure of the regions
8). The Pacific
than countries that are members of the regions
other
Alliance two trade
countries agreements,
(Chile, Colombia, especially Mexico, the and ALBA
Peru)
other two trade agreements, especially the ALBA
countries
have allowed (Figuretheir 8). The
currencies Pacific
to Alliance
depreciate, countries
helping offset
countries (Figure 8). The Pacific Alliance countries
(Chile, Colombia,
the deterioration Mexico, and Peru) have allowed
(Chile, Colombia,inMexico, their terms andofPeru) trade.have Theyallowedhave also
their currencies to depreciate, helping offset the
their currencies to depreciate, helping offset athe
either reduced their fiscal deficits or seen only modest
deterioration
widening of those in their terms
deficits. of trade. They have also
deterioration in their termsAlloffour trade. still They
have investment-
have also
either reduced their fiscal deficits or seen only a
gradereduced
either sovereigntheir credit ratings,
fiscal deficitsmeaning or seen thatonlythey ahave
modest widening of those deficits. All four still have Table for Figure 1, page 5:
been able
modest to maintain
widening of those access to international
deficits. All four still marketshaveat
investment-grade sovereign credit ratings, meaning
fairly low rates. In contrast,
investment-grade sovereign thecreditALBAratings, countries inflexible
meaning Figure 8. Real GDP growth, %, by trade alliance
that they have been able to maintain access to Figure 8. Real GDP growth, %, by trade alliance
currencies
that they have havebeen not been able able to act asaccess
to maintain externaltoshock
international markets at fairly low rates. In contrast,
absorbers,
international
the and
ALBA countries as a group
markets theirlow
at fairly
inflexible fiscal deficits
rates.
currencies havenot
In contrast,
have 2004-13 2014-16e
widened
the ALBAmarkedly.
countries None of
inflexible
been able to act as external shock absorbers, the ALBA
currencies member have states
and has
not
ALBA
2004-13
5.4
2014-16e
-4.9
asanainvestment
been able to
group their
act grade
as
fiscal bond
external rating.
deficits
shock
haveIn October,
widenedVenezuelas
absorbers, and ALBA 5.4 -4.9
asstate-owned
a group their oil company,
fiscal deficits
markedly. None of the ALBA member states has an PDVSA, have struggling
widenedto service
markedly. None of the ALBA member to states Mercosur 4.6 -1.7
its debt, was
investment forced
grade to ask
bond bondholders
rating. In October, swaphas theiran Mercosur 4.6 -1.7
investment
existing bonds grade bond
for new bonds rating. In October,
Venezuelas state-owned oil with
company, extended PDVSA,maturities
Pacific Alliance 3.6 2.4
Venezuelas
(and therefore state-owned
lower values). oil company, PDVSA, Pacific Alliance 3.6 2.4
struggling to service its debt, was forced to ask
struggling to service its debt, was forced to ask
bondholders to swap their existing bonds for new
bondholders
The adjustment to swapto lower their existing bonds
commodity for new
bonds with extended maturities (andprices thereforeand weaker
lower Source: ECLAC, Consensus Economics, EIU, and UF estimates.
Source: ECLAC, Consensus Economics, EIU, and UF estimates.
bonds with extended maturities
external demand is nearly over in Latin America. The (and therefore lower ALBA: BOL, CUBA, ECU, NIC, and VEN.
values). ALBA: BOL, ARG,
Mercosur: CUBA, ECU,
BRZ, NIC,
PRY, andand
UGY VEN.
VEN (through 2016)
values).
consensus among economists is that growth will pick Mercosur: ARG, BRZ,
Pacific Allicance: PRY,
CHL, UGY
COL, andPER
MEX, VEN (through 2016)
The adjustment to lower commodity prices and Pacific Allicance: CHL, COL, MEX, PER
up inadjustment
The 2017, with the sevencommodity
to lower largest economies prices and in the
weaker external demand is nearly over in Latin
region
weaker eking
externalout positive
demandgrowth
America. The consensus among economists is that
is nearly for the
overfirstin time
Latinin two
years (Figure
America.
growth
The9).
will pick The
up inoutlook
consensus
2017, for withthe
among region
economists
the seven is brighter
largest for
is that
three reasons.
growth
economies
will pick
in the First,
up ingrowth
region
2017, in theout
eking
with developed
the
positive markets,
seven largest
growth Figuree 9.
Figur 9.Economic
Economic performance
performance and forecasts
and forecasts
Figur
Seven e 9. Economic performance
economies. and forecasts
which
economies has been
in the tepid
region
for the first time in two years (Figure since the
eking 2008 global
out positive
8). The financial
growth
outlook
Seven largest
largest Latin
Latin American
American economies.
Seven largest Latin American economies.
for the isfirst
crisis, time intotwo
expected rise. years
In (Figure 8).the The outlook
for the region is brighter formid-January
three reasons. IMF
First, raised
2015 2016e 2017f
for
its the region
forecast for isglobal
brighter growthfor three
to 3.4% reasons.
for 2017 First,
from 2015 2016e 2017f
growth in the developed markets, which has been 2015 2016e 2017f
growth
3.1%,since in thebetter
citing developed prospects markets,in the which United has
States, been Real GDP, % -0.7 -1.9 1.0
tepid the 2008 global financial crisis, is China, Real GDP, % -0.7 -1.9 1.0
tepid since
Europe, and the 2008 global financial crisis, is Real GDP, % -0.6 -1.9 0.9
expected to Japan.
rise. InThe consensusthe
mid-January among IMF economists
raised its is
expected to sanguine
rise. In mid-January the IMF raised its
forecast for global growth to 3.4% for 2017and
not quite as about growth in China from Japan, Inflation,%
Inflation,%
27.1
27.1
76.7
76.7
67.9
67.9
forecast
but does for global
seebetter growth
a slightprospects to
acceleration 3.4% for
in the 2017
United from
States ex. Venezuela 10.0 8.9 6.0
3.1%, citing in the United States, Inflation,% 27.1 77.8 75.0
3.1%, citing better prospects in the United States, ex. Venezuela 10.0 8.9 6.0
and Europe
China, Europe, (Figure and10). Second,
Japan. Thecommodity
consensusprices among ex. Venezuela 10.0 8.7 6.2
China, Europe, and Japan. The consensus among
including theisprice
economists not of quiteoil asare off theirabout
sanguine lows. The growth futuresin Unemployment rate, %
Unemployment rate, %
5.5
5.5
6.2
6.2
6.9
6.9
economists is not quite as sanguine about growth in
marketand
China pricing
Japan, in a rise
but in the price
does see aofslight crudeacceleration
oil to $55 per
China and Japan, but does see a slight acceleration Unemployment
Current account,rate,
% of%GDP 7.5
-3.4 9.1
-2.3 8.2
-2.2
inbarrel by the end
the United States of 2018 and not high
Europe enough
(Figure 10). to provide Current account, % of GDP -3.4 -2.3 -2.2
in the United States and Europe (Figure 10).
much help
Second,
Second, to the countries
commodity
commodity pricesinthe
prices region most
including
including
the
the price dependent
price of
of Current account, %%of oGDP
Fiscal balance, f GDP -3.4
-5.8 -2.3
-5.8 -2.1
-5.0
on
oil
oil
oilare
revenues
are off their
off their such lows.
lows. as Ecuador
The futures
The futures and Venezuela,
market pricing
market pricing but a Fiscal balance, % of GDP -5.8 -5.8 -5.0
inwelcome
a rise inchange the price of
nonetheless crude oil to $55 per barrel
in a rise in the price of crude from oil tothe $55sharp decline in
per barrel Fiscal
Source:b2015:
alance, % 2016-17:
of GDP Consensus forecasts
-5.8from Consensus-5.8 -5.0
by the of
prices end of 201
2014-15. Third, notmost
high Latin enough to provide
American currencies ECLAC; Economics and
by the end of 201 not high enough to provide Source:
Bloomberg.2015:TheECLAC;
LA7 are 2016-17:
the seven Consensus forecasts from
largest economies Consensus
in Latin America Economics
by GDP: and
much help
have stopped to the
falling countries
against the in the region
dollar, and mostmost
the Brazilian Bloomberg.Brazil,
The LA7 are Colombia,
the seven largest economies
much help to the countries in the region Argentina, Chile, Mexico, Peru, andinVenezuela.
Latin America by GDP:
dependent on oil revenues such as Ecuador and
dependent on oil revenues such as Ecuador all
and Colombian peso rose last year. Almost central Source:
2015:
Argentina, ECLAC;
Brazil, 2016-
Chile, 17: Consensus
Colombia, Mexico, forecasts
from
Peru, and Consensus Economics and
Venezuela.
real and
Venezuela,
banks in the but
region a welcome
had raised change
interest nonetheless
rates to prevent
Bloomberg. The LA7 are the seven l argest economies i n Latin America by GDP:
Venezuela, but a welcome change nonetheless Argentina, Brazil, Chile, Colombia, Mexico, Peru, and Venezuela.
from the sharp decline in prices of 2014-15. Third, 5
from the sharp decline in prices of 2014-15. Third,
Figure 10. Global GDP growth that rejected
Economic necessity a change
has obligedto allow
Brazilhim to run
to open its for another
term (the reform adopted in December
offshore oil resources to foreign companies. Mexico to extend
presidential
likewise implemented terms will and
2013 not 2014
applylaws to President
that ended Correa).
In Mexico, a new constitutional reform raising the
the monopoly of its state oil company, Pemex, allowing
status of the capital region to that of a state was
foreign investment to help develop its deep-water oil
adopted.
resources. Meanwhile, Ecuador is moving ahead with oil
and gas development in its sensitive Amazon region, after
Economic necessity has obliged Brazil to open its
other countries failed to respond to President Correas
offshore oil resources to foreign companies. Mexico
2013 offer to leave the oil in the ground if developed
likewise implemented 2013 and 2014 laws that
countries offered contributions equal to half of the
ended the monopoly of its state oil company, Pemex,
forfeited revenues. However, Colombias constitutional
allowing foreign investment to help develop its deep-
court in February voided existing oil, gas and mining
water oil resources. Meanwhile, Ecuador is moving
concessions
ahead with in that nations
oil and gassensitive
development high-altitude
in its Amazon
moorland ecosystems. In May, the
region. However, Colombias constitutional court expanded court in
the ability
February of local governments
voided existing oil,to limit
gasmining
and miningin their
the depreciation of their currencies from generating jurisdictions, striking down a 2001 law that vested all
the Brazilian and Colombian rose last year. concessions in that nations sensitive high-altitude
inflation. In thereal
main, their efforts have been successful. control of mining permits in the national government. In
commodity prices. Almost all central banks in the moorland ecosystems. In May, the court expanded
Inflation has risen in the region, but less than in past June, the Colombian constitutional court further revoked
region had raised interest rates to prevent the the ability of local governments to limit mining in their
episodes (IMF, 2016). With the pressure to maintain tight mining concessions in ninedown
areas a for2001
failure to that
consult with all
depreciation of theirabating,
currencies from generating jurisdictions, striking law vested
monetary conditions authorities have some indigenous communities affected by the mining,
control of mining permits in the national government. meaning
inflation.
room to easeIn the main,
policy. their
Brazil, efforts
Chile have been
and Colombia have thatInthose
June, agreements
the Colombianwill now need to be re-negotiated
constitutional court further
successful. Inflation has risen in the region, but less
already cut rates, and Chile should follow soon. Mexico, withrevoked
proper consultation.
mining concessions in nine areas for failure
than in past episodes (IMF, 2016). With the pressure to
whose currency has come under pressure since the to consult with indigenous communities affected by
maintain tight monetary conditions abating, authorities
U.S. presidential election, is the exception; it will have to Corruption
the mining, investigations
meaning that claim high-profile
those agreements targets.
will now
have some room to ease policy. Brazil and Colombia
maintain tight monetary conditions for some time. Throughout
need to the Americas, corruption
be re-negotiated scandals
with proper continue
consultation.
have already cut rates, and Chile should follow soon.
Mexico, whose currency has come under pressure to implicate current and former leaders. In Brazil,
LEGAL ENVIRONMENT President
CorruptionDilma Rousseffs impeachment
charges continue, came amidst
claiming high-
since the U.S. presidential election, is the exception; it
will have to maintain tight monetary conditions for some of corruption investigations
profile targets. involving
Throughout theother Labor Party
Americas, corruption
During
time. 2016, the overall legal environment in Latin leaders, but corruption
scandals continuecharges also brought
to implicate currentdown the
and former
America showed minor changes, being largely former speaker
leaders. In of the lower
Brazil, house,Rousseffs
President Eduardo Cunha, impeachment
overshadowed by political and economic events. Although and came
implicatedamidst political leaders from
of corruption many parties.
investigations involving
this is not yet reflected in the indices reported in Table 14 Former
other leaders,
Laborincluding Brazils ex-president
Party leaders, but corruption Lulacharges
and 15, there
LEGAL are hopes that political change in the major
ENVIRONMENT da Silva,
alsoArgentinas
brought down ex-president
the former Kristina
speakerFernndez
of the lower
populist democracies of Argentina and Brazil will foster de Kirchner, Perus ex-presidents
house, Eduardo Cunha, and Ollanta Humala
implicated and
political
During 2016, the overall legal environment in Latin
an improvement in their legal environment in the form Alejandro Toledo, El Salvadors ex-presidents Mauricio
leaders from many parties. Former leaders, including
America showed minor changes, being largely
of a visible commitment to the rule of law. The ongoing
overshadowed by political and economic events. Funes and Elias Antonio Saca, face charges of corruption.
Brazils ex-president Lula da Silva, Argentinas ex-
corruption
Although this investigations
is not yet and prosecutions,
reflected especially
in the indices reported Guatemalas
presidentex-president
FernndezOtto Prez Molina
de Kirchner, Perus andex- his vice
ininBrazil, offer visible evidence of that commitment.
Table 14 and 15, there are hopes that political The president, Roxana Baldetti, were convicted on corruption
president Ollanta Humala, El Salvadors ex-
other populist nations, including Bolivia, Ecuador
change in the major populist democracies of Argentina and presidents
charges Mauricio Funes and Elias Antonio Saca,
and incarcerated.
Nicaragua,
and Brazilsaw willlittle improvement,
foster an improvement and Venezuelas legal
in their legal
face charges of corruption. Guatemalas ex-president
environment has imploded as surely as have
environment in the form of a visible commitment to the its political Otto Prez
Corruption Molina
scandals are and
spreadhiswidely
vice president,
throughoutRoxana the
and
ruleeconomic
of law. The environments.
ongoing corruption investigations and LABER countries, implicating government ministers and
Baldetti, were convicted on corruption charges
incarcerated.
(Brazil, Chile, Ecuador, Mexico), family members of
prosecutions, especially in Brazil, offer visible evidence
Political weakness contributed
of that commitment. The otherto an inabilitynations,
populist of political leaders (Bolivia, Guatemala, Mexico), regional
governments in Bolivia and Chile to move forward Corruption
governors (Brazil,scandals
Mexico), are spread
the police widely throughout
(Honduras),
including Bolivia, Ecuador and Nicaragua, saw little
with planned constitutional reforms. Theenvironment
rejection of has the LABER countries, implicating
customs and tax authorities (Guatemala), government
pension
improvement, and Venezuelas legal
Bolivias
imploded reform may suggest
as surely as haveanits
eventual
politicalend
and toeconomic
the authorities (Brazil), business leaders (Brazil, Chile, family
ministers (Brazil, Chile, Ecuador, Mexico),
current regime of President Evo Morales in that country. members
Colombia, of political
Ecuador, Mexico),leaders
and even (Bolivia,
sportsGuatemala,
figures
environment.
Ecuadors President Rafael Correa accepted the results Mexico), regional governors (Brazil, Mexico), the
(Ecuador). Mexico, Colombia and Chile adopted new laws
Political
of weakness
a referendum in hiscontributed
country thattorejected
an inability of to
a change police (Honduras), customs and tax authorities
to combat corruption, while Brazilian prosecutors are
allow him to run for another term (the reform adopted inwith
governments in Bolivia and Chile to move forward (Guatemala), pension authorities (Brazil), business
using new powers under recent legislation. High-profile
planned constitutional
December reforms.terms
to extend presidential The rejection of to
will not apply leaders (Brazil, Chile, Colombia, Ecuador, Mexico),
investigations and prosecutions claimed significant
Bolivias Correa).
President reform may suggest
In Mexico, an constitutional
a new eventual endreform
to the and even sports figures (Ecuador). Mexico, Colombia
successes against powerful leaders, but the successive
current regime of President Morales in that country
raising the status of the capital region to that of a state and Chile adopted new laws to combat corruption
revelations (and publicity surrounding the release of
was adopted.
6
the Panama Papers) have all tarnished the legitimacy of Figure 11. 50 Most Violent Cities in the World 2015
successes
democraticagainst powerful
institutions and leaders, but the
have reduced citizens trust in
successive revelations (and the release of the Homicides
these institutions throughout Latin America, as shown in City Country per 100,000
Panama
the mostPapers)
recent have tarnished the
Latinobarometro legitimacy of
survey. 1 Caracas Venezuela 119.87
democratic institutions and have reduced citizens trust
2 San Pedro Sula Honduras 111.03
in Social
these liberalization
institutions throughout Latin America,
trend continues. as
Recent years 3 San Salvador El Salvador 108.54
shown in the most recent Latinobarometro
have seen many countries in Latin America move survey.
4 Acapulco Mexico 104.73
towards greater openness with regard to issues like 5 Maturin Venezuela 86.45
Social
drug liberalization
legalization, same-sex Mexicos
trend. marriage andsupreme
abortion,court
and 6 Distrito Central Honduras 73.41
overturned state laws forbidding same-sex
this trend continued in 2016. Mexicos supreme court marriage, 7 Valencia Venezuela 72.31
and Presidentstate
overturned Pea lawsNieto supported
forbidding a constitutional
same-sex marriage, and 8 Palmira Colombia 70.88
initiative to allow same-sex marriage nationwide.
President Pea Nieto supported a constitutional initiative 9 Cape Town South Africa 65.53
Colombias constitutional
to allow same-sex marriage court overturned
nationwide. a ban on
Colombias 10 Cali Colombia 64.27
same-sex marriage in that country.
constitutional court overturned a ban on same-sex Colombian and 11 Ciudad Guyana Venezuela 62.33
Panamanian decrees allowed the use
marriage in that country. Colombian and Panamanian of medical 12 Fortaleza Brazil 60.77
marijuana, while the
decrees allowed theMexican presidents
use of medical proposal
marijuana, while to 13 Salvador Brazil 60.63
liberalize marijuana laws foundered in congress.
the Mexican presidents proposal to liberalize marijuana In 14 St. Louis USA 59.23
Brazil, the health agency approved the
laws foundered in congress. In Brazil, the health agencyuse of medical 15 Joo Pessoa Brazil 58.40
marijuana.
approved Chilethe use modified
of medical its abortion
marijuana.laws,Chileallowing
modified 16 Culiacn Mexico 56.09
theitsprocedure in cases of rape, risk
abortion laws, allowing the procedure in cases of death to the
of rape, 17 Macei Brazil 55.63
mother or fetal non-viability. In Brazil, a court
risk of death to the mother or fetal non-viability. In Brazil,
18 Baltimore USA 54.98
invalidated laws criminalizing
a court invalidated abortion
laws criminalizing duringduring
abortion the first
the
19 Barquisimeto Venezuela 54.96
trimester. However, Central American and Caribbean 20 So Luis Brazil 53.05
first trimester. However, Central American and Caribbean
nations resisted 21 Cuiab Brazil 48.52
nations resistedefforts
effortstotorelax
relaxabortion
abortion prohibitions,
prohibitions, 22 Manaus Brazil 47.87
notwithstanding fears raised by
notwithstanding fears raised by the spread ofthe spread ofthe
thezika
zika
virus and 23 Cuman Venezuela 47.77
virus anditsitspossible
possible effects
effects on fetal development.
on fetal development.
24 Guatemala Guatemala 47.17
Some resolution of regional border conflicts. In 25 Belm Brazil 45.83
Some easing of regional border conflicts. In December 26 Feira de Santana Brazil 45.50
December 2015, the International Court of Justice
2015, the International Court of Justice (ICJ) ruled for 27 Detroit USA 43.89
(ICJ) ruled for Costa Rica against Nicaragua over the
Costa Rica against Nicaragua over the latter countrys 28 Goina Brazil 43.38
latter countrys dredging activity in the San Juan River.
dredging activities in the San Juan River, which forms 29 Teresina Brazil 42.68
Ecuador, Peru, Colombia and Costa Rica celebrated
their border. Ecuador, Peru, Colombia and Costa Rica 30 Vitoria Brazil 42.64
the demarcation of their maritime boundaries in
celebrated the amicable demarcation of their mutual 31 New Orleans USA 41.44
September 2016. Further south, the new government
maritime boundaries in September 2016. Further south, 32 Kingston Jamaica 41.14
in Argentina reached agreement with the United
the new government in Argentina reached agreement 33 Gran Barcelona Venezuela 40.08
Kingdom to allow some direct flights from other South
with the United Kingdom to allow some direct flights 34 Tijuana Mexico 39.09
American countries to the Falkland Islands (Islas
from other South American countries to the Falkland 35 Vitria de Conquista Brazil 38.46
Malvinas), which Argentina has long claimed.
Islands (Islas Malvinas), which Argentina has long claimed. 36 Recife Brazil 38.12
However, the dispute continued on a political level,
However, the dispute continued on a political level, 37 Aracaju Brazil 37.70
with Argentina protesting British military exercises on
with Argentina protesting British military exercises on 38 Campos dos Goytacases Brazil 38.16
the islands. Elsewhere, disputes continued to simmer. 39 Campina Grande Brazil 36.04
the islands. Elsewhere, disputes continued to simmer.
Guatemala rejected efforts by Belize to submit their 40 Durban South Africa 35.93
Guatemala rejected efforts by Belize to submit their
territorial dispute to the ICJ. Venezuelan president 41 Nelson Mandela Bay South Africa 35.85
territorial dispute to the ICJ, and in April, security forces
Maduro reiterated his countrys claims to large parts of 42 Porto Alegre Brazil 34.73
exchanged shots in Belizes border region killing a
Guyana located west of the Essequibo River. 43 Curitiba Brazil 34.71
Guatemalan teenager. Venezuelan President Nicols
44 Pereira Colombia 32.58
Maduro reiterated his countrys claims to large parts of 45 Victoria Mexico 30.50
Security
Guyana issues west ofAs
locatedabide. thecan be seenRiver,
Essequibo in Figure
a claim11,
that 46 Johannesburg South Africa 30.31
Latin America provided 43 of the fifty most violent
has higher stakes since the discovery of large oil deposits 47 Macap Brazil 30.25
cities in the
off the world
coast in 2015Guyana.
of Western according to the Mexican
48 Maracaibo Venezuela 28.85
NGO, Citizens' Council for Public Security and
49 Obregn Mexico 28.29
Criminal
Security Justice.
issues abide. As can be seen in Figure 11, Latin
America provided 43 of the fifty most violent cities in the Source: Consejo Ciudadano para la Seguridad Pblica y la Justicia
world in 2015 according to the Mexican NGO, Citizens Penal A.C.,
http://www.seguridadjusticiaypaz.org.mx/biblioteca/prensa/summary/6-
Council for Public Security and Criminal Justice. prensa/231-caracas-venezuela-the-most-violent-city-in-the-world

7
BUSINESS CLIMATE
BUSINESS CLIMATE Figure
Figure 13.
13:Ease
Easeof
ofdoing
doingbusiness
businessrankings byby
rankings trade
According to the World Banks 2017 rankings, there
alliance
trade alliance
hasAccording
been littletochange
the World in Banks
the ease of rankings,
2017 doing business
there hasin
Latin America over the past year. The
been little change in the ease of doing businessWorld Bank
in Latin
assesses countries each year about the quality and Average ranking Change in ranking
America over the past year. The World Bank assesses
efficiency
countriesof regulations
each year aboutinvolved in setting
the quality up and of
and efficiency 2017 2006-17
operating a business. It now surveys regulatory
regulations involved in setting up and operating a business.
practices in 11 areas;
It now surveys somepractices
regulatory details of theareas;
in 11 surveysomeby ALBA 98 45
country are
details of reported
the surveyinbyTable
country15 are
in the back in
reported ofTable
this
publication. This year 10 out of 20 Latin American
15 in the back of this publication. This year 10 out of 20
states (including Mercosur* 109 17
AmericanPuerto Rico) moved upRico)
in the global
Latin states (including Puerto moved up
ease of doing business, while 10 slipped in the
in the global ease of doing business, while 10 slipped in
rankings. Overall,
the rankings. the regions
Overall, average
the regions average ranking
rankingfell
felltwo
two
points, from 99 to 101 out of the 190 countries in the Pacific Alliance 53 -6
points, from 99 to 101 out of the 190 countries in the
World Banks
World Bankssurvey.
survey.
Source: World Bank, Doing Business 2017 and UF estimates.
Figure 12: World Bank ease of doing An upward-poining arrow indicates a rise in the rankings and
business
Figurerankings
Figure 12:
12. World
WorldBank
Bankease
easeof of
doing
doing business an improvement in business conditions.
business rankings
rankings *ex. Venezuela, which was suspended from Mercosur in 2016.
2017 Rank 2016 Rank
Mexico 2017 Rank
47 2016 Rank
38
To be sure, changes in a country or regions
ChileMexico 57 47 48 38 ranking depend on whether other countries are
Peru Colombia 54 53 50 54 Tomoving
be sure, up
changes in a country
or down. Still, theorrankings
regions ranking
point todepend
Peru
Colombia 53 54 54 50 onconsiderable
whether otherscope countries
for are moving up or
improvement in down.
the Still,
CostaChile
Rica 62 57 58 48 theregulatory
rankings point to considerable
climate scope for
in Latin America improvement
relative to the
Costa Rica restregulatory
in the of the world. Nine
climate countries
in Latin Americain Latin
relativeAmerica
to the
Panama 70 62 69 58 are in the top half of the rankings, but only onein
Panama rest of the world. Nine countries in Latin America are
Guatemala 88 70 81 69 Mexico is in the top quarter (and then
the top half of the rankings, but only one Mexico is just
Guatemala
Uruguay 90 88 92 81 barely). Venezuelas ranking of 187 puts it fourth
in the top quarter (and then just barely). Venezuelas
Uruguay 95 90 86 92 from ofthe187
bottom,
El Salvador ranking puts it sandwiched
fourth from the between
bottom,South
sandwiched
El Salvador 95 86 Sudan and Libya. Not surprisingly,
between South Sudan and Libya. Not surprisingly, within Latin
within
Dominican Rep. 103 93
Dominican Rep. 103 93 America, the more market-oriented Pacific
Latin America, the more market-oriented Pacific Alliance
Honduras 105 110 Alliance countries have risen in the ease of doing
Honduras 105 110 countries have risen in the ease of doing business rankings
Paraguay 106 100 business rankings over the past 11 years, while
Paraguay 106 100 over the past 11 years, while the more statist-oriented
Ecuador 114 117 the more statist-oriented Mercosur countries and
Ecuador 114 117 Mercosur countries and populist ALBA countries have
populist ALBA countries have fallen (Figure 13).
Argentina
Argentina
116
116
121
121

fallen (Figure 13).
Brazil 123 116 In interpreting the Doing Business surveys, it is
Brazil 123 116
Nicaragua 127 125 125 In interpreting the Doing Business surveys, it is worth noting
Nicaragua 127 worth noting that the rankings are about de jure
that the rankingsand
regulations, are that
about de jure regulations,
enforcement may be and that
Bolivia
Bolivia 149 149 157 157
enforcement
uneven in may some becountries.
uneven in some
In other countries.
words,Inde other
HaitiHaiti 181 181 182 182 words,
facto outcomes may differ from what might be be
de facto outcomes may differ from what might
Venezuela
Venezuela 187 187 186 186 expected from consideration of theofde jurederegulations
expected from consideration the jure
alone. A different set of surveys conducted
regulations alone. A different set of surveys by the World
United States
United States 8 8 7 7 Bank, the Enterprise
conducted by theSurveys, show athe
World Bank, wide variation in
Enterprise
Puerto Rico Rico 55 55 57 57 outcomes in areas such as the number
Surveys, show a wide variation in outcomes of days needed
in
Puerto
to areas
get a construction
such as the number of days neededfewer
permit, and sometimes far to get
days than the Doingpermit,
a construction Business surveys
and sometimesindicatefar (Hallward-
fewer
Source: World
Source: World Bank, Doing
Bank, Doing Business
Business 2017.2017. The rankings
The rankings are based on are
Source: World
quantitative Bank, Doing
measures of Business
business 2017. The
regulation in rankings
11 areas areare
that basedimportant Driemeir
days thanand Pritchett,
the Doing2015). Thus, surveys
Business for someindicate
firms doing
basedon on quantitative
quantitative measures
measures of
of business business
regulation regulation
in 11Bank
areas in 11
that are
areas to how
that the
areprivate sector functions.
important to how For 2017
the privatethe World
sector surveyed
functions. 190 business may not be as difficult
(Hallward-Driemeir as a low2015).
and Pritchett, rankingThus,
would for
important
countries;to howofthe
oneprivate sector
190functions.
lowest. AnFor 2017 the World
For 2017
a rank
theabove
World Bank
is highest, upward-pointing arrowin suggest,
some though a countrys
firms doing rise may
business in thenotDoingbeBusiness
as difficult
Bank surveyed
the table 190
indicates asurveyed
countries; a rank
rise in 190
of onecountries;
the rankings is highest,
and a rank
190
improving lowest.
business of
one An
is upward-pointing
highest,
conditions. arrow inAn
190 lowest. theupward-pointing
table above indicates a riseinin the
arrow the rankings
as a lowwould still indicate
ranking wouldmovement
suggest, though toward aa more
tablerankings
aboveand improving
indicates business
a rise in theconditions.
rankings and improving favorable
countrys riseand
de jure in the regulatory
Doing
de facto Business climate.
rankings
business conditions. would still indicate movement toward a more
favorable de jure and de facto regulatory climate.
8
Financeand
Finance and Investment
investmentin Latin
inAmerica
Latin America Figure 14. Latin Americas stock markets
have been tracking commodity prices closely
The The clich
clich in financialmarkets
in financial marketsisisthat
that emerging
emerging market
market
equities are a leveraged play on commodity prices and
equities are a leveraged play on commodity prices and G-
7 (developed market) growth. That clich certainly
G-7 (developed market) growth. That clich certainly seems
to describe
seems toLatin Americas
describe stock markets
Latin Americas as of late.
stock markets as ofAn
upward trend was established with the beginning
late. An upward trend was established with the beginning of the
commodity
of the commodity supercycle in 2003-04. That upward in
supercycle in 2003-04. That upward march
prices was interrupted by the global recession of 2008-09,
march in prices was interrupted by the global recession
only to resume when growth was restored in the
of 2008-09, only to resume when growth was restored in
developing world. Stock prices collapsed along with
the developing
commodity prices world.
in 2014,Stock prices
only collapsed
to come along
off their withwith
lows
commodity
the partial pricesinincommodity
recovery 2014, only toprices
comeinoff2016.
their lows with
the partial recovery in commodity prices in 2016.
The upturn in Latin Americas equity markets in 2016,
The upturn
however, reflects in Latin
moreAmericas
than theequitypartialmarkets
recovery in 2016,
of
however,prices.
commodity reflectsAn more than the partial
improvement recoverysentiment
in investor of
commodity
in Brazil, home prices.
of the An improvement
regions largestinstock
investormarket,sentiment
also
in Brazil,
helped. home of
Business the regions
confidence largeststarting
surged stock market, in Mayalso 2016 Figure 15. Capital flows to Latin America
LA7, $ billions
as ithelped.
became Business confidence
increasingly likelysurged starting inDilma
that President May 2016
as it became
Rousseff would increasingly
be removedlikely from that President
office, promisingDilma an end 2015 2016e 2017f
to theRousseff
standoff would
thatbe hadremoved
paralyzed frompolicymaking.
office, promising an end
Business Argentina 9.5 26.6 41.8
confidence continued to rise and has since
to the standoff that had paralyzed policymaking. Business stabilized at a Brazil 56.3 20.0 34.4
relatively high level. Reformist President
confidence continued to rise and has since stabilized at a Mauricio Marcis
Chile 5.0 5.8 4.3
first relatively
year in office in Argentina
high level. Reformistwas also welcomed
President Mauricio Marcis by the
Colombia 19.0 14.0 12.5
markets, although
first year in officethe economywas
in Argentina hasalso
yet welcomed
to respond bytothethe
new governments policy changes. Mexico 34.9 36.9 28.1
markets, although the economy has yet to respond to the Peru 10.1 7.3 8.3
new governments policy changes. Venezuela 22.5 7.3 2.8
Capital flows to Latin America almost certainly declined in
2016, mainly because recession or weakness in the
Capital
regions flows to Latin
economies reducedAmerica thealmost
demand certainly declinedand
for imports, Total, LA7: 157.3 117.9 132.2
in 2016, mainly because recession
therefore resulted in smaller current account deficits or weakness in thein
needregions economies
of external finance. reduced the demand
The flows, however, for imports,
were more and Source: 2015 figures are financial account balances from
therefore resulted in smaller current
than enough to finance the regions current account account deficits in the IMF. The 2016-17 figures are UF estimates based on
need international
deficits: of external finance. reserves The flows,
in thehowever,
aggregate were more
increased consensus forecasts of current account balances plus
than enough to finance the regions
in Latin America. Preliminary data on financial flows to current account changes in forecasted international reserves.
Latindeficits:
America international
for the second reserves halfinof
the2016
aggregate
are not increased
yet
in Latinbut
available, America.
several Complete
indicators data on financial
point flows to
to an acceleration in
flowsLatin America
after the middle for the ofsecond
the year. halfOne
of 2016
is bondare not yet
issuance: Figure 16. Major Latin American currencies
dataavailable,
reportedbut byseveral
ECLAC indicators
throughpoint to anshow
October acceleration
$117 in
billion in new
flows afterbond issues
the middle of coming
the year.outOneofisthebond region
issuance in
increase
out ofover $79 billion
Argentina, Brazil in and2015
Mexico. with
Assetespecially
prices are large
increases
another indicator of increased foreign interest inAsset
out of Argentina, Brazil, and Mexico. the
prices are another
regions markets.indicator
In addition oftoincreased
the rise inforeign
stock prices,interest
in the regions markets. In addition to the rise in stock
several currencies came off their lows in 2016 (Figure
prices, several currencies came off their lows in 2016
16), and yield spreads over U.S Treasuries on sovereign
(Figure 16), and yield spreads over U.S Treasuries on
bonds have
sovereign bonds narrowed for major for
have narrowed Latin American
major Latincountries,
American
indicating an increase in demand (Figure
countries, indicating an increase in demand (Figure 17). 17). Looking
ahead,
Looking the consensus
ahead, the consensus expectsexpects
an increase in capital flows
an increase in
capital flows to Argentina, Brazil, and Peru, and as
to Argentina, Brazil, and Peru, and for the region fora the
whole
regionas growth
as a wholerecovers and the recovers
as growth demand for and investment
the demand funds for
rises. Political tensions with the United
investment funds rises. Political tensions with the United States, however,
are expected
States, however,toare make Mexico an
expected exception
to make Mexicoto this anbroad
recovery,
exception to asthisis broad
the continued
recovery, uncertainty
as is theincontinued
Venezuela.
uncertainty in Venezuela. 9
Although sovereign spreads narrowed in 2016, they remain Figure 17.Spreads
Figure 17: Spreadson
onLatin
Latin American
American sovereign
sovereign bonds
at wider levels than before the end of the commodity bonds have narrowed.
have narrowed.
supercycle in 2014, which resulted in slower economic
growth or recession and lower government revenues. Figure 17: Spreads on Latin American sovereign bond
In general, sovereign spreads across Latin America vary have narrowed.
Although sovereign spreads narrowed in 2016, they
with public debt-to-GDP ratios (Figure 18). Because its
remain at wider levels than before the end of the
government is especially reliant on oil revenues, Venezuela
commodity supercycle in 2014, which resulted in
is an outlier: Its spreads are much wider than its public
slower economic growth or recession and lower
debt-to-GDP ratio would predict. The bond market has
government revenues. In general, sovereign
been pricing in a high probability of default for CCC- rated
spreads across Latin America vary with public debt-
Venezuela for some time, and in October state-owned oil
to-GDP ratios (Figure 18), though Venezuela, a
company PDVSA reached an agreement with investors
country whose government is especially reliant on
holding $2.8 billion of the companys debt to agree to swap
oil revenues is an outlier: Its spreads are much
their bonds for $3.4 billion of new securities with longer
wider than its public debt-to-GDP ratio would
maturities. The agreement, which fell short of the amount
predict. The bond market has been pricing in a high
sought by PDVSA, has alleviated concerns about a default
probability of default for CCC- rated Venezuela for
by the company through 2017, though the relief will be
some time, and in October state-owned oil company
short-lived because payments will increase after 2018. Source: Bloomberg. Spreads over U.S. Treasury yields on 10-year
PDVSA reached an agreement with investors
U.S. dollar-denominated government bonds.
holding $2.8 billion of the companys debt to agree
Public
to swap debt
their burdens
bonds in Latin
for $3.4 America
billion of newas asecurities
whole rose
with longer maturities. The agreement, which fell points
slightly in 2016 to 38% of GDP, up 1.3 percentage
Spreads over U.S. Treasury yields on 10-year U.S.
short of
of GDP over 2015.
the amount However,
sought this rate of
by PDVSA, has increase has
dollar-denominated government bonds
alleviated concerns about a default by the rise
moderated over the past two years. The in public debt
company
through 2017, though the relief will be short-lived falling
was limited by reductions in spending that offset
government
because payments revenues, so the after
will increase average fiscal deficit for the
2018.
Figure 18. Sovereign spreads and public debt
region as a whole remained constant at -3.0 percent of
PublicGDP.
debtFiscal accounts
burdens generally
in Latin Americaimproved in Mexico and the
as a whole
Caribbean,
rose slightly whose
in 2016 toeconomies
38% of GDP, benefited
up 1.3from their close
links to the United States, which
percentage points of GDP over 2015, though grew by about the2 percent in
rate of increase has moderated over the past two in South
2016 according to the consensus. Fiscal balances
years.America,
The risehowever,
in public continued
debt was tolimited
widen as bydomestic and
external
reductions in demand
spending remained weak.
that offset falling government
revenues, so the average fiscal deficit for the region
The cost
as a whole of capital.
remained The cost
constant at of
-3.0capital in Latin
percent of America
GDP.fell during
Fiscal 2016. A modest
accounts generallyriseimproved
in yields on inU.S. Treasuries
Mexico
and the Caribbean, whose economies benefited rate which
the most common measure of the risk-free
anchors
from their closethelinks
entiretocapital cost structure
the United of dollar-based
States, which
grew corporates
by about 2worldwide
percent inwas
2016more than offset
according by a sharp
to the
decline in emerging market corporate
consensus. Fiscal balances in South America, bond spreads
over continued
however, U.S Treasuries. The Bank
to widen of America/Merrill
as domestic and Lynch
Corporate Plus Sub-Index
external demand remained weak. Option-Adjusted Spread, for
example, fell over 300 basis points (3 percent) during the
average cost of capital (WACC) fell during 2016
year. of
The cost Estimates
capital.ofThethe cost
cost ofofequity,
capitalmeanwhile,
in Latin have not for Latin American corporations that issue dollar-
changed since last year the cost
America fell during 2016. A modest rise in yields of equity estimates
on for
denominated debt. The weighted average cost of
five major Latin American markets inmeasure
2017 presented in a capital
hypothetical Colombian
U.S. Treasuries the most common of for any firm will firm financed
depend 50%much
on how with debt
debt
Figure 19 are not substantially different from the estimates and 50%relative
with equity, a tax rate of 20%, a cost
the risk-free rate which anchors the entire capital it has to equity, its debt cost, andofthe
equity of
for last yearof presented in the 2016 Latinworldwide
American
cost structure dollar-based corporates 9.4%, and a debt
corporate costitequal
tax rate faces.of 6.9% (the yield on
For example, a the Bank
wasBusiness Environment
offset byReport. Lower debt in costs and
more than a sharp decline ofhypothetical
America/Merrill Lynch Latin
Colombian America
firm financedCorporate
50% withIndex at
emerging market corporate bond spreads overthe
largely unchanged costs of equity mean that U.Sweighted year-end
debt and 2016)
50%would
with have a WACC
equity, a tax of 7.46%.
rate Lastayear its
of 20%,
Treasuries. The Bank of America/Merrill Lynch for Latin
average cost of capital (WACC) fell during 2016
WACC would have been an estimated 8.34%. Lowerofcapital
cost of equity of 9.4%, and a debt cost equal
American
Corporate Pluscorporations that issue dollar-denominated
Sub-Index Option-Adjusted Spread, 6.9%should
costs (the yield on theinvestment
help boost Bank of America/Merrill
in the region in 2017.
debt. The
for example, weighted
fell over 300 average
basiscost
points of capital for any firm
(3 percent)
will depend on how much debt it has relative to equity, its On the margin, projects that would not haveatbeen
Lynch Latin America Corporate Index year-end
feasible
during the year. Estimates of the cost of equity, 2016) would have a WACC of 7.46%. Last year
debt cost, and the corporate tax
meanwhile, have not changed since last year rate it faces. Forc example, at last years higher cost of capital will now be profitable.
its WACC would have been an estimated 8.34%.
the10cost of equity estimates for five major Latin Lower capital costs should help boost investment
American markets in 2017 presented in Figure 19 in the region in 2017. On the margin, projects that
are not substantially different from the estimates for would not have been feasible at last years higher
Investment
Investment outlook.
outlook. Latin
Latin Americanequities
American equitieshave
have Figure 20. Valuations and earnings growth
becomebecome a high-beta
a high-beta asset
asset class.
class. Betaisisaameasure
Beta measure of of estimates
Investment outlook. Latin American equities have Figure 20. Valuations and earnings growth
an assets
an assets sensitivity
sensitivity to to
broadbroad market
market movements
movements and
and February 2017
become a high-beta asset estimates Earnings growth, %:
represents
Represents systematic
systematic risk
risk class.
therisk
the
Beta
risk thatiscannot
that
a measure of
cannot be be and February 2017
an assets
diversified sensitivity
away. When to broad
thetotal market
totalreturn
returnon movements
onglobal
global equities Forward P/E Price-to-Book 2016e 2017f %:
Earnings growth,
diversified
Representsaway. When
systematicthe riskthe return
the risk that
was was
equities slightly negative
slightly in 2015,
negative in total
2015 the on Latincannot
return American
on
be Forward P/E Price-to-Book 2016e 2017f
diversified
stocks, away.
as measured When the
by measured
the MSCI Latin return on
America global
U.S. dollar
Latinequities
American stocks, as by the MSCI Latin Argentina 11x 1.4 -7 13
index, waswas slightly
-34.4%, negative
making it the in 2015
worlds the
worst return on
performing
America
Latin U.S. dollar stocks,
American index, was -34.4%, making
as measured by theinitMSCI
the Latin Argentina 11x 1.4 -7 13
regional
worlds worst market. Whenregional
performing global markets
market. turned
When aglobal
positive
America
8.5% U.S.
return dollar
last year index,
Latin was -34.4%,
American equitiesmaking
soared, it the Brazil 12x 1.5 -4 12
markets turned
worlds worstin performing
a positive 8.5% return
regional last year
market. When Latin
global
returning
American 24.7%.
equities soared, returning 24.7%.
Brazil 12x 1.5 -4 12
markets turned in a positive 8.5% return last year Latin Chile 15x 1.6 6 28
American
On average, equities
valuationssoared,
in Latinreturning
America 24.7%.
are only slightly
On average, valuations in Latin America are only Chile 15x 1.6 6 28
higher
slightly than
higher than they were a
they were year ago despite last years
On
riseaverage,
in stock valuations
prices. TheyThey in aLatin
are
yearAmerica
ago despite
inexpensive
last
are only
relative to the
Colombia 12x 1.3 -3 15
years rise
slightly in stock
higher prices.
than though
they were are inexpensive
a year ago despite last Colombia 12x 1.3 -3 15
developed
relative to the markets,
developed markets, not relative
though tonot
other emerging
relative to
years
markets, rise in stock
especially prices.
those They
in Eastern are inexpensive
Europe. Unlike last Mexico 16x 2.4 19 27
other emerging
relative to themarkets,
developed especially
markets, those in Eastern
though not relative to
year,Unlike
Europe. the consensus
last year, among equity analysts
the consensus among is that earnings
equity Mexico 16x 2.4 19 27
other
are emerging
going to grow markets,
at a double especially
digit pace those
in all in major
six EasternLatin
analysts
Europe. is that
Unlikeearnings are going
lastwith
year, to grow atamong
the consensus a double equity Peru 12x 2.0 6 11
American
digitanalysts
pace in all markets,
six major especially
Latin Americanstrong growth inwith
markets, Chile
and Mexico is that
growthearnings
though these are going towere
estimates growmade at a by
double Peru 12x 2.0 6 11
especially
digit strong
pacebefore
in all Presidentin Chile
six majorTrump and Mexico
Latin announced
American markets, though with Average:
these analysts
estimates were growth
made by analysts before his intention
President
especially
to announced strong
renegotiate NAFTA in
and toto Chile
put and Mexico
a tariff on imports though
from Emerging Markets 11x 1.5 1 15
Trump his intention renegotiate NAFTAPresident Average:
these
Mexico. estimates
Taking were
earnings made
growth, by analysts before
valuations, and improving
and Trump
to put aannounced
tariff on imports from Mexico.
his intention Taking NAFTA
to renegotiate EAFE Emerging Markets15x 11x
Sources: P/E and P/B ratios are from 1.7 1.5
MSCI. 7
Earnings 1 11 15
growth
economies
earnings growth, into account
valuations, Brazil,
and Chile,
improving andeconomies
Peru all look fairly forecasts are consensus figures reported in Heckman Global
and to put a tariff on imports from Mexico. Taking UnitedEAFE
States P/E and
Sources: 17x P/B15xratios are2.8from1.7
MSCI. 19
Earnings 17 11
7 growth
attractive
into earnings
account relative
Brazil, to other
Chile, and emerging
Peru all markets.
look fairly attractive forecasts are consensus figures reported in Heckman Global
growth, valuations, and improving economies United
Sources: States
P/E and P/B ratios are17x
from MSCI. Earnings2.8growth forecasts
19 17
relative to other emerging markets.
into account Brazil, Chile, and Peru all look fairly attractive are consensus figures reported in Heckman Global Advisors Emerging
relative to other emerging markets. Markets Equity Allocator, January 5, 2017. The P/B ratios for EAFE and the
United States are for the iShares EAFE exchange traded fund and State
Streets SPDR S&P 500 Exchange traded fund.

Figure 19. Estimated cost of equity, five major Latin American countries
February
Figure2017
19. Estimated cost of equity, five major Latin American countries
February 2017 Brazil Chile Colombia Mexico Peru
Sovereign yield, %: Brazil
5.46 3.24Chile Colombia
4.09 Mexico
3.86 3.86Peru
Sovereign yield, %: 5.46 3.24 4.09 3.86 3.86
Beta: 1.77 0.97 1.09 1.07 0.90
Beta: 1.77 0.97 1.09 1.07 0.90
Estimated cost of equity, %:
Estimatedmodel
Damodoran cost of equity, %: 15.3 7.1 9.4 7.6 7.1
Damodoran model 15.3 7.1 9.4 7.6 7.1
Citigroup model 16.1 10.1 11.0 10.9 8.6
Citigroup model 16.1 10.1 11.0 10.9 8.6

The sovereign yield is on 10-year government international bonds. Betas are calculated using the MSCI U.S. dollar return index for
each country against the MSCI All-Country World index. The Damodoran model is described in Damodoran (2013); the Salomon
The sovereign yield is on 10-year government international bonds. Betas are calculated using the MSCI U.S. dollar return index for
Brothers model is described in Abuaf (1997). Both use information from sovereign bond markets to estimate the country risk
each country against the MSCI All-Country World index. The Damodoran model is described in Damodoran (2013); the Salomon
premium in each countrys cost of equity. An equity market risk premium of 5.4% was used in both models; it is the market
Brothers model is described in Abuaf (1997). Both use information from sovereign bond markets to estimate the country risk
capitalization-weighted average of the market risk premia reported for the worlds 10 largest equity markets among the 71 reported
premium in each countrys cost of equity. An equity market risk premium of 5.4% was used in both models; it is the market
by Fernandez (2016).
capitalization-weighted average of the market risk premia reported for the worlds 10 largest equity markets among the 71 reported
by Fernandez (2016).
11
NAFTA Region

N A F
Mexico TA R E G I O N Figure 1. Mexicos share of U.S. imports has
been growing but not as fast as Chinas

M EisXalready
Mexico I C O feeling
the effects of a shift in
U.S. trade policy toward protectionism.
Mexico is already feeling the effects of a shift in
The sharp U.S. decline
trade policyin thetoward
pesoprotectionism.
following the U.S.
election complicates monetary policy.
The sharp decline in the peso following the U.S.
election complicates
Follow-through on structural monetary
reform policy.
should help
lift potential growth despite the uncertainty about
trade. Follow-through on structural reform should help
lift potential growth despite the uncertainty
Shock waves aboutfromtrade.
the U.S. presidential election
reached Mexico even before Donald Trump took office.
Shocklost
The peso waves
16% from thevalue
of its U.S. presidential
between the election reached
election and
Mexico even before
the inauguration, most of Donald Trump
it in the first took office.after
two days The the
pesoFollowing
election. lost 16% of its value between
conversations withthetheelection and the
president- reportedly
treaty. But itwould welcome
is clear some modifications
that Mexico, as the United to the
elect,inauguration, most of itcut
Carrier Corporation in the
backfirst two days
plans after the
to move treaty. But
States secondit is clear thattrading
largest Mexico,partner,
as the United States
with industries
election. Following
manufacturing units and conversations
jobs to Mexico, with the
andpresident-elect,
Ford second
that largestintegrated
are highly trading partner, with industries
into U.S. that is
supply chains,
Carrier Corporation cut back plans
abandoned plans to make a $1.6 billion investment to move manufacturing
in an are highly integrated into U.S. supply chains, is highly
highly vulnerable to a switch toward less liberal trade
units and
assembly jobs
plant to Mexico,The
in Mexico. andsame
Ford abandoned
day Mr. Trump planshad vulnerable
policies. toalso
It is a switch toward less
vulnerable liberal trade
to threats policies. It
to deport
to maketoaimpose
threatened $1.6 billion investment
tariffs on cars in an assembly
made in Mexico plant
by is also vulnerable
millions of Mexican to threats
immigrantsto deport
livingmillions of Mexican
in the United
in Mexico.
General Motors. The same day Mr. Trump had threatened to immigrants
States, or toliving in the United
restrictions on theStates,
abilityoroftothe
restrictions
35 on
impose tariffs on cars made in Mexico by General Motors. the ability of the 35 million people of Mexican origin
million people of Mexican origin living in the United living
Within days of assuming office it became clear that in the United
States to sendStates to send remittances
remittances to their
to their families in families
Donald Trumps stances onoffice,
trade itand Mexico had not in Mexico. Last year, those remittances amounted to
Mexico. Last year, those remittances amounted to over
Within days of assuming became clear that Donald
softened. President Trump formally withdrew the United $28.1 billion.
over $24 billion.
Trumps stances on trade and Mexico had not softened.
States from theTrump
President Trans-Pacific Partnership
formally withdrew (TPP),States
the United a 12-
Last year, the Banco de Mexico raised interest rates
nation trade deal that included Mexico, reiterated
from the Trans-Pacific Partnership (TPP), a 12-nation his Last year, the Banco de Mexico raised interest rates five
five times in an effort to keep currency depreciation
intention
tradetodeal
renegotiate
that includedNAFTA, and
Mexico, affirmedhishis
reiterated supportto
intention times in an effort to keep currency depreciation from
from turning into higher inflation. The U.S. election
for a renegotiate
border taxNAFTA,
on companies that move production
and affirmed his support for a border turning into higher inflation. The U.S. election has now
has now made maintaining economic stability much
abroad.
tax on companies that move production abroad. made maintaining economic stability much more difficult.
more difficult. Since the election business and
Since the election business and consumer confidence in
consumer confidence in Mexico have deteriorated
It is not clear how much of President Trumps Mexico have deteriorated markedly, and economists
It is not clear howwill much of President law, orTrumps protectionist markedly, and economists expecting weaker
protectionist agenda become what the expecting weaker consumption and a fall-off in foreign
agenda will become
NAFTAlaw, or what thewill outcome of new consumption and a fall-off in foreign investment
outcome of new negotiations be both investment are paring back their forecasts for GDP
NAFTA negotiations will be would both Canada and Mexico are paring back their forecasts for GDP growth. With
Canada
Mexico: economic indicators and Mexico reportedly
Avg. 2010-14 welcome
2015 some
2016e 2017f growth. With the peso expected to be under continued
the peso expected to continue to be under pressure,
modifications to the pressure, policymakers will face both a softening
Real GDP,Mexico: % change economic indicators 3.3 2.5 2.1 1.5 policymakers will face both a softening economy and
economy and rising inflation.
Consumer prices, % Dec/Dec Avg. 3.62010-14 2.1 2015 3.4 2016e 2017f 4.9 rising inflation.
GovernmentReal balance, GDP, % c%hange of GDP -2.6 3.3 -3.0 2.5 -2.9 2.1 -2.61.5
Thedomestic
The domesticpolitical
political environment
environmentininMexico,Mexico, meanwhile,
Consumer
Merchandise trade ($ bil) p rices, % D ec/Dec 3.6 2.1 3.4 4.9
has becomehas
meanwhile, toxic. President
become Enrique
toxic. Pea Nietos
President Pea
ExportsGovernment balance, % of GDP 360 -2.6 381 -3.0 374 -2.9 381-2.6 Nietos popularity rating has
popularity plummeted
rating following following
has plummeted several
ImportsMerchandise t rade ( $ b il) 361 395 389 395 corruption scandals and a move
several corruption scandals and a move on on the part ofthe
thepart
Exports
Current account balance, % of GDP -1.5 360 -2.9 381 2.8 374 2.8381 ofgovernment the governmenton January 1 to raise
on January gasoline
1 to prices by 20%.
raise gasoline
Imports 361 395 389 The price
395 prices increase
by 20%. Thewas metincrease
price with rioting
wasthat
metresulted
with in
International reserves ($ bil) 25.0 185.2 168.4 175.0 several deaths. Ironically, the administration has made
Current account balance, % of GDP -1.5 -2.9 -2.9 -3.0 rioting that resulted in several deaths. Ironically, the
Total external debt ($ bil) 347 426 487 537 considerable
administration progress
has madein in efforts to
considerable reform the
progress energy
in in
International reserves ($ bil) 25.0 168.4 175.0 173.0
% of GDP 29 37 29 29 and utility
efforts sectorsthe
to reform and education.
energy The reforms
and utility sectorswill
and
Total external debt ($ bil) 347 426 487 537
% of exports 88 29 104 37 120 29 141 29 education. help raise Mexicos long-term
The reforms growth
will help raiserate, though long-
Mexicos the
% of GDP proposed reforms to education have metreforms
with resistance
term growth rate, though the proposed to
% of exports 88 104 120 141 education
(see below).have met with resistance (see below)
12

Haiti: economic indicators


LEGAL E N V I RONM ENT

Tougher anti-corruption laws adopted. In June, the country. Teachers oppose the reforms mandatory
the Mexican Congress passed legislation to establish evaluations. The reforms are meant to lessen corruption,
new offenses and to increase penalties for corruption reduce bureaucracy, improve teacher competency, and
by public officials. Intended to implement 2015 generate an updated curriculum in a school system
constitutional amendments, the new laws provide that ranked at the bottom of OECD states. Teacher protests
officials convicted of bribery, embezzlement and other and strikes in Oaxaca, Mexico City, and regions in the
forms of corruption will face increased fines and jail time. south of the country disrupted commercial activity
The laws also include increased public disclosures for and resulted in several deaths. Existing teachers were
government-funded organizations. Another law replaces grand-fathered into the new system, but future teaching
former public procurement legislation, and allows positions will depend upon passage of a qualifying
administrative penalties for companies that bribe officials examination.
or otherwise abuse the public procurement process.
An additional administrative accountability law allows New labor amendments under consideration. In
companies to avoid liability if they have in place sufficient October, the Mexican Senate approved amendments to
integrity policies, including whistleblower and reporting two articles of the Mexican Constitution which address
systems, as well as disciplinary procedures for employees labor justice issues and fully conform Mexican labor
who violate company policies or Mexican anti-corruption laws with recommendations of the International Labor
laws. Organization. The proposed amendments would create
federal and state labor courts responsible for worker-
Court overturns state corruption laws. Mexicos employer conflict resolution. An independent agency will
supreme court invalidated laws passed in the states of be responsible for conciliation, registration of collective
Veracruz and Chihuahua which allowed anti-corruption bargaining agreements and union organization, at the
investigators to be appointed by outgoing state federal level. The amendments will need approval of the
governors. The court considered the state provisions to lower house and a majority of the states in order to take
be unconstitutional because the primary anti-corruption effect.
agency is the federal National Anticorruption System.
Simplified corporations authorized. In March, a
Statehood for the Federal District. A constitutional decree amended the general corporations law to allow
amendment enacted in June made Mexico City the 32nd incorporation of a simplified corporation, sociedad
state of the Republic of Mexico. The amendment was por acciones simplificada (SAS), within a 24-hour time
undertaken to gain some autonomy from the federal frame. The new SAS requires fewer shareholders and
government. The states governor will henceforth be able allows electronic registration without the services of a
to appoint the chief of police and the state prosecutor. notary, and is intended to encourage small businesses to
After seeking broad public input with hundreds of incorporate.
proposals submitted online, a group of experts selected
by mayor Miguel ngel Mancera presented the first draft BUSINESS ENVIRONMENT
of the capitals new constitution. The 100 deputies of
Mexico Citys Constitutional Assembly, elected in June,
Mexico fell two spots to 47th place in the World Banks
began reviewing the document that will define the
ease of doing business rankings. This fall moves Mexico
new federal status of the capital area. The proposed
to the bottom of the top quartile in worldwide rankings.
constitution will include mechanisms for integrating the
However, improvements were shown in the time required
informal sector (unsalaried, self-employed, and street
to register property and to enforce contracts.
vendors) into the states commercial and tax structures.
The final document will be approved by the constitutional
assembly and take effect in February 2017.

Education reforms implemented amidst teacher


protests. Notwithstanding vehement and often violent
protests by teachers, education reforms submitted by
President Pea Nieto, have been introduced throughout
13
The Caribbean
The Caribbean
Cuba T HE CARIBBEAN
[=] Figure 1. Cuba has become a predominantly
services-based economy
Cuba
The new [=]U.S. administration can be expected to Figure 1. Cuba has become a predominantly
put theC U B A [ ] of relations with Cuba on
normalization services-based economy
hold.
The new U.S. administration can be expected to
The new U.S. of
put the normalization administration
relations with canCuba be expectedon to
hold.
The death put oftheFidel normalization
Castro doesofnot relations
signal with the Cuba on
hold.
beginning of a new era in Cuba.
The death of Fidel Castro does not signal the
Before
beginning death
his The
of adeath of Fidel
on November
new era in Cuba.Castro
25 at does the age notofsignal 90, Fidel the
beginning of a
Castro made no secret about his distaste for the new era in Cuba.
normalization
Before his death of relations
on November with the 25United
at the age States of 90, andFidel had
insisted Before
that the his death
ideals on
of
Castro made no secret about his distaste for the November
the Cuban 25 at
Revolutionthe age of
should 90,
never beFidel
normalization Castro
abandoned. made
of relations nowith
Following secret hisabout
the death,
United hisStates
itdistaste
is natural and forhad the
to
wonder normalization
insistedifthat the the economic of
ideals of relations
reforms
the Cuban with
initiated the United States
by his brother,
Revolution should and
Ral
neverCastrohadabandoned.
be insisted thatFollowing
will accelerate. the ideals of
histhe
Instability Cuban
after
death, Revolution
itFidel
is natural to
wondershould
Castros ifdeath never be abandoned.
is unlikely:
the economic Raul Castro
reforms Following
initiated has his
bybeen hisdeath, in it is
brother,
charge
Ral Castronatural
since will to
2008 wonder if
with no plans
accelerate. the economicto stepafter
Instability reforms
down Fidel until his by his
initiated
there
600,000 have been no workers
government announcements between 2010 recently
and 2014of in
term brother,
as president
Castros Ral
death is unlikely: Castro
is up in 2018, will accelerate.
and he has
Raul Castro Instability
has been remained afteraFidel
in plans for further layoffs, the three-quarters
an effort to improve productivity and free up labor for the of
chargeCastros
supporter of the
since 2008death
reforms.
withis unlikely:
noBut it Raul
plans would to Castro
step has been
be unrealistic
down until in to
his charge
Cubas
there workers that are have
still on government
since 2008 with no plans to step down until privatehave sector. beenWhile nothere
announcements been recently of
no announcements
expect
term asa president
swift transition is up in to 2018,
a moreand open, he has market remained aas
his term
payrolls are apprehensive. Complaints that of tourists
economy. president is up in 2018, and he has remained a supporter recently of plans for further layoffs, the three-quarters
plans for further layoffs, the three-quarters of
supporter Internalof the reforms. opposition But to the reforms
it would be unrealisticpersists in
to and rising incomes in the private sector are
Cuba, of
and thewith reforms.
the But
election it would
of Donaldbe unrealistic
Trump, to
the expect
thaw a Cubas workers
Cubas workers that areare
that still still
on government
on government payrolls are
expect a swift transition to a more open, market
in swift
relationsInternal transition
with theopposition to a more
United States open, that market economy.
has encouraged Internal apprehensive.
responsible
payrolls arefor Complaints
increasing
apprehensive. that tourists
prices areand
Complaints rising
common incomes
in
that tourists
economy. to the reforms persists in
those opposition to election
the
the reforms persists in Cuba,the andthaw with the in therising
Havana.
and private sector are
incomes in responsible
the privatefor risingare
sector prices are
Cuba,reforms
and with is,thefor timeofbeing, Donald in question.
Trump,
common in Havana.
in relations with the United States that has encouraged the
election of Donald Trump, the thaw in relations with responsible for increasing prices are common in
Since United States that has encouraged thoseafter reforms is, for Cubas
Havana. economy, meanwhile, is in trouble.
those Ralreforms Castro is, for began
the time a seriesbeing, of in reforms
question.
the time being, in question.
replacing his ailing brother as president in 2008 market Following
Cubas economy, a yearmeanwhile,
of strong growth fueled
is in trouble. by a a year
Following
forces boom
of strong growth fueled by a boom in tourism andgrowth
Cubas in tourism
economy, and pickup
meanwhile, in construction,
is in trouble. pickup
Since haveRal Castro begun to beganplay aa series
larger role in the Cuban
of reforms after
economy.
replacing Since hisRal
Cuban ailing Castro
citizens
brother began
areas apresident
now series of reforms
allowed to operate
in 2008 after
market replacing decelerated
in construction,
Following a sharply
year growth indecelerated
of strong 2016growthas Cubasharply
fueledstruggled
in by
2016 a asto
small his ailing
forcesbusinesses
have begun brother
suchto playas
aspresident
a larger in
restaurants, role2008,
barber
in themarket shops,
Cuban forces have deal
boom with
in two
Cuba struggled to deal with two external shocks. First,
tourism external
and shocks.
pickup inFirst, prices
construction, for growth
and room
economy. begun rentals,
Cuban to play and a larger
citizens theyare rolenow
can in
buy the andCuban
allowed sellto economy.
operateCuban
homes. prices for
Cubas
decelerated Cubas
traditional
sharplytraditional
exports
in 2016 exports
of nickel, ofrefined
as Cuba nickel, refined
oil, andoil,
struggled to
Individuals citizens are such
small businesses and now allowed
cooperatives areto operatebarber
as restaurants, allowed small businesses
to cultivate
shops, such and sugar
sugar
deal fell or
with fell
two orexternal
remained
remained flat.flat.
shocks. Second,
Second, First, with
with
prices itseconomy
its economy
for
unused
and room as restaurants,
plots of land.
rentals, barber
andManagers
they can shops, buyand
have and room
been rentals,
sellgiven homes. more and they in shambles,
in shambles,
Cubas Venezuela
Venezuela
traditional exportscutcutsupplies
ofsupplies
nickel, ofrefined
oil
of tooilCuba
tooil, by
Cuba
and as
autonomy
Individualscanto buy
and and
allocate sellresources.
cooperatives homes. are Individuals
These
allowed and to cooperatives
reforms have
cultivate are much as
by as
sugar fell40%.
much as Cuba hasflat.
40%.
or remained Cuba traditionally
Second,swapped
has with its medical
traditionally swapped
economy
unusedallowed
been plots oftoland.
accompanied cultivate
by fewer unusedhave
Managers plots of
restrictions been land.given
on Managers
travel morehave
by services
medical
in shambles, for oilVenezuela
services withfor Venezuela,
oil with and sold the
cutVenezuela,
supplies of and oilto
oil itsold
refines
Cuba the
Cubans
autonomy been togiven
abroad, and
allocate more by autonomy
the gradual
resources. to allocate
These spread reforms resources.
of have These from
by asVenezuela
much as 40%. to theCuba rest ofhas the traditionally
world. As a result swappedof the
Cuba: economic indicators
reforms have
communication
been accompanied been
technology.
by fewer accompanied
Cell phones
restrictions byare fewer
on more
travelrestrictions
by medical services for oil with Venezuela, and sold the
Avg. 2010-14 2015 2016e 2017f
Cubansonabroad,
common intravel byand
Cuba Cubans
than they
by the abroad,
were
gradual andspread
just by the gradual
a year ago,
of andspread
Cuba: economic
Real GDP, % change indicators 2.4 4.4 0.5 1.0
Wi-Fi of communication
spots
communication becometechnology.
havetechnology. popular
Cell phones in Cell phones
Havana, are more are more
though so
far common
not many
common in Cuba exist.in than
Cuba
The they thanwere
pace they were
of reform,just ajust a year
however,
year ago, ago,has
and and Consumer prices, % avg Avg. 2010-14
6.7 2015
4.2 4.7 2016e 2017f
4.8
been Wi-Fi
uneven spots
and have
slow. become
Self-employment
Wi-Fi spots have become popular in Havana, though so popular in Havana,
is still though
limited Real GDP, % change
Government balance, % of GDP 2.4
3.1 4.4
-0.5 -0.5 0.5 1.0
-0.3
to not so
farspecificmany far
and not
exist.many
usually The exist.
unskilled
pace The of pace
activities.
reform, of reform,Architects,
however, however,hasforhas Consumer prices,
Merchandise trade%($avgbil) 6.7 4.2 4.7 4.8
example,
been unevenbeen may uneven
driveslow.
and and
taxisslow. but Self-employment
face difficulties
Self-employment is still is still
going limited limited
into
Government
business
to specificto inspecific
theirusually
and and usually
own profession.
unskilled unskilled Theactivities.
activities. government Architects,
Architects, for
Exports balance, % of GDP 3.1
5.7 -0.5
3.6 -0.5 3.3 -0.3
3.6
for mayexample,
Merchandise
Imports trade ($ bil) 13.9 11.7 10.7 11.3
explicitly
example, prohibits drivemay
the drivebuttaxis
accumulation
taxis facebut offace difficulties
wealth
difficulties hardly
going into going
an
business intoinbusiness
incentive their own in their
to entrepreneurship own profession.
profession. The though The
government it isgovernment
hard to Exports
Current account balance, % of GDP 5.7
2.5 3.6
2.1 2.3 3.3 3.6
1.8
imagine
explicitly explicitly
that thisprohibits
prohibits is the
enforced the accumulation
accumulation effectively. of wealthof wealth
Meanwhile, hardly hardly Imports reserves ($ bil)
International 13.9
n/a 11.7 11.7
12.1 10.7 11.3
11.2
backtrackingan incentive
an incentive has to entrepreneurship
occurred
to entrepreneurship in some areas.
though though Last it is hard
year,
it is hard for
to Current account balance,
Total external debt ($ bil) % of GDP 2.5
24.1 2.1 26.3
26.0 2.3 1.8
28.6
imaginetothat
example, imagine
the state
this is that this is enforced
reasserted
enforced its control
effectively. effectively.
of part
Meanwhile, Meanwhile,
of the
International
food backtracking
distribution
backtracking hassystem. has occurred
occurred And in not
some ineveryone
someareas. areas. in Cuba
Last Last
year, year,
isforfor % of GDP reserves ($ bil) n/a
32 12.1
30 11.7 28 11.2
29
happy example,
with the the
reforms. state reasserted
The Cuban
example, the state reasserted its control of part of the its control
government of part
laid of
offthe Total external
% of exports debt ($ bil) 24.1
131 26.0
137 141 26.3 28.6
151
600,000 food distribution
government
food distribution system. system.
workers And not Andeveryone
between not everyone
2010 and
in Cuba in Cuba
2014 is inis % of GDP 32 30 28 29
happy happy
ff with
t t i the with the reforms.
reforms. dThe itThe Cuban
ti Cuban d government
f government
l b laid f laid off off
th % of exports 131 137 141 151
600,000
14 government workers between 2010 and 2014 in
ff t t i d ti it df l b f th
cut backs
cut backs in in oil
oilimports,
imports,Cuba
Cubahas had
has to ration
had energy
to ration energy Figure 2. Tourism and investment have increased
domestically and
domestically anddelay
delaypayments
paymentstotoforeign
foreigncreditors,
creditors, Figure
markedly
2, p. 15 since Cubas reforms began in 2008
and the
and the country
country has hasseenseenits
itsearnings
earnings from
fromthe export
the export of
of oil
oil products
products plummet.
plummet. Rumorsofofa areturn
Rumors returntotothethe
hardships Cuba
hardships Cubasuffered
sufferedininthe theearly 1990s
early 1990safter thethe
after loss $ billions millions
10.0 5.0
of subsidized
loss of subsidized tradetrade
with thewithSoviet Union are
the Soviet exaggerated
Union are
earnings from
exaggerated tourism will
earnings continue
from tourismtowill
helpcontinue
offset theto 8.0 Real gross fixed investment 4.0
lower oil imports. Still, Cuba will do well to eke
help offset the lower oil imports. Still, Cuba will do well out any
6.0 Visitors 3.0
growth
to eke outat all in 2017.
any growth at all in 2017.
4.0 2.0
Cuba
Cuba may mayyet yetbebehithitwith
witha athird
third shock:
shock: A chilling
A chilling of of 2.0 1.0
relations
relations with the United States. Donald Trump hashas
with the United States. Donald Trump saidsaid
he
he will reversethe
will reverse thedeal
dealPresident
President Obama
Obama reached
reached to to re- 0.0 0.0
open
re-open relations
relations withwithCubaCuba andandrelax relaxrestrictions
restrictionson on trade
and travel unless the Castro regime
trade and travel unless the Castro regime agrees to free agrees to free Source: World Bank and EIU
political prisoners and restore political
political prisoners and restore political freedoms. Cuba freedoms. Cuba
released
released 53 53political
politicalprisoners
prisonersa few a few weeks
weeks after
after Obama Obama
administrations 2014announcement
announcementofofaachange change Reform and Export Enhancement Act passed in 2000
administrations 2014 in in Figure 2, p.26 (Peru)
policy, but has
hasresisted
resistedcalls calls allows U.S. firms to sell food and medicine to Cuba, and
policy, but toto freefreemoremore political
political prisoners
prisoners betweenfood and 2000 and 2016,
medicine tothe
Cuba, UnitedandStates
between exported
2000 an and
since that since time. that time. Sol/$ %oya %oya
estimated
8 2016 the $5.5 billionStates
United to Cuba. Cuban-Americans
exportedInflation
an estimated could
5 $5.5
The normalization of relations between the two countries 4 have their
billion ability
to Cuba. to see and support
Cuban-Americans relatives
could in Cuba
have their
The normalization of relations
that began in December 2014 has supported Cubas between the two countries hampered.
ability to Americans
see and would
support not be
relativesable to
in enjoy
Cuba travel
4
that began
reforms by in December
supplying 2014 has
a steam supported
of new visitorsCubasto the to0 the island or to
hampered. buy Cuban
Americans cigarsnot
would andberum. able A to
New enjoy
3
York
reforms by supplying a steam of
island and by increasing Cubas connectivity with the new visitors to the island travel
Times/CBS
-4 to poll
the found
island that
or nearly
to buy six
Cuban in 10 Americans
cigars and rum. A
and by increasing Cubas connectivity
rest of the world. Although tourism is formally still with the rest of the supportNew normalizing
York Times/CBS relationspoll with Cuba,
found that and a
nearly 2016 six
2 in 10
-8
world. Tourism
banned under the is still formally banned
Helms-Burton Actunder
of 1996, the inHelms-
2015, Florida International
Americans
Exchange support
rate University
normalizingpoll found that awith
relations majority
Cuba,
1
Burton Act of 1996. However, in
around 140,000 U.S. citizens took advantage of one of 2015, an estimated -12
56
and percent
a 2016 of Cuban
Florida Americans
International in Miami-Dade
University poll found
266,000 U.S. citizens took advantage
the 12 licenses established in December 2014 under of one of the 12 county
-16 that strongly
a majority or
mostly
56 favor
percent a re-engagement
of Cuban Americans
0
licenses
which theestablished
United States in December
permits travel 2014 underto Cuba which a the
54% withinthe island. Cuba,
Miami-Dade meanwhile,
county strongly has an or obvious
mostlyinterest
favor a
United States permits travel to Cuba
increase over 2014. U.S. airlines commenced regular air in avoidinga 90% increase IMFisolation. with
re-engagement
Source: Tourism providesCuba,
the island. a good example.
meanwhile,
over 2014. U.S. airlines commenced
service to Cuba this year, and several cruise lines now regular air service to According
has an to a Cuban
obvious Ministry
interest in of Tourism
avoiding 30-year
isolation. Tourism
Cuba this year, and several cruise
offer cruises to the island. Several U.S. mobile carrierslines now offer cruises development
provides aplan,
good capacity
example. in Cubas
According hotels to isato grow
Cuban
to thesigned
have island. voice,
Severaltext, U.S. and
mobile carriers haveagreements
data-roaming signed from 63,000of
Ministry rooms
Tourism today to 85,000
30-year in 2020 andplan
development 200,000
voice, text, and data-roaming agreements
with Etecsa, the Cuban telecommunications provider. with Etecsa, in 2030.
capacity It is hard
in to
Cubas see how
hotels those
is to rooms
grow can
from be filled with
63,000
the Cuban telecommunications
One American bank has issued a credit card intended provider. One American a full U.S.
rooms trade
today and to travel
85,000 embargo
in 2020 still
and in place.
200,000 in 2030.
bank has issued a credit card intended
for use in Cuba, and U.S. credit cards are accepted for for use in Cuba, and It is hard to see how those rooms can be filled with a
U.S. credit cards are accepted for currency
currency transactions at state-owned foreign exchange Thefull transactions at
dayU.S.aftertradeFideland travel
Castros embargo
death, still incalled
Mr. Trump place. Mr.
state-owned foreign exchange facilities in Havana, though
facilities in Havana, though so far they do not work Castro a brutal dictator, and said our administration will
they do notinyet work elsewhere in Cuba. The daytoafter Fidel
elsewhere Cuba. do all it can ensure theCastros
Cuban people death,can Mr.finally
Trump called
begin
their Mr. Castro
journey a brutal
toward dictator,
prosperity andand saidThis
liberty. our suggests
So far,
So far,the
theTrump
Trumpadministration
administrationhas hasnotnot spelled
spelled outout its administration will do all it
that he is leaving the door open to a rapprochement. can to ensure the Cuban
its intentions
intentions on on
Cuba,Cuba, but but it islikely
it is likelyititwill
will initially
initiallytaketakeaa Donald people Trump, can meanwhile,
finally begin seestheir journey
himself as toward
The Man of
hard line
hard line ononCuba
Cubatotododootherwise otherwise would
would appear
appear prosperity and liberty.
to to be the Deal, and the temptation will be strong for This suggests thathim he tois
be backing
backing down down Mr.onTrumps
Mr. Trumps campaigncampaign promises.
promises. leaving the door open to
History try to get a better deal from Cuba. Such negotiations, a rapprochement. Donald
History suggests,
suggests, however, however,
that Cuba that will Cuba will steadfastly
steadfastly resistresist however, Trump, aremeanwhile,
bound to besees to behimself
difficult:asHumanThe Man rights,of the
demands on
demands on human
humanrights rightsorordemocratic
democraticreforms, reforms, eveneven if claims Deal, forand the temptation
expropriated property, willandbe Cubas
strong insistence
for him to try on
itif means
it meansenduring
enduringconsiderable
considerable hardships.hardships. This Thismeansmeans to get a better deal from Cuba.
compensation for damages from the embargo issues on Such negotiations,
thataa stand-off
that stand-off and and worsening
worseningof ofrelations
relationsisispossible,
possible, which however,
little or no areprogress
bound towas be achieved
to be difficult:
in pastHumantalks will
which could
which could involve
involverestrictions
restrictionsonontravel travel and andtrade.
trade. rights,
ButBut all be on the table. claims for expropriated property, and Cubas
there are
there are costs
costs to to isolating
isolatingCuba Cubainin thethelonglong run,
run,andand insistence on compensation for damages from the
support exists
support exists in in the
theUnited
UnitedStates Statesfor fora a
further
further opening
opening embargo issues on which little or no progress was
to Cuba.
to Cuba. Any Anychill
chillininrelations
relations wouldwould meanmean U.S.U.S.
firmsfirms losing achieved in past talks will all be on the table.
business
losing to foreign
business competitors.
to foreign The Trade
competitors. Sanctions
The Trade A version of this report originally appeared in The Conversation,
A version of this report originally appeared in The Conversation,
S ti R f dE tE h tA t d December 14, 2016.
15
Mexico: economic indicators
Avg. 2010-14 2015 2016e 2017f
D O M I N I CRepublic
Dominican A N R E P
UBLIC H A I %T changeI [ =[=]
Real GDP, Haiti
] 3.3 2.5 2.1 1.5
Consumer prices, % Dec/Dec 3.6 2.1 3.4 4.9
While most of the region struggled with slow growth or After an electoral process that took almost two years
Government balance, % of GDP -2.6 -3.0 -2.9 -2.6
recession
While mostlast year,region
of the real GDP in the Dominican
struggled Republic
with slow growth or and was Aftermarred an electoral by allegations processofthat fraud,
tookJovenel
almostMose two years
expandedlast
recession by an estimated
year, real GDP 6.2%, making
in the it the fastest
Dominican Republic
Merchandise
won and Haitis trade
was (marred
$ bil)
presidential byelection
allegations in lateofNovember
fraud, Jovenel 2016
growing economy
expanded in Latin America.
by an estimated Growth
6.2%, making it was boosted
the fastest and
Exports
will
Mose takewonoffice in March
Haitis presidential 360
2017. Heelection 381
plans toin 374
late on 381
focus
by a record
growing number
economy inof tourist
Latin arrivals,Growth
America. estimated wasto have
boosted modernizing
Imports November Haitis 2016 agriculture,
and will take with the395
361 office objective
in March389of2017.395
exceeded 6 million. Tourist arrivals have grown by about
by a record number of tourist arrivals, estimated to have reducing
Current He thebalance,
plans
account need%for
to of GHaitians
focus on
DP to-1go
modernizing .5 to the
-2.9 Dominican
Haitis agriculture,
-2.9 -3.0
exceeded
50% since62009.
million.
As Tourist arrivals the
an oil importer, have grown by about
Dominican Republic with or thetheobjectiveUnited of reducing
States to find the need
work. Mr.for
Mose Haitians to
International reserves ($ bil) 25.0 168.4 175.0 173.0
50% since 2009. As an oil importer, the Dominican
Republics economy has also been helped by low oil prices, also intends go to the toDominican
address corruption Republicand or the
reduce United
HaitisStates to
Republics Total efind xternal work.
debt ($ bMr.
il) Mose also intends 347 426
to address487 537
which haveeconomy
helped keep hasinflation
also been helped
below by low oilhis
2%. Following dependence on external aid. However, the new president
% of GDP 29 dependence
37 29 29
prices,
May 2016which have helped
reelection, keepDanilo
President inflation belowis 2%.
Medina expected doescorruption not have aand strong reduce mandate: Haitis Voter turnout was on
Following his May 2016 reelection, President Danilo
to focus on reforms in health and education and on an unusually % oexternal
f exports aid. However, the new
low following the widespread 88 president
104
damage
does not
120
caused141
Medina is expected to focus on reforms in health and have a strong mandate: Voter turnout was unusually
expansion of cash-transfer programs. by Hurricane Matthew.
education and on an expansion of cash-transfer low following the widespread damage caused by

Dominican Republic: economic indicators Haiti: eHaiti: economic


conomic indicators
indicators
Avg. 2010-14 2015 2016e 2017f Avg. 2Avg.
010-2009-15
14 2015 20152016e
2016e 2017f
2017f
Real GDP, % change 5.3 7.0 6.2 4.9 Real GDP,
Real%GDP, change
% change 2.0 2.0 1.7 1.7 2.02.0 2.4 2.4
Consumer prices, % Dec/Dec 3.3 0.9 1.7 3.4 Consumer
Consumerprices, %prices,
Dec/Dec
% Dec/Dec 5.0 5.0 9.0 9.0 15.914.2 10.3
10.3
Current account balance, % of GDP -5.8 -1.9 -1.8 -2.2 Current Current
account account
balance, % of GDP
balance, % of GDP -4.8 -4.8 -2.5 -2.5 -5.0-5.0 -7-7.5
.5
Total external debt ($ bil) 20.2 26.6 26.2 26.9 Total external
Total external debt ($ debt
bil) ($ bil) 1.3 1.3 2.1 2.1 2.02.0 2.5 2.5
% of exports 127 151 148 144 % of e%xports
of exports 95 95 119 119 115115 138.7
139

Criminal defamation laws weakened. In February, the New elections laws have mixed effects. A new law on
New parties
political elections lawsfor have mixed effects. A new law
Constitutional Court invalidated parts of the Dominican Costa Rica: economic allowed indicators the formation of many new
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government officials, finding that these provisions violate of candidates be women. The number of women willing
Republics Real that
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trade zones. U.S.% oadds
f exportsHaiti to list of countries 90 that139fail to 135 combat135
Change to taxAlaws
December 2015 law allowed
for businesses operating businesses
in free
operating
trade in free
zones. trade zones
A December to offer
2015 law any amount
allowed of their
businesses human U.S. trafficking.
adds Haiti to Notwithstanding
list of countries a new that 2014
faillaw to and
products for sale in the Dominican market.
operating in free trade zones to offer any amount of Prior to thetheir a few combat reported human investigations trafficking. by Haitian authorities,a the
Notwithstanding new
reform, only
products 20%inofthe
for sale a free trade zone
Dominican businesss
market. Prior products
to the U.S. State economic
2014
Guatemala: Department
law and indicatorsincluded Haiti
a few reported . on an updated black
investigations by Haitian
could be
reform, offered
only 20%for of asale ontrade
free the domestic market. products
zone businesss list authorities,
of countriesthe thatU.S. do not State
A do
vg. 2
Department
enough
010- 1 4 2015
included
to control 2016e
Haiti
human 2017f
could be offered for sale on the domestic market. on an updated
trafficking. Belize was black thelist of other
only countries Western that Hemisphere
do not do
Real enough
GDP, % change to to control human 3.6 4.1 3.5 the3.6
Business environment ranking fall masks some nation added the list, whichtrafficking.also includes Belize was
Venezuela.
Business environment ranking fall masks some Consumer
Cuba only had pother
rices,
been % Western
Dec/Dec
removed from the2.3listnation
Hemisphere 3.1 added
in 2015. 4.2 to the4.1
improvement. The Dominican Republic fell ten places list,account
which also%includes
improvement. The Dominican Republic fell ten places Current balance, of GDP Venezuela. -0.1 -0Cuba
.2 had0.0 been -0.1
fromlast
from lastyears
years survey,
survey, according
accordingtotothe
theWorld
WorldBank,
Bank, yet removed from the list in 2015.
yet fall
thisinfallthe
in the rankings came alongside a small Total
Haiti external
remains debt ($ abvery
il) difficult business 16.6 20.2 20.2
environment. 20.2
this rankings came alongside a small
improvementininits itsmeasurements,
measurements, basedbased on % Haiti
Citing of eimprovements
xports to port 128 business
infrastructure 143 and 128 a 111
improvement on aadecrease
decrease remains a very difficult
in corporate income tax rates and a decrease
in corporate income tax rates and a decrease in time in time newenvironment.
ability to receive Citingelectronicimprovements copies ofto customs
port
neededto
needed toapprove
approve new new electricity
electricity connections.
connections. TheThe documents,
infrastructure Haiti and moved up slightly
a new ability to in the
receiveWorld Bank
electronic
DominicanRepublic
Dominican Republic improved
improved itsitsranking
rankingininTransparency Doing Business rankings, but it remains near the bottom.
copies of customs documents, Haiti moved up slightly
InternationalsInternationals
Transparency Corruption Perceptions
Corruption Index from 115 in
Perceptions Transparency
in the World Internationals
Bank Doing survey Business found similar but
rankings, small
it
2014 from
Index to 103 115 in 2015.
in 2014In this case,
to 103 however,
in 2015. a significant
In this case, remains near the
improvements, but Haiti is tied with Venezuela as the bottom. Transparency Internationals
move in the
however, rankings masked
a significant move ina the
veryrankings
small improvement
masked a in survey found
lowest-ranked countrysimilarinsmall the Western improvements, Hemisphere. but Haiti is
the countrys
very actual score.
small improvement in the countrys actual score. tied with Venezuela as the worst country in the
Western Hemisphere.
16
Puerto Rico*
PU
Puerto E Ris Tstruggling
Rico *OR I CinO * aftermath
the of the Figure 1. Puerto Ricos debt crisis in one picture
Puerto
default Rico
on its government debt.
Puerto
Rico is Rico is struggling in the aftermath of the
Debt
Puerto
reduction struggling in the
will not ease theaftermath of the
debt burden unless Figure 1. Puerto Ricos debt crisis in one picture
default
defaultresumes. on its government
on its government debt. debt.
growth

Debt
Puerto RicosDebt
reduction reduction
debt will not
crisis will
came not
ease to aeasethe
head the
debt indebtburden
early burden
Julyunlessof
growth unless
resumes.
last year when growth resumes.
it became apparent that it would default on
$2 billion in payments coming due on government and
Puerto debt.
agency Ricos debt crisis came to to create
a headthe in early July of
Puerto Congress
Ricos debtrushed crisis came to a head in Federal
early July of
last year
Oversight when it became apparent that it would default on
last Management
year when it became Board apparent
(FOMB) that to supervise
it would default
$2 billion
Puerto on Ricosin payments
finances coming
and bring due on
its debt government and
$2 billion in payments coming dueunder control. It
on government
agency
also provideddebt. Congress
Puerto Rico rushed
protection to create
from the Federal
creditors
and agency debt. Congress rushed to create theinFederal
the
Oversight
form ofOversight Management
a temporary stay Board
on (FOMB)
creditor to supervise
lawsuits.
Management Board (FOMB) to supervise Puerto
Puerto Ricos finances and bring its debt under control. It
Ricos finances and bring its debt under control. It also billion or 105% of GNP a far heavier burden than any
also crises
Debt provided arePuerto
invariably Ricocontentious,
protection from creditors
andcreditors
usually in in the
take Private forecasters expect that austerity will result in
provided Puerto Rico protection from the form other country in Latin America.
form
years toof a temporary stay on creditor lawsuits. a decline in GNP for Puerto Rico at least through
ofresolve.
a temporary So far, stayiton appears
creditorPuerto lawsuits. Ricos crisis will
be no exception. In late January of this year, the newly 2018. Puerto Rico needs fiscal balance and debt
Debt crises
elected governor,are invariably
Ricardo Rossell, contentious, and usually
rejected the austeritytake Private
Privateforecasters
reduction forecasters
but these expect
expect
alone that
are austerity
that notausterity
enoughwill result
will
to end in the
resulta in
Debt crises are invariably contentious, and usually take decline
a decline in GNP
in GNPfor Puerto
for Rico
Puerto at
Ricoleast at through
least 2018.
through
plan proposed days earlier by the FOMB. That plan hadwill
years to resolve. So far, it appears Puerto Ricos crisis crisis. With high interest rates on its government
years
be no for to resolve.
exception. In late SoJanuary
far, it appears of this Puerto
year,Ricosthe crisis will be Puerto
2018. Rico
Puerto needs Rico fiscal
needs balancefiscal and debt
balance reduction
and debtbut
called $4.5 billion in cost cutting, equivalent to newly
6% of debt and GNP falling, Puerto Ricos debt-to-GNP
nogovernor,
exception.Ricardo In late January of this year, the newly elected these
elected
Puerto Ricos GNP in areas including health care, Rossell, rejected the austerity ratio isalone
reduction likelyare
buttonot
these enoughtotorise,
continue alone areendmuch
not the crisis.
enough With
to end
as Greeces highthe
governor,
plan proposed Ricardo
days earlier Rossell,byathe rejected
FOMB. the austerity
That plan plan interest
crisis. ratestwo
With on its
high government
interest rates debt on its and GNP
government falling,
education, and pensions, with goal of achieving a had has despite support packages and a debt
proposed days earlier bycutting,
the FOMB. That plantohad 6%called Puerto
called for $4.5 billion in cost
balanced budget by fiscal year 2018/19. The government equivalent of reduction deal. Structural reforms to improve theto
debt andRicos GNP debt-to-GNP
falling, ratio
Puerto is
Ricoslikely to continue
debt-to-GNP
for $4.5 billion in cost cutting, equivalent tocare,
6% of Puerto rise,
ratiomuchis likelyas Greeces
to continue hashelp,
despite
to rise, two
much support
as packages
Puerto Ricos GNP in areas including
of Puerto Rico intends to submit its own plan seeking to health business climate would as would an Greeces
end to the
Ricosand GNPpensions,
in areas including health of care, education, a theand and
hasa despite
debt
education,
avoid deep spending cuts and withwidespread
a goal achieving
layoffs. If Jones Act,reduction
two support
which deal. Structural
prohibits packages
non-U.S. reforms
and
ships to
to improve
a debt carry
pensions, with a goal of achieving a balanced budget the business climate would
balanceddoes
governor budget notby fiscalayear
submit plan2018/19.
the FOMB The government
finds reduction
cargo fromdeal. Puerto Structural
Rico tohelp,
reforms
mainlandas would an end
toports.
improve to
the
Puerto the
of by fiscal
Puerto Rico year
intends2018/19. to The government
submit its own plan ofseeking
Puerto Rico to Jones
business Act, which
climate in effect
would prohibits
help, as non-U.S.
would an ships
end from
to the
acceptable, it has the legal authority to have its own plan Rico has the most efficient port in Latin America, but
intends to submit its own plan seeking to avoid deep carrying cargo between
avoid deepas
considered spending
having been cuts and widespread
approved by thelayoffs.governor. If the Jones make
cannot Act, which
full use ofPuerto
prohibits Rico andships
it. non-U.S. mainland U.S.
to carry
governorspending
does cuts
not and widespread
submit a plan thelayoffs.
FOMB If the
finds governor ports.
cargoPuerto from PuertoRico hasRico the most efficientports.
to mainland port inPuertoLatin
Negotiations between the FOMB and creditors about a
does not submit the alegal plan the FOMBto finds acceptable, it has America, hasbut thebecause offor
these legalinrestrictions cannot
acceptable,
restructuring itofhas
Puerto Ricosauthority
debt are underway. have its own If plan ARicoworsening most
climate efficient port
business. Latin America,
Treated for but
the legal
considered as authority
having to have
been its own plan
approved by deemed
the governor.to have make
cannot full use
make of it. as a sovereign country, Puerto
full use of it.
voluntary agreements are not reached, the FOMB has the statistical purposes
been approved
Negotiations between bythe theFOMB
governor. andNegotiations
creditors about between
a
authority to seek a court-ordered resolution. Rico is ranked comparably to the higher-scoring
restructuring of Puerto Ricos debt are underway. If Puerto
the FOMB and creditors about a restructuring of
A Aworsening
Latin worsening
American climate
climate
countries forfor inbusiness.
business.
the World Treated
Treated
Banks for
for statistical
Doing
Ricos debt are underway.
voluntary not Ifreached,
voluntarythe agreements are statistical purposes as a sovereign country, Puerto
From 1975agreements
through 2006, arePuerto Rico had aFOMB vibranthas the purposes
Business as a sovereign
report, but farcountry,
below the Puerto RicoStates.
United is ranked
not
authority to reached,
seek the FOMB has the authority to seek a court- Rico is ranked comparably to the higher-scoring
economy, with reala incomes
court-ordered rising resolution.
at a faster pace than in comparably to the higher-scoring Latin American
Puerto Rico has also slipped in the World Banks
ordered resolution. Latin American countries inDoing
the World Banks Doing
the United States or Latin America. But the commonwealth countries
governance in the World
indicators, Banks
suggesting a weakening
Business report, but
of
From 1975
suffered through
a severe 2006, Puerto
economic shockRico whenhad a vibrant
Congress Business report, but far below
far below the United States. Puerto Rico has also slipped
the rule of even U.S. law. the United States.
economy,
allowed taxwith
From 1975real
breaks incomes
through
that had2006, rising
Puerto
encouraged at Rico
a faster had pace
businesses a vibrant than
to in inPuerto
theRico:
Puerto World Rico has also
Banks
economic governance
indicators
slippedindicators,
in the World Banks a
suggesting
the United
economy, States with or Latin
real America.
incomes rising But at the
a commonwealth
faster pace than governance
weakening indicators,
of the rule of even suggesting a weakening of
locate on the island to expire. The last of these tax breaks
suffered a severe economic shock when Congress the rule of even U.S. law. Avg. U.S.
2010-14law. 2015 2016e 2017f
in the United
were phased out inStates 2006. or ThemostendofofLatin the America.
tax breaks, Butplusthe
allowed tax recession,
breaks that had encouraged businesses to Real GNP, % change -1.3 -0.6 -1.2 -2.0
the commonwealth
2008-09 suffered
brought a severe
factoryeconomic closings shock
and job Puerto Rico: economic indicators
locatewhen
losses, on
andthe islandRicos
Congress
Puerto toallowed
expire.
realtax The
GNP last
breaks hasthatofdeclined
these taxin breaks
had encouraged all but
Consumer prices, % Dec/Dec 1.9 0.1 -0.2 0.5
Avg. 2010-14 2015 2016e 2017f
were phased
one of businesses out in 2006.
to locate The
on Puertoend
the island of the tax
to expire. breaks,
The last plus Government
1
the past seven years. Ricos population, Real GNP, %balance,
change % of GNP -6.3
-1.3 -7.1
-0.6 -8.0 -1.2 -5.1-2.0
the 2008-09
of these
meanwhile, recession,
hastax beenbreaks brought
fallingwereasphased factory
thousands closings
out inhave 2006.left and
Thetoend job
find Merchandise trade ($ bil)
losses, and Puerto Ricos real GNP has declined in all but
Consumer prices, % Dec/Dec 1.9 0.1 -0.2 0.5
of the tax breaks, plus the
jobs on the mainland. These shocks, together with chronic2008-09 recession, brought Exports 1 62.1 69.4 68.7 68.1
one of the
budgetfactory past
deficits, seven
closings
causedand years. Puerto
job losses,
public debt toand Ricos Puerto
double population,
Ricos real
between Government balance, % of GNP -6.3 -7.1 -8.0 -5.1
Imports 43.2 43.2 41.4 41.4
meanwhile,
2006-16 GNP to ahashas
peak been
declinedof $72 falling
in billion
all butasone thousands
or of theof
105% pasthave
GNP sevenleft tofar
ayears. find Merchandise trade ($ bil)
jobs on the mainland. These Current account balance, % of GNP 7.0 9.2 10.2 9.4
heavier Puerto
burden Ricos
thanpopulation,
any othershocks,
countrytogether
meanwhile, has been
in Latin withfalling
America. chronic as Exports 62.1 69.4 68.7 68.1
budgetthousands
deficits, caused have leftpublic to finddebt jobs to ondouble
the mainland. between These Public debt ($ bil) 62.6 66.2 70.0 n/a
Imports 43.2 43.2 41.4 41.4
*2006-16 toisaapeak
Puerto shocks,
Rico together of $72
commonwealth withbillion
chronic orbudget
of the United 105% States of and
GNP
deficits, ana far
notcaused
% of GNP 93 98 96 102
Current account balance, % of GNP 7.0 9.2 10.2 9.4
heavier
independent burden
public nation, than
debtthoughto double any other
it hasbetween country
an elected2006-16 in
governorto Latin and America.
a peak of $72
legislature.
1
Fiscal years
Public debt ($ bil) 62.6 66.2 70.0 n/a
Culturally and linguistically, however, it is part of Latin America.
*Puerto Rico is a commonwealth of the United States and not an % of GNP 93 98 96 102
*Puertoindependent
Rico is a commonwealth
nation, though of thean
it has United
electedStates and and
governor not legislature.
an
1
independent nation,
Culturally though it has
and linguistically, an elected
however, governor
it is part of Latinand legislature.
America. Fiscal years
Culturally and linguistically, however, it is part of Latin America. 17
C E N T RAmerica
Central AL AMERICA C O S TA
Costa RicaR I [=]
CA [=]
Figure 1. Remittances to Central America President
President Luis LuisGuillermo
GuillermoSols Solis is expected
is expected to maintain pro-
to maintain
fluctuate with U.S. GDP market
pro-market policies for the rest of his term in office,which
policies for the rest of his term in office, whichends
in 2018,
ends and to
in 2018, andcontinue
to continueto attempt
to attempt fiscal reform.
fiscal reform.Costa
Ricas debt is not on a sustainable path.
Costa Ricas debt is not on a sustainable path. The ratio The ratio of central
government
of central government debt to GDP rose to an estimated last
debt to GDP rose to an estimated 44.6%
year,
44.6%alast full year,
10 percentage points higher
a full 10 percentage pointsthan
higherit was
than four
years earlier. The ratio of public debt to
it was four years earlier. The ratio of public debt to GDP,GDP, meanwhile, is
63.2% its highest level since 1991
meanwhile, is 63.2% its highest level since 1991 and and all three credit
agencies haveagencies
all three credit Costa Rica haveon negative
Costa Rica on watch.
negativeThe
administrations efforts at fiscal
watch. The administrations efforts reform have
at fiscal been
reform have
hampered by a deadlock with the
been hampered by a deadlock with the opposition- opposition-controlled
legislature. In December
controlled legislature. the 2017the
In December, budget, which deep
2017 budget,
spending
which imposed cuts, deep
was passed
spendingwithout
cuts, wasa quorum after 20 of the
passed without
57 legislators left the chamber. The outlook
a quorum after 20 of the 57 legislators left the chamber. for passage of
tax reform legislation in the year ahead
The outlook for passage of tax reform legislation in the is clouded.
Mexico: economic indicators
year ahead is clouded.
New labor code enacted. Avg. A
2010-
new 14 labor
2015 procedure
2016e 2017f code,
adopted
Real GDP, in January
% change enacted. A new labor will take effect3.3 in July2.5 2017. The
2.1code, 1.5 new
Newdefines
law labor code the legality of strikes, andprocedure how authorities
Figure 2. Not all of Central Americas real Consumer pin
adopted rices, % Dec/Dec
January will take effect 3.6
in July 2.1
2017. The 3.4 new4.9may
exchange rates have fallen in recent years respond to illegal strikes, expands prohibitions on
law
Government
discrimination defines the in
balance, legality of GDP of strikes,and
% employment -and how
2.6 adds -3.0authorities
-2.9
protections -2.6 poor
for
may
Merchandise
and respond
pregnant to illegal
trade (employees.
$ bil) strikes, expands prohibitions
The new law address ILO on
discrimination in employment and labor
Exports
reservations about Costa Rican 360adds protections
381
law and374 for
practices.381
poor and pregnant employees. The new law address ILO
Imports
reservations about Costaproperty
Rican labor 361 law395 389
and practices. 395
New tax laws address transfers and
Current account balance, % of GDP -1.5 -2.9 -2.9 -3.0
corporations. A May law imposes a 1.5% tax on transfers
ofInternational
New realtax reserves
laws
property, ($ including
address bil) property indirect 25.0 168.4 and
transfers
transfers 175.0
of stock173.0
in a
corporations.
Total external debt
corporation (A
$ bMay
owning law imposes
il) property. A 347 a 1.5%
new 426 tax on 487
corporation transfers 537 was
tax law
of real
pending property,
% of GDPin congress including in indirect
December, transfers
29 intended
37 of stock
to 29 in
replace 29 one
a corporation
% of exportsbyowning
invalidated the supreme property. court A new88in corporation
2015.
104 In the 120tax meantime,
141
law was pending
because the courts in congress ruling only in December, intended to the
applied prospectively,
replace one
national invalidated
registry beganbyliquidating the Supreme Court in 2015.
corporations for failure to
In the
pay back meantime,
taxes due because through the 2015.courts ruling only applied
prospectively, the national registry began liquidating
Haiti: economic indicators
Acorporations
favorable for business failure toclimate. pay
Avg. 2back 4taxes2015
010-1Having due through
shot up to 2017f
2016e 58 in the
2015. Banks 2015 Business Environment Report, Costa
World
Real GDP, % change 2.0 1.7 2.0 2.4
Figure 3. Central America has a history Ricas progress stalled and it sank to 62 in 2016.
Consumer prices, % DInternational
Transparency ec/Dec moved 5.0 9.0 15.9up from 10.3 47 to
of Running current account deficits. A favorable business climate. Havingthe shot country
up to 58 in
40Current its account balance, % of GDP Perceptions -4.8 -Index.
2.5 -5.0 -7.5
theinWorld 2015Banks Corruption
2015 Doing Business report, Costa Ricas
Total external
progress debt ($ band
stalled il) it sank to 62 in
1.32016.2.1 2.0
Transparency 2.5
International
% oRica:
Costa f exports moved
economic the country up
indicators 95 from119
47 to 40
115in its 139
2015 Corruption Perceptions Index.
Ave. 2009-2014 2015 2016e 2017f
Real GDP, % change 6.6 7.0 6.3 5.0
Costa Rica: economic indicators
Consumer prices, %YoY 3.6 2.3 2.1 3.5
Avg. 2010-14 2015 2016e 2017f
Current account balance, % of GDP 11.5 15.6 15.9 n/a
Real GDP, % change 3.9 3.7 4.1 3.9
Total external debt (US $ bil) 11.6 15.6 15.9 16.1
Consumer prices, % Dec/Dec 4.3 -0.8 0.8 2.8
% of exports 82 91 90 90
Current account balance, % of GDP -4.8 -4.6 -4.7 -5.1
Total external debt ($ bil) 13.9 23.7 24.9 27.0
% of exports 90 139 135 135
18
Consumer prices, % Dec/Dec 5.0 9.0 15.9 10.3
Current account balance, % of GDP -4.8 -2.5 -5.0 -7.5
EElL Salvador
S A LVA DO R G U
GuatemalaAT E M A
Total external debt ($ bil) L A
[=] [ = ] 1.3 2.1 2.0 2.5
% of exports economy has managed
Guatemalas 95 119
to grow115 at a 139
El Salvadors President, Salvador Snchez Cern of
El Salvadors President, Salvador Snchez Cern of the Guatemalas
rate close to economy4% despite has managed
the austerity to grow at a ratethat
measures
the leftist FMLN party, faces challenges in the form
leftist FMLN party, faces challenges in the form of a weak close to 4% despite the
President Jimmy Morales put in place immediately austerity measures that President
of a weak economy, widespread criminal and gang
economy, widespread criminal and gang violence which Jimmy
afterRica: Moralesoffice
taking put ininplace January immediately
2016. These after takingmeasures
violence which has discouraged investment, and a Costa economic 2016.indicators
has discouraged investment, and a standoff with the office in January
were intended to curb waste in government. These measures were intended Mr.
standoff with the opposition over the 2017 budget.
opposition over the 2017 budget. The administration is toMorales
curb waste in government.
approval
Avg. Mr.
rating has Morales
2010- 14 2015
plunged approval
from
2016e
80% rating
to
2017f
The admin-istration is seeking a standby agreement
seeking a standby agreement with the IMF, and hopes has
Real plunged
justGDP,
20%. from
% change 80%
The drop reflects the3.9to just 20%. The drop3.7
unpopularity reflects
of the
4.1cuts 3.9
with the IMF, and hopes the IMF will help broker an
the IMF will help broker an agreement on the budget. unpopularity
Consumer
to social of
prices, cuts to social
% Dec/Decand concerns
spending spending and
4.3 about concerns 0.8 about
-0.8the influence 2.8
agreement on the budget. For its part, the main
For its part, the main opposition party, Arena, insists the
of influence
former of
military former military
hard-liners hard-liners
in his party, in his
the party,
Frentethe
opposition party, Arena, insists on IMF monitoring of Current ade ccount balance, % of GDP -(FCN-Nacin).
4.8 -4.6 -4.7 -5.1
on IMF monitoring of budget execution and wants Frente
de Convergencia Convergencia Nacional
Nacional (FCN-Nacin). Although
Although
budget execution and wants more oversight of fiscal Total Morales
external dis ebt pursuing
($ bil) 13.9 23.7 24.9an 27.0
more oversight of fiscal policy. Moodys downgraded El Mr.
Mr. Morales is pursuing an anti-corruption
an anti-corruption program,program,
policy. Moodys downgraded El Salvadors
Salvadors government bond ratings to B3 in November investigation
of exports opened
an% investigation in September
opened in September 90against his brother
139against 135his and 135
government bond ratings to B3 in November 2016,
2016, citing the governments reliance on short-term one of his sons has not
brother and one of his sons has not helped his helped his approval rating.
citing the governments reliance on short-term
funding and the ongoing budget impasse. approval rating.
funding and the ongoing budget impasse.
El Salvador: economic indicators Guatemala: economic
Guatemala: economic iindicators
ndicators ..
Avg. 2009-15 2015 2016e 2017f AAve.
vg. 22009-14
010-14 2015 2015 2016e 2017f
2016e 2017f
Real GDP, % change 1.7 2.5 2.2 2.2 Real GDP,
Real GDP, % cchange
hange 3.6
2.9 4.14.2 3.5 3.9 3.6
3.7
Consumer prices, % Dec/Dec 0.6 1.0 0.7 1.8 Consumer pprices,
Consumer rices, %%YoY
Dec/Dec 2.3
4.0 3.13.4 4.2 2.8 4.1
3.4
Current account balance, % of GDP -4.9 -3.6 -0.2 -0.2 Current a ccount b alance,
Current account balance, % of GDP % o f G DP - 0 .1
-1.8 -0.2-2.4 -1.5
0.0 -0.1
-1.9
Total external debt ($ bil) 12.8 14.7 14.8 15.1 Total external
Total external ddebt
ebt ($ (US
bil)$ bil) 16.6
14.0 20.219.0 20.2 20.2
19.7 20.1
% of exports 213 216 221 213 % of% exports
of exports 128n/a 143n/a 128 n/a 111
n/a

Amnesty law found unconstitutional. In July, the Guatemala accedes to Trademark Law Treaty. In March,
Supreme Courts constitutional chamber declared parts Guatemala announced its accession to the Trademark
Amnesty law1993
found unconstitutional . In July, the Guatemala accedes to Trademark Law Treaty. In
of El Salvadors amnesty law unconstitutional, Law Treaty. The treaty will lead to harmonization and
March, Guatemala announced its accession to the
particularly sections which prevent the statedeclared
Supreme Courts constitutional chamber from simplification of procedures to register and renew
Trademark Law Treaty. The treaty will lead to
parts of Elwith
complying Salvadors 1993 amnesty
the Inter-American law
Convention on trademarks, including by foreign trademark holders.
unconstitutional, particularly sections which prevent harmonization and simplification of procedures to
Human Rights. The amnesty law is said to hinder register and renew trademarks, including by foreign
the state from
investigation, complying and
prosecution, withreparations
the Inter-American
for cases of
Convention on Human Rights. The amnesty law is Mining rights
trademark curbed. A July ruling by the Supreme Court
holders.
violence committed during the civil war. upheld the suspension of operations in a mine run by a
said to hinder investigation, prosecution, and
reparations for cases of violence committed during subsidiary of U.S.curbed.
Mining rights mining company, Kappes,
A July ruling by Cassidy &
the supreme
Electronic signature law adopted. A new law approving
the civil war. Associates.
court upheldThethe
court found thatofthe
suspension mine had no
operations in avalid
mine
use of electronic signatures took effect in April. Seen municipal permit, that the companys environmental
run by a subsidiary of U.S. mining company, Kappes, impact
as a modern signature
Electronic legal instrument to provideAsecurity
law adopted. new law for analysis
Cassidy was
& flawed, and that
Associates. Thethere
courthad beenthat
found no previous
the mine
transactions made through information technology
approving use of electronic signatures took effect in consultation
had no valid with the community
municipal permit,as is required
that by law.
the company's
applications,
April. Seen asthealaw provides
modern legal
legal support intocase
instrument of
provide environmental impact analysis was flawed, and that
breach offor
security contract. The lawmade
transactions also enables
throughthe creation of
information thererenewed
CICIG had beenfor notwo
previous
years. consultation with the
In May, Mr. Morales
businesses to certify signatures.
technology applications, the law provides legal community as is required by law.
requested a two-year extension of the U.N.s International
support in case of breach of contract. The law also Commission Against Impunity (CICIG) which was to expire
Some
enablesworsening in the
the creation ofbusiness
businesses climate has occurred.
to certify inCICIG renewed
September 2017.for twowas
CICIG years. In May,inPresident
established 2007 to
Elsignatures.
Salvador fell to 95th in the World Banks 2017 ease of investigate and assist with the prosecution ofof
Morales requested a two-year extension the
crimes
doing business report, having made it more difficult for U.N.s International Commission Against
committed by illegal groups and clandestine security Impunity
businesses to access
Some worsening in credit information.
the business The country
climate has is (CICIG), although
structures, recently
including those he has
within hinted he would
the government.
essentially
occurred.unchanged
El Salvador in fell
Transparency Internationals
to 95th in the World Banks seek an end to its mandate when it expires in
corruptions index. Although El Salvadors
2017 ease-of-doing-business reported
report, having rateitof
made September 2017.
Little change in the business environment. Guatemala
crime victimization is low for Latin America, its homicide
more difficult for businesses to access credit fell to 88th place in
rate, at 64 perThe
information. 100,000,
countryis the second highest
is essentially in the in
unchanged Little change inthe
theWorld Banksenvironment.
business most recent ease of
doing business ratings despite a reduction
Guatemala fell to 88 place in the World
th in the corporate
Banks most
region.
Transparency Internationals corruptions index. income tax. Guatemala fell to 123rd place in Transparency
Although El Salvadors reported rate of crime recent ease-of-doing-business ratings despite a
Internationals
reduction in thecorruption index.
corporate income tax. Guatemala fell
victimization is low for Latin America, its homicide
to 123rd place in Transparency Internationals 19
HONDURAS [] NICARAGUA [=]
Honduras
Honduras Nicaragua
Nicaragua [=]
[=]
Hondurass economy has benefitted from low oil prices Although it is one of the poorest countries in Latin
and
Hondurass tradeeconomy
Hondurass with the United
economy hashas States
benefitted infrom
benefitted recent
from low years.
lowoiloil The
prices
prices IMF America,
AlthoughNicaragua
Although ititisisoneoneofofhas
thebeen
the poorestonecountries
poorest of the fastestin
in Latingrowing.
Latin America,
America,
and gave
and
trade Honduras
trade
withwith a generally
the the
United
United positive
States
States in review
in recent
recent in
years. October,
years.The The IMFIMF That
Nicaragua growth,
Nicaragua has however,
has been
beenone masks
one of some
of the
the vulnerabilities.
fastest
fastest growing.
growing. That One
That
gaverecognizing
gave
Honduras
Honduras the countrys
a generally
a generally progress
positive
positive inreview
review reducing
in in its fiscal
October,
October, isgrowth,
the countrys
growth, however,
however, persistent,
masks
masks some large vulnerabilities.
some current accountOne
vulnerabilities. deficits.
One isisthe
the
deficit
recognizing
recognizingand
themaintaining
the
countrys
countrys stability.
progress
progressExtortion
in reducing
in reducing anditsgang-
its
fiscal
fiscal Low
countrysagricultural
countryspersistent, prices
persistent,large recently
large current have meant
current account deficits.flat export
deficits.Low Low
related
deficit
deficit
andand violence,
maintaining however,
maintaining are
stability. widespread
stability.
Extortion
Extortion andand
and threaten
gang-
gang- revenues,
recent while imports
recentagricultural
agricultural prices
priceshave
have
have continued
meant
meant flat to grow.
exportAs
export a
revenues,
revenues,
to
related deter
related investment
violence,
violence,however, andare
however, growth.
are President
widespread
widespread and Orlando
andthreaten
threaten result,
while Nicaraguas
whileimports
importshave have external
continued
continued debt toisgrow.
to now 27%As aaabove
result,its
result,
Hernndez
to deter
to deterinvestmenthas proposed
investment andand new President
growth.
growth. anti-crime
President reforms,
Orlandobut
Orlando 2009-15
Nicaraguas
Nicaraguas averageexternal level.debt
external To be
debt issure,
is now
now 27% at 232%above
above of exports,
its
its 2009-15
2009-15 its
progress
Hernndez
Hernndez hasagainst
has entrenched
proposed
proposed newnew gangs
anti-crime is likely
anti-crime reforms,to bebut
reforms, slow.
but external
averagedebt
average level.
level. isTomanageable,
Tobebesure,
sure, atatand
232%
232% its central government
of exports,
exports, its
its external
external
Mr.
progress Hernndez
progress againstagainstis seeking
entrenched
entrenched agangs
second
gangs isterm
likely into
is likely elections
to
bebe slow. to
slow. debt
debt
debtis isisabout
notatat30%
not of GDP, welllevels,
unmanageable
unmanageable below the
levels, andaverage
its
its central
central for Latin
be
PresidentheldOrlando
President in November,
OrlandoHernndezbut theisrules
Hernndez seekingare inadispute.
is seeking second
a second Interm
April
term America.
government
government However,
debt
debtisis 92%
aboutof that
about 30%debt
30% of is denominated
of GDP, well
well below
below the in
the
2015,
in elections the
in elections toSupreme
be
to held
be held Court
in suspended
November,
in November, butbut athe
constitutional
therules
rules are are ban
in in foreign
average
average currencies,
forforLatin leaving the
LatinAmerica.
America. government
However,
However, 92% exposed
of
of that
that debt to isis
debt
on re-election. The opposition claims it is up to Congress
dispute.
dispute.
In April
In April
2015 2015the the
Supreme
Supreme CourtCourt suspended
suspended a a foreign
denominated
denominated exchange risk. This
ininforeign
foreign exposure leaving
currencies,
currencies, is a factor theingovernment
the its low
government
to create new
constitutional
constitutional laws
banban governing
on re-election.
on presidential
re-election. The Theopposition termsclaims
opposition inclaims
office.
it it (B2/B+/B+) sovereign credit ratings.
exposed
exposed to to foreign
foreign exchange
exchange risk.
risk. This exposure
exposure isisaafactor
factor
is upistoupCongress
to Congress to create
to create new new
lawslaws governing
governing ininitsitslowlow(B2/B+/B+)
(B2/B+/B+)sovereign sovereign creditcredit ratings.
ratings.

Honduras:
Honduras:
economic
economic
indicators
indicators Nicaragua:
Nicaragua:economic
economicindicators
indicators
Avg.Avg. 2009-15 201520152016e
2009-15 2016e 2017f
2017f Avg.
Avg.2009-15
2009-15 2015
2015 2016e
2016e 2017f
2017f
Real GDP,
Real GDP,
% change
% change 3.5 3.5 3.63.6 3.63.6 3.73.7 Real
RealGDP,
GDP,%%change
change 4.8 4.9
4.9 4.64.6 4.5
4.5
Consumer
Consumer
prices,
prices,
% Dec/Dec
% Dec/Dec 5.1 5.1 2.42.4 3.53.5 4.14.1 Consumer
Consumerprices,
prices,%%Dec/Dec
Dec/Dec 5.9 3.1
3.1 4.44.4 6.2
6.2
Current
Current
account
account
balance,
balance,
% of%GDP
of GDP -7.6-7.6 -6.4-6.4 -5.8-5.8 -5.6-5.6 Current
Currentaccount
accountbalance,
balance,%%ofofGDP
GDP -10.1 -8.2
-8.2 -9.5
-9.5 -9.7
-9.7
Total Total
external
external
debtdebt
($ bil)($ bil) 5.5 5.5 7.67.6 8.18.1 8.58.5 Total
Totalexternal
externaldebt
debt($($bil)
bil) 8.8 10.5
10.5 11.2
11.2 12.3
12.3
% of exports
% of exports 89 89 68 68 74 74 7676 % %ofofexports
exports 199 218
218 232232 232
232
New fiscal responsibility law tries to curb spending. In Supreme court facilitates one-party system. In
April, Congress approved the Law on Transparency and June,
Supreme the Nicaraguan
Supreme court
courtfacilitatessupreme
facilitates court removed
one-party
one-party system.
system. Eduardo
In
In June,
June,
Accountability. The new law will set limits on the countrys Moealegre
the as leader
theNicaraguan
Nicaraguan of theCourt
Supreme
Supreme Independent
Court removed Liberal Party (ILP),
Eduardo
Eduardo
NewNew fiscal
fiscal
responsibility
responsibility lawlaw tries tries to to curbcurb spending.
spending. InIn
fiscal deficit and create a new governing body for its macro effectively
Moealegredisrupting
Moealegre as leaderthe
asleader of coalition
ofthe
the that opposed
Independent
Independent LiberalPresident
Liberal Party
Party
April,April,
Congress
Congress approved
approved thethe Law Law on on Transparency
Transparency and and
fiscal policy. Daniel
(ILP), Ortegas
(ILP),effectively
effectivelyruling party, the
disrupting
disrupting theFrente
the coalitionSandinista.
coalition that
that opposed
opposed
Accountability.
Accountability. TheThe newnew lawlaw willwill
setset limitslimits
onon thethe country's
country's
Montealegres
President
PresidentOrtega'sreplacement
Ortega's ruling in thethe
ruling party,
party, PLI,Frente
the PedroSandinista.
Vallejos,
Sandinista.
fiscalfiscal
deficit
deficit
andand create createa new a new governing
governing body
body forforitsits
New campaign finance and accountability law adopted was rumored toreplacement
Montealegre's
Montealegre's be a collaborator
replacement in
in the
the with the
PLI, rulingVallejos,
Pedro
Pedro party. In
Vallejos,
macromacrofiscal fiscal
policy.
policy.
amidst corruption scandals. In September, after August,
was the Supreme
wasrumored
rumored totobe Electoral
beaacollaborator
collaborator Council
with responded
the ruling to a InIn
ruling party.
party.
Newconsiderable
Newcampaign
campaign delays,
financefinance the
andHonduran
andaccountability congress
accountability law adopted
law adopted
adopted a request by Vallejos and removed 28 opposition deputies
August,
August, the
thesupreme
supreme electoral
electoral council
council responded
responded to
toaa
reform
amidst
amidst law
corruption proposed
corruption scandals.by theIn
scandals. OAS-backed
September,
In September, Support
after Mission
after from
requestCongress
request by for their
byVallejos
Vallejos andfailure
and removed
removed to accept his leadership
28 opposition
opposition of
deputies
deputies
Against
considerable
considerable Corruption
delays,
delays, and
the the Impunity
Honduran
Honduran in Honduras
congress
congress (MACCIH).
adopted
adopted aa the
from ILP.
from congress
congressfor fortheir
theirfailure
failure to to accept his leadership
leadershipofof
the
theILP.
ILP.
The
reform
reform new
law lawlawproposed
proposedestablishes
by the by the aOAS-backed
commission
OAS-backed to supervise
Support
Support Mission
Mission
electoral
Against
Against campaigns
Corruption
Corruption andand and
Impunity sets out
Impunity penalties
in Honduras
in Honduras for violations.
(MACCIH).
(MACCIH). U.S.
U.S.may
U.S. mayplace
may placeconditions
place conditionson
conditions onaid
on aidtoto
aid Nicaragua.
Nicaragua.
Nicaragua. In In
Inthe
the
TheThese
The
newnewlaw canlawrange
establishes from afines
establishes to the termination
commission
a commission to to
supervise of the
supervise the run-up to Nicaraguas election, the U.S. House of
run-up
run-uptotoNicaraguas
Nicaraguaselection,
election, thethe U.S. House
House of of
candidacy of individuals and even parties.
electoral
electoral
campaigns
campaigns and and
sets sets
out out
penalties
penalties for for
violations.
violations. Representatives
Representativespassed
Representatives passedthe
passed theNicaraguan
the NicaraguanInvestment
Nicaraguan Investment
Investment
TheseThesecan can range rangefrom from
fines fines to the
to thetermination
termination of of
thethe Conditionality
ConditionalityAct,
Conditionality Act,which
Act, whichwould
which wouldblock
would blockthe
thecountry
countryfrom
country from
from
candidacy
candidacy of individuals
of individuals andand even evenparties.
parties. access to loans by international financial institutions
Business environment shows slight improvement. access
accesstotoloans
loansby byinternational
international financial institutions
institutions
Honduras moved up to 105th place in improvement.
the World Banks unless
unlessthe
unless thecountry
the countryholds
country holdsfree,
holds free,fair
free, fairand
fair andtransparent
transparent
transparent
Business
Business environment
environment shows shows slightslight improvement. elections. While the bill must still be approved byby
thethe U.S.
ease
Honduras
Hondurasof doing
moved movedbusiness
up to up105 ratings
to 105place
th th for
place 2017,
in thein the up
World from
World Banks
Banks
elections.
elections.While
Whilethethebill
billmust
must still
still be approved
approved by the
110th in the 2016 rankings. This improvement came Senate,
U.S. Nicaraguas
U.S.Senate, government
Senate,Nicaraguas
Nicaraguas government criticized
government criticizedthe bill
criticized theas
theabill
bill
ease-of-doing-business
ease-of-doing-business ratingsratings for for
2017, 2017, upup fromfrom 110 110th in
th in
violation of international law. law.
notwithstanding changes in border inspections that asasa aviolation
violation ofofinternational
international law.
the 2016
the 2016rankings.
rankings. ThisThis improvement
improvement came came
made
notwithstandingit morechanges
notwithstanding difficult
changes to
intradeborder across
in border inspectionsborders.that
inspections The
thatmademade
country showed significant improvement in Transparency Little
Littleimprovement
Little improvement
improvementseen seen
seeninin
inNicaraguas
Nicaraguas
Nicaraguasbusiness
business
business
it more
it more
difficult
difficult
to trade
to trade acrossacross borders.
borders. The Thecountry
country
Internationals corruption rankings, environment.
environment.The The
TheWorld
World
WorldBank
Bank
Bank ranked Nicaragua
Nicaragua 127
127thth
showed
showed significant
significant improvement
improvement in moving
in Transparency
Transparency from 126th in environment. ranked Nicaragua 127th
2014 to 112th place in rankings,
therankings,
2015 index. Crime remains th a in
ininits
itsits2017
2017
2017ease
ease-of-doing-business
ease-of-doing-business
of doing business survey survey
thethe
the lowest
lowest
lowest
Internationals
Internationals corruption
corruption movingmoving fromfrom 126 126th in in
serious problem: Hondurass homicide rate is the highest in inCentral
Central
in Central AmericaAmerica
America while
while Transparency
Transparency International
International
while Transparency International
20142014to 112to 112
th place
th place in thein the
2015 2015index.
index. Crime
Crime remains
remains aa
of any country notHondurass
at war. homicide ranked
ranked it it
130
130
ththin
in
ranked it 130th in its 2015its
its2015
2015Corruption
Corruption
CorruptionPerception
Perception
PerceptionIndex.
Index.
Index.
serious
seriousproblem:
problem: Hondurass homicide raterate
is the
is the highest
highest
of20any
of any
countrycountrynot notat war.at war.
Panama [=]
PA N A M
Panamas A [ is= decelerating
growth ] now that the Figure 1. Panamas growing tourism industry is
canal expansion is complete but will remain rapid. gaining market share.
Panamas growth is decelerating now that the
Tourism
canal and financial
expansion servicesbut
is complete to will
remain sources
remain rapid.
of growth.

In JuneTourism
Panama andopened
financial itsservices to remain
third canal sources of
to shipping.
growth.
The $5 billion expansion of the canal had been
subject to long delays, work stoppages, and came in
atInleast
June,onePanama billionopened
dollarsits third
over canal Its
budget. to shipping.
completion The
$5 billion expansion of the canal had been subject to long
comes at a time when shipping rates are low,
delays, work
extending thestoppages,
time it will and takecame in at leasttoone
for Panama billionits
recoup
dollars overBut
investment. budget.
it was Itsnecessary
completiontocomes expand at athe
time when
canal
toshipping
allow newer,rates are low, extending the time it will take for
massive container ships to use the
Panama
canal andto recoup its
compete investment.
with ships going Butthough
it was necessary
the Suezto
expand
canal. the canalon
Spending tothe
allow newer,
canal massive container
expansion and otherships
to useworks
public the canal and compete
projects had helped withpropel
ships going
GDPthoughgrowth,the Longtime trade dispute with Colombia worsens.
which Longtime trade2015
dispute with Colombia
found worsens. A
Suezhad Canal. been the most
Spending on therapid in Latin
canal America
expansion during
and other A November WTO ruling Colombian
the years 2010-15. Panamas growth rate will November 2015 WTO ruling found Colombian tariffs
public works projects had helped boost GDP growth, tariffs on textiles and shoes manufactured in
decelerate onPanamas
textiles and shoes manufactured in Panamas free
which hadnow beenthat construction
the most on the
rapid in Latin canal has
America during the free trade zone violated international
ended, but the country will still get a boost from public trade zone violated
and ainternational tradebody
rules, upheld
and a the
years 2010-15. Panamas growth rate will decelerate now trade rules, WTO appellate
spending on a second Metro line and urban renewal. WTO appellate body upheld the ruling. After
ruling. After Colombia continued to impose the Colombia
that construction on the canal has ended, but the country
continued to impose
tariffs, Panama the tariffs,retaliation.
threatened Panama threatened
The WTO
will still get a boost from public spending on a second
Meanwhile, Panamas tworenewal.
other major industries, retaliation. The WTO panel rejected Colombias
panel rejected Colombias arguments that the
Metro line and from urban
tourism and finance, should continue to be sources of arguments thatwere
higher tariffs the higher
neededtariffs
to were
combat needed to combat
smuggling
growth. Last year an estimated three million tourists smuggling
and money andlaundering.
money laundering.
Meanwhile,
visited Panama, Panamas
spendingtwo other major industries,
an estimated tourism
$4.75 billion,
andafinance,
with should continue
total contribution likely to be sourcestoof18
amounting growth.
% of Little change
Little change seen seenin Panamas in Panamas business business climate.
Last year an estimated three
GDP. Following the leak in April of the Panama million tourists visited Panama slipped one place in the World
Panama slipped one place in the World Banks
climate. latest
Panama,the
Papers, spending
government an estimated
convened $4.75 billion, of
a panel with a total Bank latest Doing Business survey to 70 th out of
Doing Business survey to 70th out of 190 countries.
contributionexperts
international likely amounting
to improve to 18and% protect
of GDP. itsFollowing
role as 190 countries.
Panama ranked 42Panama out of 138 ranked countries 42 out
in the of 138
Global
the leak in April of the Panama
a vibrant offshore banking center. The experts, Papers, the government
Competitiveness Index, up 8 places. However,Index,
countries in the Global Competitiveness up 8
the country
convened
however, a panel
were unableof international experts to on
to reach agreement improve
a and places. However, the country moved up to 72 in
moved up to 72 in Transparency Internationals 2015
protect its
common role as
report. a vibrantinoffshore
Deposits Panamas banking center.
offshore The
banks corruption index, up from 94 in 2014.
experts,
have risenhowever,
in the monthswere unable to reach
following the agreement
leak. on a
Panama: economic indicators
common report. Deposits in Panamas offshore banks
havelaw risen in the months following the leak. on Avg. 2010-14 2015 2016e 2017f
New imposes accounting obligations
offshore companies. A law adopted in October Real GDP, % change 7.9 5.8 5.4 5.5
Panama: economic indicators
requires companies and other legal persons Consumer prices, % Dec/Dec 3.6 0.3 1.2 2.1
New law imposes accounting obligations onthat do
offshore Avg. 2 010- 1 4 2015
not do business in Panama to maintain
companies. A law adopted in October requires companies accounting Government balance, % of GDP -3.2 -3.9 -2.9 -1.62017f
2016e
records for legal
five years in that
the office Real GDP, % change 7.9 5.8 5.4 5.5
and other persons do notofdotheir resident
business in Panama Merchandise trade ($ mil)
agent.
to maintain accounting records for five years in the office Consumer Exports prices, % Dec/Dec 16.2 3.6 12.80.3 15.31.2 15.7 2.1
of their resident agent. Government Imports balance, % of GDP -3.2
23.8 -3.9 22.4-2.9 23.8 -1.6
22.5
Panama signs tax information exchange agreement Merchandise trade ($ mil) % of GDP
Current account balance, -10.8 -6.5 -5.0 -4.7
with U.S. In April, Panama agreed to implement a
Panama signs tax information exchange agreement International
Exports reserves ($ bil) 16.1
2.9 12.83.4 15.3 3.915.7
3.9
Foreign Account Tax Compliance Act (FATCA)
with U.S. In
agreement April,
with Panama
U.S. agreed
to allow to exchange
for an implement of a Foreign
tax Total
Imports
external debt ($ bil) 23.8
62.7 22.5
87.7 95.3 22.4 103.023.8
information about U.S. persons with accounts inwith
Account Tax Compliance Act (FATCA) agreement Total external
Current account debt, % of %GDP
balance, of GDP 159.9
-10.8 168.4 -6.5 183.0-5.0 197.6 -4.7
U.S. to allow
Panama. Thefor an exchangecongress
Panamanian of tax information about
ratified the Total external debt,
International reserves ($ bil) % of exports 241.1 2.9 322.23.4 293.23.9 308.6 3.9
U.S. persons
agreement with accounts
in October in Panama.
requiring The Panamanian
Panama-based
congress ratified the agreement in October requiring
Total external debt ($ bil) 62.7 87.7 95.3 103.0
financial institutions to report annually about accounts
ofPanama-based
U.S. persons. financial institutions
The agreement to report
reflects annually
Panamas Total external debt, % of GDP 243 321 292 308
about accounts
continued efforts of
toU.S.
get persons. The agreement
off the OECD gray list. reflects Total external debt, % of exports 242 322 293 309
Panamas continued efforts to get off the OECD gray list.
21
Colombia: economic indicators
Andean South America
ANDEAN SOUTH AMERICA Presidential decrees target mining coops. Following
the August assassination of the deputy minister of the
Bolivia interior while he was attempting to mediate a strike by
BOLIVIA [] miners, President Morales issued several decrees: 1)
Despite its heavy dependence on exports of petroleum reassigning
interior whiletoattempting
state control areas mined
to mediate under
a strike by contracts
Despite its heavy
products dependence
and metals, Boliviaonhas exports
so farof petroleum
weathered the or subcontracts between mining cooperatives
miners, President Morales issued several decrees: and 1)
products
weaknessand metals,
in globalBolivia has somarkets
commodity far weatheredfairly well. national or foreign
reassigning to stateprivate
controlcompanies;
areas mined 2) returning
under to state
the weakness
Although GDP in global
growthcommodity
decelerated markets fairlythe
following well.
end of control areas opened for mining where mining
contracts or subcontracts between mining cooperatives had not
Although GDP growth decelerated following
the commodity supercycle in 2014, it has still averaged the end of yet begun; 3) placing all workers with mining cooperatives
and national or foreign private companies; 2) returning to
the commodity
4.6% over the supercycle
past threeinyears.
2014, itInflation,
has still averaged
meanwhile, under the general
state control areasBolivian
openedemployment law; 4)
for mining where registering
mining had
4.6% hasover the pastsubdued.
remained three years. Inflation,
However, somemeanwhile,
clouds have has all
not yet begun; 3) placing all workers with mininghealth
mining cooperative workers with the national
remained
appearedsubdued.
on theSome clouds,
horizon. Exportshowever, have appeared
have fallen off last service; and 5)under
cooperatives making thethe use ofBolivian
general dynamite in protests and
employment
on the
yearhorizon.
they were Exports
only have fallenofofftheir
two-thirds last year they
average 2009-14 demonstrations
law; 4) registering a criminal
all mining act.
cooperative workers with
werevalue
only
two-thirds of their average 2009-14
resulting in a widening current account deficit value the national health service; and 5) making the use of
resulting
that isinexpected
a widening to current
narrow onlyaccount deficit
slightly that isThese
in 2017. President
dynamite inMorales
proteststargets journalists. Disputes
and demonstrations a criminal act.
expected
currenttoaccount
narrow deficits
only slightly
haveinbeen 2017. These deficits
financed in part by between the Bolivian leader and the press resulted in
havedrawing
been financed
down the central banks internationalcentral
in part by drawing down the reserves, criminal
President prosecutions. A judge
Morales targets in August allowed
journalists. Disputesa criminal
banks international
which have fallenreserves,
by a third which
overhave fallen
the past by ayears,.
three third defamation
between thesuit by theleader
Bolivian president against
and the a journalist
press resulted inwho
overThetheconsensus
past three years. The consensus expects
expects they will decline further this they linked Mr.prosecutions.
criminal Morales to the A death
judge of a policeallowed
in August officer ina 2000.
will decline
year. The further this year.has
government The government
chosen to keephas thechosen
currency Another journalist who,
criminal defamation suitinbythe course of
President reporting
Morales on a
against
to keep
peggedthe currency
at Bs6.91:US$1peggedsinceat Bs6.91:US$1
November 2011, since which ajournalist
corruption scandal,
who had made
linked Morales to disclosures
the death ofabout the
a police
November
means 2011, which means
its exchange its exchange
rate stands rate stands
to rise relative to that of presidents mistress and illegitimate son fled to
officer in 2000. Another journalist who, in the course ofArgentina
to rise
its relative to that ofif its
trading partners thetrading partners if the
dollar appreciates, dollarit
which after facing
reporting onthreats.
a corruption scandal, had made disclosures
appreciates,
likely will which it likely
if interest willrise
rates if interest rates rise
in the United in theas
States, about the presidents mistress and illegitimate son fled to
United States, as
forecasters expect.forecasters expect. Argentina after
BUSINESS facing threats.
ENVIRONMENT

President
President Evo Evo Morales
Morales will likely
will likely seek seek to extend
to extend his term
his term BUSINESS ENVIRONMENT
Bolivia ranked 149th in the World Banks latest ease of
of office beyond its end in 2020, though
of office beyond its end in 2020, though a referendum a referendum to
doing business ratings, rising 8 places since the last report.
allowthat
to allow thatfailed
failedininFebruary
February2016 2016(see(see below).
below). Even
Even if if Bolivia ranked 149th in the World Banks latest ease of
The rise came because of changes making it easier
thatthat
effort is not
effort successful,
is not successful, his his
party, the the
party, Movimieneto
Movimieneto al doing business ratings, rising 8 places since the last
and quicker to start businesses, and allowing pre-trial
Socialismo (MAS) will remain firmly in control in the face
al Socialismo (MAS) will remain firmly in control in the report. The rise came because of changes making it
conferences in contract disputes which should encourage
of a face
weakofand divided
a weak andopposition. The government
divided opposition. is
The government easier and quicker to start businesses, and allowing pre-
settlements without the need for long and expensive
expected to continue to keep expenditures high, including
is expected to continue to keep expenditures high, trial conferences in contract disputes which should
litigation. Bolivia also showed a small improvement in
public investment,
including publicas a way of softening
investment, as a waythe effect of soft
of softening the encourage settlements without the need for long and
Transparency Internationals corruption index, rising to
export earnings
effect of soft on the economy,
export earnings on though this risksthough
the economy, making expensive litigation. Bolivia also showed a small
99th place.
the budget
this risksdeficit
making larger.
the budget deficit larger. improvement in Transparency Internationals corruption
index, rising to 99th place.
LEGAL ENVIRONMENT Bolivia: economic indicators
LEGAL ENVIRONMENT
Avg. 2009-14 2015 2016e 2017f
Morales loses national referendum to allow re-
President Morales loses national referendum to allow Real GDP, % change 5.3 4.8 3.6 3.7
election to fourth term. In February, President
re-election
Evo Moralesto fourth
lost a term. In February,Mr.
national referendum on Morales lost a Consumer prices, % Dec/Dec 5.4 3.0 3.5 4.1
national referendum on proposed revisions
proposed revisions to the Bolivian Constitution. to the Bolivian Government balance, % of GDP -0.1 -4.5 -4.6 -3.2
constitution.
One of theOne of thesought
changes changes sought
was wasanto allow
to allow Merchandise trade ($ bil)
an incumbent president to run for a fourth consecutive
incumbent president to run for a fourth consecutive Exports 10.0 8.3 6.7 7.9
termterm
in office.
in office. In initial statements, Morales agreed
In initial statements, Mr. Morales agreed to Imports 8.4 9.7 8.1 8.6
abideto by the by
abide peoples wishes.wishes.
the peoples However, in its December
However, in its Current account balance, % of GDP 3.8 -5.6 -6.5 -5.2
congress, the ruling MAS party selected Evo
December congress, the ruling MAS party selected Morales as
its 2020 presidential candidate, so this issue is not yet International reserves ($ bil) 13.0 13.1 10.3 8.3
Evo Morales as its 2020 presidential candidate, so
settled.
this issue is not yet settled. Total external debt ($ bil) 7.1 9.8 10.6 13.3
% of GDP 27 30 30 35
Presidential decrees target mining coops. % of exports 65 102 135 144
Following the August assassination of the deputy
22 minister of the
Colombia

C O L OJuan
President M BManuel I A Santos will be focused on Figure 1. A stabile exchange rate allowed
implementing the peace accord with the rebels. central bank to cut interest rates in
President Santos will be focused on implementing December.
The worstthe peace of the accord with the
oil price rebels.
shock seems to be over,
and the central bank recently cut interest rates.
The worst of the oil price shock seems to be over,
President andJuan
the central
Manuelbank Santosrecently
maincut goal interest
for therates.
remainder of his second term, which ends in 2018, will be
President
to end Manuel
the conflict Santos the
between maingovernment
goal for the remainder
and rebel of
his second
movements term,
that beganwhich inends
1964. in 2018, will be to end
In November, the the
conflict between
government signed the government
a revised agreement and rebel peacemovements
that began
agreement with in the
1964. In November,
Fuerzas Armadas the government
Revolucionarias signed
a revised
(FARC), the agreement
largest of the peace agreement
countrys two with the Fuerzas
guerilla
Armadas Revolucionarias
movements. Congress approved (FARC),the therevised
largest peace
of the
countryswithin
agreement two guerilla
a few movements.
days in late CongressNovember. approved
An earlier
the revised
version peace agreement
of the agreement within a few
was rejected by adays in late
narrow
November.
margin An earlier
in an October version of the
referendum. agreement
Most was
voters supported
rejected
an end to the byconflict,
a narrowbut margin in an the
thought October
deal referendum.
offered too Figure 2. Colombias trade volumes are
much Most voters to
leniency supported
the FARC, an endwhich to thehasconflict,
a longbut thought
history of picking up
the deal offered
kidnappings too much
and killings. Mr.leniency
Santos to was theforced
FARC, which
to has Panama: economic indicators
a long
reopen history of kidnappings
negotiations with the rebels and killings.
and reachMr. Santos
a new was Avg. 2010-14 2015 2016e 2017f
forced tothat
agreement reopen negotiations
addressed at leastwithsomethe rebels and reach
of voters Real GDP, % change 7.9 5.8 5.4 5.5
a new agreement
objections. Congressional that addressed
opponents at least
of the somedealofwalked
voters Consumer prices, % Dec/Dec 3.6 0.3 1.2 2.1
out objections.
before the Congressional
November vote, opponents
and theof the deal
peace walked
agreement
Government balance, % of GDP -3.2 -3.9 -2.9 -1.6
will out
remainbefore the November
a polarizing issuevote, and the peace
in Colombia. agreement
However, both
will remain
houses of the alegislature
polarizing issue in Colombia.
are controlled byHowever,
Mr. Santos both Merchandise trade ($ mil)
houses
Unidad of the legislature
Nacional coalition, are makingcontrolled by Mr. Santos of
full implementation Exports 16.1 12.8 15.3 15.7
the Unidad
agreement Nacional likelycoalition,
over the making
next few full implementation
months. In of Imports 23.8 22.5 22.4 23.8
the agreement
January, the government likely over the next few
announced thatmonths.
it hadInrestarted
January, Current account balance, % of GDP -10.8 -6.5 -5.0 -4.7
talksthe
withgovernment
the Ejrcito announced
de Liberacin that it had restarted
Nacional (ELN),talksawith
the Ejrcito
smaller guerillade Liberacin Nacional (ELN), a smaller guerilla
group. International reserves ($ bil) 2.9 3.4 3.9 3.9
group. Total external debt ($ bil) 62.7 87.7 95.3 103.0
Colombias macroeconomic managers have long been Total external debt, % of GDP 243 321 292 308
amongColombias
the best macroeconomic
in Latin America, management
and the country has longhas been Total external debt, % of exports 242 322 293 309
among
largely the best
avoided in Latin America,
economic instabilityand the country
despite has
the conflict
withlargely avoided
the rebels. A economic
permanent instability
resolution despite
of the theconflict
conflict
withput
should the rebels.
investment A permanent
and tourism, resolutionbothofofthe conflict
which have Colombia: economic indicators
should
enjoyed a put investment
revival in recent and tourism,
years, on a both of which
sound footing.haveThe Colombia: economic indicators Avg. 2010-14 2015 2016e 2017f
main enjoyed
challengea revivalfor in recent years,
Colombia overon thea sound
past two footing.
years The
has Real GDP, % change Avg. 2010-144.8 2015 3.1 2016e 2.0 2017f
2.5
the main
collapsechallenge
of thefor Colombia
price of oil, over the pastprincipal
Colombias two years has Real Consumer prices, % Dec/Dec
GDP, % change 4.82.9 3.1 6.8 2.0 5.7 4.42.5
been(Petroleum
export. the collapseproducts of the price of oil, Colombias
account for about half principal
of
Consumer Government prices, balance,
% Dec/Dec % of GDP -2.7 6.8-3.0 5.7
2.9 -3.9 -3.34.4
export. (Petroleum
Colombias exports.) Colombia products accountallowedforitsabout exchangehalf of rate
Colombias which
to depreciate, exports.) Colombia
helped offset allowed
the shock its exchange rate to
to its terms Government Merchandise trade%($ obil)
balance, f GDP -2.7 -3.0 -3.9 -3.3
depreciate, which helped offset the shock to its terms of
of trade. The central bank, the Banco de la Repblica Merchandise Exports trade ($ bil) 55.6 38.1 32.6 35.8
trade. The
(Banrep), wascentral
forcedbank, the Banco
to raise interest derates
la Repblica
to keep(Banrep), ExportsImports 55.6 53.2 38.152.1 32.6 44.0 45.4
35.8
was forced
exchange ratetodepreciation
raise interestfrom ratesturning
to keepinto exchange
higher Current account balance, % of GDP
Imports 53.2 -3.5 52.1 -6.7 44.0 4.9 4.0
45.4
rate depreciation
inflation. By December fromofturning
last year, into however,
higher inflation.
the By
December
currency of last year,enough
had stabilized however,for the currency
Banrep to had stabilized
cut interest Current International
account breserves
alance, %($ obil)
f GDP -337.0
.5 -6.746.1 -46.3
4.9 46.5
-4.0
enough for Banrep to cut interest rates.
rates. International Total external debt(($$ bbil)
reserves il) 37.081 46.1 111 46.3 109 112
46.5
Total external % of GDPdebt ($ bil) 8123 111 38 10939 36112
TheThe Santos
Santos administration
administration isisexpected
expectedto tocontinue
continue to
to % o%f GofDPexports 23123 38 220 242 39 22836
adhere
adhere to an
to an orthodox
orthodox setset
ofof macroeconomicpolicies,
macroeconomic policies,
% of exports 123 220 242 228
including
including a flexible
a flexible exchangerate,
exchange rate, inflation targeting, and
inflation-targeting,
and a medium-term plan to reduce the budget deficit.
a medium term plan to reduce the budget deficit Oil
23
Oil exports have also stabilized, and the trade balance is to restitution of their property, and that the state must
improving, which should help growth pick up in 2017. preserve these rights.

Nevertheless, oil prices are still low enough to hamper fiscal U.S. court allows claims against Chiquita executives
performance. In December, the government increased under Torture Victim Protection Act. In May, a federal
the value added tax from 16% to 19% to help offset low oil district court in Florida allowed claims by Colombians
revenues (see below). The higher tax rate, efforts to curb against executives of Chiquita Brands Intl, Inc. for violation
evasion, and a partial recovery in oil prices should allow of the Torture Victim Protection Act to go to trial. The
the government to hold the budget deficit down to 3.9% Colombian plaintiffs claim they are victims of torture by
of GDP in 2017 and 2.2% in 2018, and this will permit the paramilitary squads hired by Chiquita to prevent labor
government to follow through on a 2015 plan to increase unrest and leftist agitation on banana plantations in
infrastructure spending. Colombia. Chiquita had pleaded guilty in 2007 to U.S.
charges of paying paramilitary squads, and was fined $25
LEGAL ENVIRONMENT million. The company claims that it paid the money under
duress to avoid violence against its workers. In 2015, the
Government tax reform measure enacted. Congress U.S. Supreme Court had let stand an appeals court ruling
approved the tax reform bill in December, and it will take dismissing claims by Colombian plaintiffs against Chiquita
effect in January 2017. In addition to increasing value under the Alien Tort Claims Act, but that decision did not
added taxes and certain excise taxes, the new law reduces affect claims under the Torture Victim Protection Act.
corporate income tax rates from 43% to 33% over the next
two years. Finally, the law introduces additional penalties Constitutional Court approves both initial peace
and tools to combat tax evasion. referendum and subsequent peace agreement. In
July, the Constitutional Court had approved the process
for the initial referendum on the peace agreement
New anti-corruption legislation passed. In February,
between Colombia and the FARC guerrilla army. When
Colombia demonstrated its commitment to the OECDs
that agreement was rejected in October, the government
Anti-Bribery Convention by enacting the Transnational
sought to avoid a referendum on the second, revised
Corruption Act. The new law will allow the Colombian
agreement. The Constitutional Court, in December,
government to impose administrative fines not only on
ruled in favor of the President Santoss fast-track plans
companies domiciled in Colombia, but also on their parent
to expedite the revised agreement. This decision allowed
companies or foreign subsidiaries. The law imposes
the agreement to be submitted to Congress for a simple
penalties of up to 15 years in prison and higher fines
up-or-down vote on its key aspects without allowing
for individuals, as well as fines and disqualification from
amendments to the deal.
government contracts for organizations convicted of
corruption. The law also offers concessions for those who BUSINESS ENVIRONMENT
assist in identifying offenders.
Only Mexico beats Colombia among Latin American
Constitutional Court revokes mining licenses in parts countries in the World Banks most recent ease of doing
of Colombian Andes. In February, the Constitutional Court business rankings, with the country ranked 53rd of 190
revoked 347 mining licenses to private companies granted countries in 2017. The most recent improvement is due
in environmentally sensitive areas of the Andes. The court to business registration changes that make it easier to
found that environmental concerns under the Colombian start a new business. As part of its accession to the OECD,
constitution trumped rights of mining companies. a process that began in 2013, Colombia has adopted
The decision overturns part of Colombias national measures that should help improve the business climate in
development plan which had banned issuing licenses, coming years. These measures include efforts to promote
but had allowed those already granted to continue. The competition and protect property rights. Plans to increase
decision enjoined any current or future mining in the investment in infrastructure should also help make it easier
region. to do business in the future.

Constitutional Court moves to allow people displaced Colombia is in third place in the regional rankings in the
by war to reclaim lands. In February, the Constitutional 2016 Index of Economic Freedom. Colombia improved its
Court also overturned part of the national development ranking in Transparency Internationals corruption index,
plan that prevented peopled displaced by Colombias long rising to 83rd place in 2015 from 94th in 2014. However
guerrilla war from returning to their land. The court ruled this improvement in rankings masks a 2015 score that was
that persons displaced by war have a fundamental right unchanged from the 2014 index.
24
Ecuador [=]
E C Ucontinues
Ecuador A D O Rto [struggle
] with low oil prices. Figure 1. Business investment has yet to
return to pre-crisis levels
Ecuador continues to struggle with low oil prices.
Investment demand remains weak.
Ecuador [=]
Given its Investment
dependencedemand
on oil, Ecuador
remains was fortunate to get
weak.
Ecuador continues
through 2016 with a to struggle
contraction with
of onlylow
1.9%oilinprices.
economic Figure 1. Business investment has yet to
activity. Oilits revenues, which accounted for about 30%toofget return to pre-crisis levels
Given
Investment dependence
demand remains on oil, Ecuador
weak.began was fortunate
government revenues when oil prices their descent
through 2016 with a contraction of only 1.9% in economic
in 2014, fell to 10% , and because oil production is about
Given activity. Oil revenues, which accountedfortunate for about 30% of
13%its ofdependence
GDP nonoil on oil,
revenues Ecuador
fell aswas well. The government to get
hrough government
2016 with arevenues
contraction when of oil
onlyprices
1.9% began in their descent
economic
was forced to cut spending to prevent the budget deficit
from in
activity. 2014,
Oil fell to
revenues,
exceeding its10% which , andaccounted
statutory because
cap of 4% oilfor
production
of about
GDP. 30% is about
Ecuador of
government 13% of
is a dollarized GDP,
revenues nonoil
economy when revenues
(it oil
uses prices fell as
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began
U.S. The
dollartheirgovernment
asdescent
its
n 2014,was fell forced
to 10%to, cut andspending
because to prevent
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13% of GDP from exceeding
nonoil revenues its statutory fell as
currency to help offset the effect of lower oil prices on cap of
well. 4% Theof GDP. Ecuador
government
was forced to cut spending
is a Export
dollarized economy to prevent the budget deficit
exports. volumes fell(itinuses
2016, the U.S.
but dollar as
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fell
rom exceeding
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so it did account cap
not have deficit of 4%
the option of GDP. Ecuador
of depreciating
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New lossescommittee to prioritize
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s a dollarized economy (it uses the U.S. dollar as its
currency
The rating to helpdid
agencies offset notthe cuteffect
Ecuadors of lower oil prices
credit ratingon for investors,case.
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exports. Even though imports
from its already low, below-investment grade status. fell by more than exports, capital exit taxes. The law
involved multi-billion dollar claims forprovides that Latin American
currency to help offset the effect of lower oil prices on
exports.the current account balance turned but into aEcuadors
deficit
fell in 2016. arbitration bodies damages
will serve asallegedly
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Although Export
its public
volumes
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in 2016,
in 2016,
imports even
debt environmental
burden The is rating
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urther, so the current account deficit actually narrowed. New losses subsidiary
for Ecuador Texaco. In August, a U.S.
in long-running
The gradualfrom
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rom its Although
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rating, Ecuadors
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against
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attorneys,case.
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Although debt
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Ecuadors and anis for a The Chevron
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Chevrons subsidiary Texaco. In August, a U.S.
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Ecuadorean subsidiary Texaco. In August, a U.S. appeals
Potential investors in Ecuador will be watching the results appeals court judgment
affirmed the using civilfraud and corruption.
racketeering
n coming a recovery
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A highergrowth and an
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the court affirmed
In June,
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Ecuador andCourt judgment
its against
had rejected
U.S. attorneys,
of the upcoming presidential election in February.
ikely havegovernments
to await a liquidity.
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Although the
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Potential investors in Ecuador will be watching the results secured
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Potential of the in countrys reputation as a less-than-
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July. In June,
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had rejected
of the upcoming presidential election in February.
Although
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Although the government of Foreign
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Ecuador 114thinout of
riendly place to do business has kept investment lowlow
friendly place to do business has kept investment byby July.
190 countries in its most recent ease-of-doing
New
Latin Latin American
intellectual
American standards. standards.
property ForeignlawForeign
adopted.
direct direct investment
In
investment December, in in Business
business environment
report. Thisshowed represented little change
a slightin 2016.
Ecuador Ecuador
Ecuadors as anew asintellectual
percent a percent
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property
for example, law is took is only
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The of
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Business Bank ranks
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improvement from 2016. The country showed 114th out
little of change
190to
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91in
st
law isPerus.
Perus. controversial for making IP rights conditional on in its most recent ease of doing business report. This
2016. The World Bank ranks Ecuador 114 th out of

social conditions, and also for ignoring requirements of the 190Ecuador:


represented economic
countries inindicators
a slight itsimprovement
most recent from 2016. The country
ease-of-doing
New New
intellectual
Andean intellectual
Communitys property property
common law
law adopted. adopted.
IP regime, Inas Inwell
December,
December, as the fell to 91st report.
business place in the This2016-17
represented global competitiveness
Avg. 2009-15 a2015
slight 2016e 2017f
Ecuadors Ecuadors
new TRIPS
international new intellectual
intellectual property
agreement. property law took law took effect.effect.
TheThe rankings, down 15 places.
improvement
Real GDP, % change from 2016. The country
5.0 0.3 fell to
-1.991st 0.6
aw is controversial
law is controversial for making for making IP rights IP rightsconditional
conditional onon
Consumer
Ecuador: prices, %indicators
economic Dec/Dec 3.6 3.4 1.6 2.0
social conditions,
Ecuador and also for ignoring
social conditions, and also for ignoring requirements
joins Andean free trade requirements
agreement with ofEU.the
of
Andean Communitys common IP2009,regime, as well as the Government balance, % of GDP Avg. 2009-15 -3.4 2015 -3.8 2016e -3.9 2017f
-2.3
Although it suspended talks in
the Andean Communitys common IP regime, as well as Ecuador finally joined
nternational
Colombia TRIPS
and Peru agreement.
inTRIPS
a freeagreement.
trade agreement with the Merchandise
Real GDP, % changetrade ($ bil) 5.0 0.3 -1.9 0.6
the international
European Union. Effective in January 2017, the Exports
Consumer prices, % Dec/Dec 23.6
3.6 19.0
3.4 16.4
1.6 19.1
2.0
Ecuador
agreement joinsprovides
Andeanfor free trade agreement
progressively eliminating with EU.
tariffs. Imports balance, % of GDP 24.1 -3.8 20.7 14.7 -2.316.9
Although Ecuador
it suspended joins Andeantalks infree 2009, trade agreement
Ecuador finally withjoinedEU. Government -3.4 -3.9
Although it suspended talks in 2009, Ecuador finally joined Internationaltrade
Merchandise reserves
($ bil)($ bil) 2.2 2.1 4.2 4.1
Colombia and Peru
Public-private in a free trade
partnership law agreement
seeks to attract with the
European Colombia
Union. and Peru
Effective in a
in free
January trade agreement
2017, the with the Current
Exports account balance, % of GDP 23.6 -0.9 19.0 -0.6 -2.2 19.1
16.4 -0.2
investment. A law passed in December 2015 promotes
agreement European
provides Union.for Effective
progressively
public-private partnerships. The law creates an inter- in January 2017,
eliminating the agreement
tariffs. Total external debt ($ bil)
Imports 18.7 20.7
24.1 27.3 34.1 16.9
14.7 37.6
provides for progressively eliminating
agency committee to prioritize projects, offers incentives tariffs. % of GDP
International reserves ($ bil) 2.222 27
2.1 33
4.2 36
4.1
Public-private
for investors, partnership
including reduced law seeks income, to value
attract added and % ofaccount
Current exportsbalance, % of GDP -0.967 -0.6 116 183 -0.2
-2.2 173
investment.Public-private
A law partnership
passed in December
capital exit taxes. The law provides that Latin American law seeks 2015 to attract
promotes
Total external debt ($ bil) 18.7 27.3 34.1 37.6
investment.
public-private A law passed
partnerships. The law in December
creates an 2015 promotes
inter-
% of GDP 22 27 33 36
agency public-private
committee topartnerships.prioritize projects, offers
The law creates an inter- incentives
or investors, including reduced income, value added and % of exports 67 116 183 173
capital exit taxes. The law provides that Latin American 25
Peru
The economy is recovering slowly but steadily
P Ethe
from R U2014-15
commodity price shock . Figure 1. The prices of Perus two largest
exports have stabilized
Central bank rate hikes have tempered inflation. Figure 2, p. 15
The economy is recovering steadily but slowly
from the 2014-15 commodity price shock .
President Pedro Pablo Kuczyinski will pursue $ billions millions
market-oriented policies, but faces challenges in 10.0 5.0
Central
improving bank
the rate hikes
business have dampened
climate further. inflation. Real gross fixed investment
8.0 4.0

Over thePresident
past 25 yearsPedroPeru PablohasKuczyinski
been one willofpursue
Latin 6.0 Visitors 3.0
Americas market-oriented
best performing policies,
economies.but faces challenges
Heeding the in
4.0 2.0
lessons improving
learned in the the business
early 1990s climate.
when the country
experienced hyperinflation, Peru has since followed 2.0 1.0
prudent fiscal policies, promoted private and public
Over the past 25 years, Peru has been one of Latin
investment, and sought integration into the global 0.0 0.0
Americas best performing economies. Heeding the
economy. The result has been an average real GDP
lessons learned in the early 1990s when the country
growth rate of 4.8% between 1991 and 2016 a rate
experienced hyperinflation, Peru has since followed Source: World Bank and EIU
higher than the average among the six largest
prudent fiscal policies, promoted private and public
economies in the region and matched only by Chile.
investment, and sought integration into the global
Helped by a boom in the mining sector, poverty in Peru Figure 2. The inflationary impact of the
economy. The result has been an average real GDP growth Figure 2, p.26 (Peru)
depreciation of the Sol is subsiding
fell from 58.7% of the population in 2004 to 21.8% by
rate of 4.8% between 1991 and 2016 a rate higher than
2015, Peru, like other commodity-producing countries,
the average for the six largest economies in the region and Sol/$ %oya %oya
saw its terms of trade deteriorate sharply beginning in
matched only by Chile. Helped by a boom in the mining 8 Inflation 5
2014, and its growth decelerate. Peru allowed its
sector, poverty in Peru fell from 58.7% of the population
currency to depreciate by about 16% during 2014-15, 4
in 2004 to 21.8% by 2015, Peru, like other commodity- 4
which helped soften the blow from lower commodity
producing countries, saw its terms of trade deteriorate 0
prices, but at the cost of an inflation rate that rose above 3
sharply beginning in 2014, and its growth decelerate. -4
the central banks 1% to 3% inflation target. The central
Peru allowed its currency to depreciate by about 16% 2
bank responded by raising its policy rate, which has -8
during 2014-15, which helped soften the blow from lower
succeeded in bringing inflation back down to within its Exchange rate
commodity prices, but at the cost of an inflation rate that -12 1
target band. GDP growth picked up modestly in 2016
rose above the central banks 1% to 3% inflation target.
and should continue to do so in the year ahead. -16 0
The central bank responded by raising its policy rate, which
has succeeded in bringing inflation back down to within its
Perus President Pedro Pablo Kuczyinski, elected in April
target band. GDP growth picked up modestly in 2016 and Source: IMF
2016, is an economist and former investment banker
should continue to do so in the year ahead.
who was Prime Minister of Peru in 2005-06. He can be
expected to continue Perus market-friendly policies
whilePerus President
seeking Pedrosecurity
to improve Pablo Kuczyinski,
and combatelected in April
2016, is Some
corruption. an economist
conflicts and former investment
between the Kuczyinski banker
administration and the opposition Fuerza Popular be
who served as prime minister in 2005-06. He can party,
which expected to continue
has a majority in thePerus market-friendly
National Assembly, policies while
are likely.
seeking
But both theto improve security
opposition party and and President
combat corruption.
KuczyinskisSome
Peruanos por el Kambio (PPK) party share similar the
conflicts between the Kuczyinski administration and
opposition
center-right Fuerza Popular
orientations, party,
so the which haswill
opposition a majority in
likely stop
shortthe National
of being Assembly,
overtly are likely. But both the opposition
obstructive.
party and President Kuczyinskis Peruanos por el Kambio
While(PPK) party
Perus share similar center-right
macroeconomic management orientations,
is sound, so at
the opposition
the micro level Peru willhas
likelyconsiderable
stop short of scope
being overtly
for
obstructive.
improving the business climate. Dispute settlement
remains problematic in Peru according to the U.S. State
Departments
While Perus Investment
macroeconomic Climate statement for
management that
is sound,
country,
at the micro level Peru has considerable scope forthe
Piracy of intellectual property (including
counterfeiting
improving itsof medicines)
business climate.is common. Regulatory
Dispute settlement
transparency and independence,
remains problematic have become
in Peru according to the U.S. central
State
issues for foreign investors, according to
26
Departments Investment Climate statement for that seek approval from the relevant prosecutors office and
country, Piracy of intellectual property (including the then from the council of ministers.
counterfeiting of medicines) is common. Regulatory
transparency and independence, have become central Financial intelligence unit given more powers. In
issues for foreign investors. While the legal and regulatory November, another decree gave the financial intelligence
framework in Peru provides for transparent procedures, unit additional authority to combat money laundering and
in practice delays and a lack of predictability in rulings are terrorism offenses. Perus ministerial council approved
common. The U.S. State Department reports that U.S. and allowing the unit access to information covered under
other non-Peruvian firms have complained in particular bank secrecy provisions. The decree also allowed the
about re-interpretations of regulations and laws, usurious centralization of management of public notaries, and
interest charges, and disproportionate fines levied by approved the expansion of the list of entities required to
SUNAT, the Peruvian tax agency. submit clients financial information to include credit card
processors, loan companies, betting agencies, lawyers and
Civil unrest in the mining sector, meanwhile, has adversely accountants.
affected Perus perceived investment climate. Violent
protests centered on environmental concerns have New education reform law approved. In October, the
occurred against Mexican and Chinese-owned mining Peruvian congress approved an education law to improve
projects over the past two years. Still-high levels of secondary schools. Part of the law increases minimum
poverty in rural areas and persistent activism in indigenous teacher pay in an attempt to recruit and retain more
communities make further conflicts about extractive qualified teachers. The law will also require students to
projects likely. have access to at least three hours of drama, art or music
per week, and seeks to preserve access to and teaching
LEGAL ENVIRONMENT in indigenous languages. The law requires expansions to
the education budget to fund infrastructure and other
Perus congress grants President Kuczynski special improvements, as well as to establish regional technical
legislative powers on economy and public matters. The academies.
Peruvian congress in late September passed legislation
giving the executive branch powers to pass economic New laws target corruption. Following high profile
reform decrees for a 90-day period. The government corruption scandals, the government moved quickly to
issued decrees lowering sales taxes from 18% to 17%, and enact additional legal measures targeting corruption.
reducing taxes on small- and medium-sized businesses, The penal code was amended to increase penalties
while increasing taxes on larger businesses. for corruption to include prison sentences of between
two and 20 years. Another measure will ban politicians
Decree expands penalties for those convicted of convicted of corruption from running for public office
organized crime. President Kuczynski also issued an again.
executive decree which includes longer prison sentences
for those involved in criminal organizations and the BUSINESS ENVIRONMENT
revocation of conditional release for those convicted
of certain crimes including murder for hire and money Peru was ranked 54 out of 190 countries, in the World
laundering. Banks latest Doing Business report, slipping just behind
Colombia in the rankings. The improvement in Perus
New decree targets bureaucracy. In December, the score stems from a decrease in corporate income taxes.
Peruvian government approved a decree to eliminate Peru has slipped in corruption perceptions, falling to 88th
bureaucratic obstructions to public services and the place in 2015. Peru was essentially unchanged in the global
streamline public administration practices. The law competitiveness rankings for 2016-2017. The Economic
requires that once the agency for competition and Freedom Index ranks Peru fourth among Latin American
intellectual property (Indecopi) has determined a nations, citing its sustained open-market policies and
bureaucratic procedure to be illegal, that procedure can regulatory reforms.
no longer applicable to anyone. The law also specified that
public entities cannot appeal Indecopi decisions to axe a
bureaucratic procedure in court directly: they must first

27
Venezuela
V E NIs
Venezuela
Venezuela Efacing
Z U Ethe
LA severe economic and
most Figure 1. Picture of a failing economy.
political crisis in its history.
Venezuela Is facing Is
Venezuela the mostthe
facing severe
most economic and and
severe economic Figure 1. Picture of a failing economy.
Economic
political crisis activity
in its is contracting rapidly amidst
history.
political crisis in its history.
widespread shortages and near hyperinflation.
Economic activity is contracting rapidly amidst
Economic
The government
widespread shortages activity
andandthe is contracting
National
near rapidlyare
Assembly
hyperinflation. amidst
deadlocked. widespread shortages and near hyperinflation.
The government and the National Assembly are
Venezuela
deadlocked. The is rapidly
government becoming and the a failed
National state.Assembly
It is in theare
third year of a
deadlocked.deep recession. Inflation, according to the
consensus, may have approached
Venezuela is rapidly becoming a failed state. It is in the 600% in 2016. No
oneyear
hird knows of afor deep surerecession.
because the government
Inflation, according stopped
Venezuela
publishing may official is rapidly
statistics becoming
at the 600% a failed
beginning state.
of lastIt to
is inthethe
consensus, have approached in 2016. Noyear.
GDP third
is in for year
a freefall, of a deep recession.
with a consensus Inflation,
estimate according
of an the to
one knows sure because the government stopped
consensus,
11.3% decline may have approached 600% in 2016. No
publishing officiallast year. (An
statistics at the early leaked estimate
beginning of last year. from quickly became overvalued. It failed toininvest in PDVSA,
the centralone knowsbank put for sure becauseatthe
theadecline government
18.6%.) Price stopped
controls per barrel (WTI) to $26 per barrel February 2016
GDP is in a freefall,
publishing
with
official
consensus
statistics at the
estimate
beginning
of an
of last year. whose
beforeproduction
recovering fell,toreaching
around a$50 13-year low lastReal
per barrel. year.
and unrealistic exchange rates have resulted in empty GDP per capita
by afailed to grow in 2013, then2014-16
plummeted
11.3% decline last year. (An early leaked estimate from
shelves GDP is in a freefall, with a consensus estimate of an perGDP barrel fell (WTI) cumulative
to $26 per 20% barrelduring
in February 2016and
he centralinbank stores, putwith severe shortages
the decline at 18.6%.)of Pricefood, basic
controls when the price of oil fell from a peak of $107 per barrel
household 11.3% decline
items, and last year. (Ansupplies.
medical early leaked Theestimate from the consensus
before recoveringexpects to around it to$50decline by another
per barrel. Real 3.9%
and unrealistic exchange rates have resulted incentral
empty (WTI) in April 2014 to $26fell, perso barrel in February 2016
banks in the central
international bank put the decline at 18.6%.) Price controls in 2017. As oil prices
GDP fell by a cumulative 20% during 2014-16 and did government
shelves stores, withreserves severe shortages have fallen of from
food,$22 basic billion
before recovering to around $50 per barrel. Real to
GDP fell
and unrealistic exchange
household items, and medical supplies. The central 1.6
two years ago to $4 billion, and rates
now haveamountresulted to in
only empty therevenues,
consensus andexpects
the budget deficit
it to decline ballooned
by another 9.2%
3.9%
shelves by a GDP
cumulative 20%Itduring 2014-16 and withthe consensus
months
banks worthinofstores,
international imports.
reserves withSovereign
severe
have fallen shortages
bond from of
markets
$22food, basic
are
billion inof 2017. As lastoilyear.
prices was
fell, so financed
did government money
household items, and medical supplies. The central expects
creation, andit to decline
which by another 3.9% in 2017.
rateAs oil
wopricing
yearsinago a high to $4 probability
billion, and of default
now amount on theto only 1.6 revenues, thehas budgetled todeficit
an inflation
ballooned estimated
to 9.2%
banks international reserves have fallen from $22 prices fell, so did government revenues, and the budget
are billion ofby
governments low-rated bonds. In October the state- GDPthe lastconsensus
year. It was to have reached
financed with590%money in 2016.
months worth of imports. Sovereign bond markets deficit ballooned to 9.2% of GDP last year. It was financed
owned two
oil years
company, ago to $4
PDVSA,
pricing in a high probability of default on the billion, wasand now
able amount
to avoid to
a only 1.6
default creation, which has led to an inflation rate estimated
months worth of imports. Sovereign bond markets are with money
byOpposition
the consensus creation,
parties, which has
whichreached
to have led to an
won a veto-proof inflation
590% in 2016. rate
only by persuading
governments low-rated investors
bonds.to Inexchange
October the their bonds for
state-
pricing in with
a high probability estimated
supermajority by theof consensus
seats in the to have
Nationalreached 590% inin
Assembly
new securities
owned oil company, longer
PDVSA, wasofable
maturities. default to on theagovernments
Venezuela
avoid is a
default 2016.
terrible Caa3/CCC
place to do rated bonds.
business.
only by persuading investors to exchange their bonds In October
According the
to state-owned
World Bank for Opposition parties, which won a veto-proof President
December of last year, tried first to induce
oilits
company, PDVSA, wasconfidence
able toVenezuela
avoidina the default Maduro to free political prisoners andAssembly
then to force in a
newsurveys
securities citizens
with longer have maturities.
little aonly
rules
is of by supermajority of seats in the National
society, persuading
in the investors
judiciary, or to
in exchange
the their
enforceability bonds of for new recall
Opposition of
December referendum.
parties,
last year, The
whichtried efforts
wonfirst were
a veto-proof unsuccessful.
to inducesupermajority
President
errible place to do business. According to World Bank
contracts.
surveys securities
The government
its citizens with have longerlittlematurities.
intimidates
confidence Venezuela
and
in the is a terrible
criminally
rules of ofSupreme
seats to
Maduro in theCourt,
free NationalfilledAssembly
political with regime
prisoners inand loyalists,
December
then toof has
forcebeen
a
able to block most of the National
last year, tried first to induce President Maduro to free Assemblys
society, place
prosecutes in thetojudiciary,
its do business.
critics, or inAccording
and uses excessive
the enforceabilityto World Bankforce of onsurveys recall referendum. The efforts were unsuccessful.
unarmed its The
citizens
protestors. haveItlittle confidence
hasintimidates
the highest in thecriminally
reported rules of ratesociety,
of initiatives,
political
Supreme and filled
prisoners
Court, the
andelectoral
then
withto commission,
force
regime aloyalists, also
has filled
recall referendum. been
contracts. government and
crime in the
victimizationjudiciary, in or in
Latin the enforceability
America, and of
the contracts.
regions The with
The efforts
able loyalists,
to block were
mosthas prevented
unsuccessful.
of the National a recall
The Supreme referendum
Assemblys Court,
prosecutes its critics, and uses excessive force on
unarmedgovernment
second protestors.intimidates
highest homicide rate.
It has the highest and criminally
How did prosecutes
Venezuela
reported rate of itsto
get filled with regime
initiatives, and the loyalists,
electoral hascommission,
been able to block also most
filled
with loyalists,
of Venezuela:
the National has prevented a recall referendum
acritics,
suchvictimization
crime desperate and uses state?
in Latinexcessive
America, forceand on unarmed
the regions protestors. economicAssemblys
indicators initiatives, and the electoral
second highestIt has thehomicide highest reported rate. How ratedid of Venezuela
crime victimization get to in
It was not always so.and Between 2003 Hugo Chvezs Avg. 2010-14 2015 2016e 2017f
such Latin
a desperate America, state? the regions second highest homicide Venezuela:
fifth year rate. asHow president
did Venezuela andget its topeaksuch ina2010desperate GDP state? per Real GDP,economic
% changeindicators -3.9 -5.7 -11.3 -3.2
capita in Venezuela more
t was not always so. Between 2003 Hugo Chvezs than tripled, and between Consumer prices, % Dec/Dec Avg. 2010-1468.5 2015
180.9 590.62017f544.3
2016e
2004
ifth yearand 2014 poverty was essentially halved. These RealGovernment
GDP, % change -3.9-5.9 -5.7-7.7 -11.3-9.2 -3.2-7.0
were Itas
yearswaspresident
not
in always
which
so.
the
and
price
its peak
Between of 2003
oil,
in 2010
the Hugo
countrys
GDP per
Chvezs
main fifth
balance, % of GDP
capita inyear Venezuela
as president more than
and its peaktripled, and
in 2010, between GDP per capita Consumer prices,
Merchandise trade % Dec/Dec
($ bil) 68.5 180.9 590.6 544.3
export,
2004 androse 2014rapidly. povertyHugo was Chvezessentially and his successor,
halved. These
Nicols in Venezuela
Maduro, more
used than
oil tripled,
revenues and
to between
provide 2004 and Government
Exports balance, % of GDP -5.974.7 -7.737.4 -9.227.1 -7.033.1
were years in which the price of oil, the countrys main
2014
improvements poverty to healthwas essentially halved. These were years Merchandise
Imports trade ($ bil) 47.5 36.9 21.3 22.9
export, rose rapidly. Hugocare Chvez and and educationhis successor,to millions.
But troublein which was the price of oil,
brewing. Thethe countrys main
government export, rose Exports 74.70.9 37.4-4.3 27.1-1.6 33.1-0.5
Nicols Maduro, used oil revenues to providenationalized Current account balance, % of GDP
rapidly.
plants in a variety Hugo Chvez
of industries, and his successor, Nicols
steel, Maduro,
mprovements to health care and including educationthe to millions. crude Imports
International reserves ($ bil) 47.522.1 36.95.1 21.34.0 22.93.8
oil, used
glass, andoil revenues
supermarket to provide
industries.improvementsIt put on to
pricehealth care
But trouble was brewing. The government nationalized Current
controls and education to millions. But trouble was brewing. The Total account
externalbalance, % of GDP
debt ($ bil) 0.9
135.7 -4.3
123.7 -1.692.4 -0.589.7
plants in aand variety introduced
of industries, a fixedincludingexchange therate steel,(latercrude
expanded government
to supermarket nationalized
three official rates) plants in
that quickly a variety of industries, International reserves
Total external debt,($% bil)
of GDP 22.132.9 5.1 26 4.0 18 3.8 15
oil, glass, and industries. It put onbecame price
controls and introduced a fixed exchangeand
overvalued.including It the
failed steel,
to crude
invest oil,
in glass,
PDVSA, whose
rate supermarket
(later TotalTotal
external debt ($ bil)
external debt, % of exports 135.7
177.0 123.7322 92.4333 89.7265
production
expanded industries.
to fell,
three Itofficial
put onrates)
reaching price
a 13-year controls
that low and
quickly lastintroduced
year. GDP
became a fixed Total external debt, % of GDP 32.9 26 18 15
exchange
per capita growth
overvalued. rate
It failedfailed (later
to invest expanded
to grow in PDVSA, to
in 2013, three then
whose official rates) that
Total external debt, % of exports 177.0 322 333 265
l
production t fell,
d hreaching th ai 13-year f il flow ll f last year. kGDP f $107
28
per capita growth failed to grow in 2013, then
l t d h th i f il f ll f k f $107
commission, also filled with loyalists, has prevented a with charges that illicit funds were laundered through the
recall referendum from going through. Talks between the Venezuelan oil company. The U.S. Treasury, Andorra, Spain
government and the opposition sponsored by the Vatican and Switzerland are also looking at suspicious banking
and Unasur, a regional cooperative body, fell through in activity involving current and former Venezuelan officials.
December.
Referendum disputes with courts. The Supreme Court
The opposition will continue to try to oust President decided in March that any new constitutional amendment
Maduro, and he can be expected to resist with every changing rules for recall referenda would not apply
means at his disposal. Recently, he appointed a hard-liner, retroactively. In April, the elections court ruled that only
Tareck El Aissami, as vice president, signaling a move away it had authority to proscribe rules for recall referenda,
from dialogue, compromise, and reform. At this point rejecting the Assemblys referendum law. The elections
Venezuela is running out of options. Mr. Maduros game court ruled that signatures from 20% of voters from
plan seems to be to stave off the opposition and an each of Venezuelas 23 states would be required to bring
increasingly discontent population until the price of a recall referendum. The timetable allowed by the court,
oil recovers. The futures market is looking for oil prices pushed any referendum to February, thus ensuring that
to go up, but only to $55 a barrel by the end of 2018 in the event President Maduro is recalled, he would be
not enough to bring Venezuela out of its crisis. The succeeded by his vice president.
IMF estimates that the fiscal break-even price of oil for
Venezuela is over $100 per barrel. Court assumes budget functions, authorizes central
bank to take on new debt. Because the Assembly did
LEGAL ENVIRONMENT not remove legislators whom it had found unqualified,
the Supreme Court held the Assembly in contempt,
Courts affirm government against Assembly. Facing and determined it was without authority to assume its
desperate economic conditions, Mr. Maduro decreed budgetary responsibilities. In October, the court ruled that
a state of emergency on January 15. The opposition- it would assume the duty of approving the budget. In July,
controlled National Assembly claimed the move needed the court had allowed the central bank to issue new debt
its approval. However, the Supreme Court ruled five days without the approval of the Assembly under Venezuelas
afterwards that the law is constitutional. The court also state of economic emergency.
ruled that all decisions by the Assembly would be void until
elected lawmakers who were allegedly involved in election Opposition leaders imprisoned. In August, an appeals
fraud were removed. court upheld the 13-year sentence imposed on
opposition leader, Leopoldo Lpez, who was found guilty
U.S. and international corruption investigations target of arson, criminal association and conspiracy, damage to
PDVSA, other businesses. U.S. prosecutors obtained public property and inciting violence and given a sentence
guilty pleas to violations of the Foreign Corrupt Practices of nearly 14 years imprisonment. Also in August, another
Act, conspiracy and wire fraud in at least six high profile opposition leader, Daniel Ceballos, former mayor of San
cases involving Venezuelan officials or business leaders in Cristobal, was arrested and returned to prison. He had
2016, been arrested last year for inciting anti-government
violence during protests, but had been placed on house
Venezuelas exchange rates arrest for medical reasons.
In March 2016, Venezuela adopted a new, dual exchange
rate system. One rate is the official peg, known as the BUSINESS ENVIRONMENT
Dipro, and is for public sector transactions. It is fixed at
VEF10:US$1. The other, called the Dicom (replacing
the Simadi) is a managed floating rate, At end- January Venezuela remains one of the worst countries in the world
2017 the Dicom was trading at VEF690:US$1. for business. It ranked 187th out of 190 countries in the
Venezuela also has a black market rate which has been World Banks 2016 Doing Business report, placed between
depreciating rapidly. At the end of January 2017 it was South Sudan and Libya. It ranks 158th in Transparency
trading at VEF3,541: US$1, down from VEF984:US$1 a Internationals corruption index. Venezuela continues
year earlier. to score at the bottom of both World Banks rule of law
ranking and the Economic Freedom Index.

29
Argentina
B R Anew
The Z Iadministration
L A N D S OofUMauricio
T H E RMacro
N CO hasN E Figure 1. Argentinas debt has been rising
moved quickly to reverse economic distortions.
ARGENTINA
The recession in 2016 was deeper and longer than
expected, and inflation higher.
The new administration of Mauricio Macro has
Themoved quicklysees
consensus to reverse economicofdistortions.
a resumption growth, lower
inflation, and fiscal stability in 2017.
The recession in 2016 was deeper and longer than
expected,
Within days of and inflation
taking office higher.
in December 2015,
President Mauricio Macri began taking steps to
The consensus
eliminate the distortions sees athat
resumption
had hamstrung of growth, lower
inflation, and fiscal stability in
Argentinas economy during the previous 13 years of 2017.
Peronist rule. President Macri first announced the
Within days of taking office in December 2015, President
elimination of taxes on the countrys major agricultural
Mauricio Macri began taking steps to eliminate the Figure 2. Its been real: the peso has
exports, then scrapped restrictions on the ability of
distortions that had hamstrung Argentinas economy depreciated in real as well as nominal
individuals and companies to buy dollars. The
during the previous 13 years of Peronist rule. President terms
elimination of currency controls led to an immediate
Macri first announced the elimination of taxes on the
26% depreciation of the currency and an effective
countrys major agricultural exports, then scrapped
convergence of Argentinas official and blue market
restrictions on the ability of individuals and companies
(black
to buymarket)
dollars. The rates. Over the
elimination of next
currency few controls
months,led the
Macri administration successively:
to an immediate 26% depreciation of the currency and (1) reached
agreement
an effectivewith holdout creditors
convergence of Argentinas to pay $4.65
official andbillion
blue on
defaulted debt, in effect ending the
market (black market) rates. Over the next few months, dispute and paving
the way for Argentinas return to
the Macri administration successively: (1) reached international capital
markets;
agreement (2)with
arranged
holdoutfor the sale
creditors to of
pay$16.5
$4.65billion
billion onin
global bonds, the largest sovereign bond
defaulted debt, in effect ending the dispute and paving the issue ever by
an
wayemerging
for Argentinasmarket; (3) to
return announced
international a tax amnesty;
capital markets; (4)
(2) arranged for the sale of $16.5 billion in global bonds, the
raised public utility prices, which had been out of line
largest
with sovereign
costs; and (5) bond
metissue
witheverthe byIMF anforemerging market;
a consultation
(3)economic
on announcedpolicy a tax amnesty;
the first (4) such
raisedmeeting
public utility prices,
in ten
which had been out of line with costs; and (5) met with the
years.
IMF for a consultation on economic policy the first such Argentina: economic indicators
meeting
Few in ten years.
observers expected that the economy would
respond quickly to President Macris initiatives, or that
Avg. 2010-14 2015 2016e 2017f
Few observers
those efforts would expectedoccur that the economy
without opposition.wouldThe respond Real GDP, % change 3.0 2.4 -2.3 2.9
quickly to was
economy President Macris initiatives,
in recession at the time or that
Mr. those
Macriefforts
took Consumer prices, % Dec/Dec 13.2 27.5 39.4 21.4
would and
office, occurit without
has notopposition.
yet returned Thetoeconomy
growth wasit in Government balance, % of GDP -2.4 -3.1 -5.0 -4.9
recession atbythe
contracted antime Mr. Macri2.3%
estimated took last
office, and instead
year, it has notof
Merchandise trade ($ bil)
yet-0.2%
the returned to growth
decline it contracted
the consensus hadbyenvisaged
an estimated at the
2.3% last year,
beginning instead
of 2016. Theof the -0.2% decline
recession in Brazil,the which
consensus is Exports 75.3 56.7 56.8 60.3
had envisaged
Argentinas at thetrading
largest beginning of 2016.
partner, didThe
notrecession
help. in Imports 64.8 57.2 55.6 61.4
Brazil, which
Inflation climbed is Argentinas
to 39%, largest
boosted trading partner,
by higher did not
utility prices Current account balance, % of GDP -0.9 -2.5 -2.5 -3.4
help.the
and Inflation climbed to
pass-through 39%,
from boosteddepreciation.*
currency by higher utility
International reserves ($ bil) 38.0 23.4 35.2 41.3
prices and
Citizens took theto pass-through
the streets from in Julycurrency
to protestdepreciation.*
higher
Citizens took to the streets in July to protest higher Total external debt ($ bil) 138.8 159.7 182.1 192.9
utility prices, and again in September to protest the
utility governments
Macri prices, and againausterityin September to protest
measures. Thethe Macri
price % of GDP 26 25 42 51
governments
hikes and austerity,austerity measures.
however, wereThenecessary
price hikes to and % of exports 151 219 250 249
austerity, however, were necessary
address a fiscal deficit that had grown to 5% of GDP,to address a fiscal
deficit
and that had public
a growing grown to 5%burden.
debt of GDP, and a growing public
debt burden.
*In November the IMF lifted its censure on Argentinas official statistics
agency, which had been publishing inaccurate figures.
30
Argentina is now engaged in a balancing act, attempting other persons implicated must be of the same or higher
to bring down the fiscal deficit and inflation without authority.
making the recession worse. The government had taken
a gradual approach to deficit reduction, supported by four Courts convict military leaders for human rights
consecutive rate hikes through the end of November. violations during dictatorship. A court in Buenos Aires
But since then the central bank has held rates constant. sentenced the countrys last dictator, Reynaldo Bignone,
Disputes about monetary policy reportedly led to the to 20 years in prison for crimes, while another 16 military
resignation of Finance Minister Alfonso Prat-Gay on leaders faced lesser prison sentences. Another court in
December 26, and the ministry he headed was spit in two. Crdoba sentenced several other military officers to long
sentences for crimes committed during the dictatorship in
Forecasters remain optimistic about Argentina, the 1980s, including torture, murder and the kidnapping of
seeing a 2.9% increase in growth in 2017 as the initial newborn babies.
contractionary effects of measures to eliminate
distortions in the economy fade. JP Morgans economists, After agreement with creditors, U.S. court lifts
looking at high-frequency data, estimate that economic injunction allowing Argentina access to financial
activity picked up the fourth quarter of 2016, The markets. President Macri sought negotiations with
consensus projects a decline in inflation to about 21% holdout creditors who did not participate in bond swaps
in 2017 a view shared by respondents to the central in 2005 and 2010 and who had used the U.S. courts to
banks inflation survey published in January. A tax amnesty pressure the country to settle debts from its 2002 default.
and higher-than-expected VAT receipts point to a slightly In February 2016, the government reached agreement
smaller fiscal deficit in 2016. with most creditors amounting to U.S. $4.65 billion, and
this agreement was approved by the Argentine congress
LEGAL ENVIRONMENT in March. This agreement fulfilled the requirements of
the U.S. district court in New York to lift its injunction
Presidential decrees draw fire. Argentine presidents preventing Argentina from paying the restructured debt.
have long used their authority to pass decrees of The deal involved around 90% of the holdout creditors.
necessary urgency with the force of law. In his first year, Congressional action was needed because of an
President Macri issued several such decrees attempting earlier law that prevented negotiations with and barring
to dismantle programs created by ex-president Cristina payments to holdout creditors.
Fernndez de Kirchner, but also more controversially to
change the telecommunications law and appointments Former president Fernndez indicted for corruption.
of magistrates. One decree overturned ex-president In May, ex-president Cristina Fernndez de Kirchner was
Fernndezs media law, creating a new communications indicted on corruption charges involving manipulating the
authority, while another decree appointed two new central bank to support the Argentine peso for personal
justices to the Supreme Court. Another controversial gain. In December, another court indicted her and several
decree postponed implementation of the national criminal accomplices for fraud and corruption in public works
procedure code, an area not previously considered to be projects in the south of the country. The charges allege
subject to the presidents decree powers. that surcharges on these projects benefitted the ex-
president and her associates.
Tax regulation removes foreign exchange restrictions.
A December 2015 regulation eliminated all capital BUSINESS ENVIRONMENT
controls. As a result, there is no legal restriction limiting
conversion, remittances or repatriation of earnings by Argentina currently ranks 116th out of 189 countries
investors in Argentina. Regulations continue to place in World Banks ease of doing business survey.
minimum time periods for capital deposits in Argentina, Improvements cited by the World Bank included a new
though this has been reduced to 120 days. import licensing system that streamlined cross-border
trade and some improvements to tax policies. Argentina
New law allows plea bargaining. A new plea bargaining showed slight gains in global competitiveness, but was
law is aimed at fighting corruption, offenses against the unchanged in corruptions perception. Only Venezuela
customs code and other white collar crimes. The new and Cuba rank lower among Latin American nations in the
law, passed in October, provides that plea bargaining is most recent Index of Economic Freedom. The report notes
permissible only for criminal cases in which the defendant that Argentina performs far below its potential.
is actually is involved. The law provides that sentences
can only be reduced, not eliminated, and requires that
31
Brazil

B Temer
The R A Z Iadministration
L is taking steps to Figure 1. Brazil should be coming out of recession
restore fiscal balance. while its inflation abates
The Temer administration is taking steps to
An easing of monetary
restore policy should help bring
fiscal balance.
Brazil out of recession.
An easing of monetary policy should help bring
Ongoing corruption scandals, however, are a
Brazil out of recession.
distraction to policymaking.

Hopes were
Ongoing
high corruption
that the new scandals, however,
government are a
of President
Michel Temerdistraction
wouldtoallow
policymaking.
Brazil to move out of the
political paralysis that had hampered policymaking
during the previous
Hopes were hightwothatyears.
the new Mr. Temer took
government ofoffice on
President
August 31 after the impeachment and removal
Michel Temer would allow allow Brazil to move out of theof his
predecessor, Dilma
political crisis thatRousseff, frompolicymaking
had paralyzed office. Formally, Ms.
during the
Rousseff was charged with breaching Brazils
previous two years. Mr. Temer took office on August 31 fiscal
responsibility law, but she had
after the impeachment long agooflost
and removal public and
his predecessor,
congressional support amidst a wide-ranging
Dilma Rousseff, from office. Formally, Ms. Rousseff corruption
was Figure 2. Brazils public debt is unsustainable
scandal, a recession, and unsound economic policies.
charged with breaching Brazils fiscal responsibility law, but
Mr. Temer
she hadquickly
long agotook
loststeps
publictoandbring Brazils fiscal
congressional support
deficit under control. He obtained approval from
amidst a wide-ranging corruption scandal, a recession, and
lawmakers
unsound foreconomic
a constitutional
policies.amendment to cap
Mr. Temer quickly public
took steps
spending at the rate of inflation for as long as 20 years,
to bring Brazils fiscal deficit under control. He obtained
and began a program to privatize government assets.
approval from lawmakers for a constitutional amendment
The fiscal tightening is necessary because Brazils
to cap public spending at the rate of inflation for as long
government deficit has widened to more than 9% of
as 20 years, and began a program to privatize government
GDP, putting its public debt on an unsustainable path.
assets. The fiscal tightening is necessary because Brazils
Brazil had already lost its investment grade rating in
government deficit has widened to more than 9% of
2015, and could face higher risk premiums on its
GDP, putting its public debt on an unsustainable path.
international borrowings if the markets perceive its fiscal
Brazil lost its investment grade rating in 2015, and could
problems are not being addressed.
face higher risk premiums on its international borrowings
While if the markets perceive
acknowledging that its
its fiscal problems
primary balance are not being
addressed.
(noninterest deficit) must move into surplus, the
government has chosen to take a gradual approach to
While acknowledging
strengthening public financesthat itsinprimary
order tobalance
avoid (noninterest
further
deficit) must
lengthening move into surplus,
the recession. the government
The central bank beganhas Brazil: economic indicators
chosen
cutting to take
interest ratesa gradual
in Octoberapproach
in whatto strengthening
should be a Avg. 2009-15 2015 2016e 2017f
public easing
sustained financescycle.
in order Thisto avoid
easingfurther
should lengthening
help offset the Real GDP, % change 3.3 -3.9 -3.4 0.7
recession.
the effects of theThefiscal
Central Bank began
tightening andcutting interest
allow Brazil to rates Consumer prices, % Dec/Dec 5.9 10.7 6.3 4.9
emergein October in what promises
from recession this year. be a sustained easing cycle. Government balance, % of GDP -2.7 -9.2 -7.9 -7.3
The easing should help offset the effects of the fiscal
The tightening
new government and allow had been
Brazil in officefrom
to emerge onlyrecession
a few this Merchandise trade ($ bil)
weeks, however,
year. before it became apparent that the Exports 233.1 190.1 187.5 194.6
massive corruption scandal that began in 2014 was not Imports 220.6 172.4 140.8 151.0
over. The scandal is centered on bribes to officials of Current account balance, % of GDP -3.4 -3.2 -1.3 -1.4
The new
Petrobras, the government
state-owned hadoilbeen in officeScores
company. only a few
of weeks,
however, before it became apparent
people, including politicians and executives of some ofthat the massive International reserves ($ bil) 347.2 364.3 362.1 369.1
corruption
Brazils leadingscandal that began
businesses have in 2014charged,
been was not over.
and The Total external debt ($ bil) 448 543 566 605
during the fall the charges spread to include yet more the
scandal is centered on bribes to officials of Petrobras, % of GDP 18 31 34 32
state-owned
politicians, includingoil company.
President Scores
Temer of himself
people, including
(see the % of exports 158 144 137 252
next section). The corruption investigations areleading
politicians and executives of some of Brazils strongly
businesses
supported have been
by voters, charged,
but the falloutand during
from the the fall the
investigations promises to hamper the ability of the
32 tt f t i th d t bilit
charges spread to include yet more politicians, including Facebooks WhatsApp banned and un-banned. Judges
President Temer himself (see the next section). The banned access to WhatsApp in December 2015, again
corruption investigations are strongly supported by voters, in February and again in July for failure to help police in
but the fallout from the investigations is likely to hamper criminal investigations by intercepting messages sent
the ability of the government to focus on restoring growth through the service. Each time, a higher judge quickly
and stability. overturned the ban. In July, the Supreme Court lifted
a ban imposed by a Rio judge, finding the nationwide
LEGAL ENVIRONMENT blockage disproportionately burdensome on other users,
as well as a violation of constitutional rights to freedom of
expression.
Corruption scandal implicates President Temer and
nearly everyone else. Having brought down President
Rousseff and the Speaker of the House Eduardo Cunha, Pre-salt oilfields fully opened to private investors. A
and implicated former president Luiz Incio Lula da Silva, 2007 law reserved a 30% minimum stake in all pre-salt oil
the Supreme Court in late September authorized an deposits to the state-owned oil firm Petrobras. However,
investigation into new president Michel Temers role in a new law adopted in November will allow the heavily
the widespread corruption scandal known as Lava Jato, indebted Petrobras to sell off blocks for exploration. The
or Operation Car Wash. In mid-December, plea bargains move represents an easing of what had once been a very
by directors of the Brazilian construction firm, Odebrecht nationalistic oil policy.
brought allegations of illegal campaign donations against
President Temer. Mr. Temer denies the allegations. Senate Arbitration decision upholds alternate dispute
president Renan Calheiros faces embezzlement charges, resolution mechanisms. A decision by Brazils superior
though he has not been removed from his position as of court of justice involved a dispute by two shareholders
this writing. There are estimates that some 50-60% of in Odbinv S/A, a holding company which controls one of
the Brazilian congress may be implicated in the scandals Brazils largest construction companies, and allowed the
to some extent, as well as numerous other officials and court to interpret Brazils new arbitration law. Under the
business leaders. Since 2014, prosecutors have charged arbitration law, where an arbitration clause has defects
over 240 of Brazils political and economic leaders for that may prevent the arbitration, parties may turn to
violating anti-corruption laws. the courts to amend the clause and resolve any gaps
that prevent the arbitration. The agreement at issued
Brazils supreme court voids anti-corruption bill provided that disputes would be settled by mediation
under consideration by Congress. After the House of or arbitration, except for issues involving the transfer
Representatives passed an amended an anti-corruption of shares, which would be referred to the judiciary. The
bill to weaken the authority of prosecutors to investigate Brazilian court found that, since mediation could only be
and prosecute corruption and shielded lawmakers from voluntary among both parties, the arbitration provision
corruption investigations, a Supreme Court justice remained viable in the event the parties could not agree.
issued an order sending the bill back to the House for The court also decided that the transfer of shares matter
reconsideration. The injunction issued by Judge Luis Fux might also be considered in any arbitration, and that a
held that the bill as passed by the House was based upon reviewing court would seek to enforce the arbitration.
popular initiatives, and that this precluded Congress from The decision is seen as one which affirms the increased
amending the legislation in ways that would distort the acceptance by Brazilian courts of arbitration mechanisms.
purpose of the original citizen proposals.
Criminal procedure clarified. In a February decision, the
Legal twist in President Rousseffs impeachment federal Supreme Court ruled that defendants could be
means that she remains eligible for public office in made to begin serving prison sentences as soon as an
the future. Although Brazils constitution provides that intermediate appeals court has upheld the sentence, and
public officials removed by impeachment are banned from not wait until all appeals are exhausted.
public life for eight years, judge Ricardo Lewandowski, who
presided over the impeachment, issued a split decision The court found that the policy does not violate
that allowed separate votes on impeachment and loss of constitutional presumption of innocence for criminal
eligibility to hold future office. Although the Senate voted defendants. A subsequent November Supreme Court
61 to 20 to remove Rousseff, the Senate voted separately
by 42 to 36 not to impose the eight-year ban.
33
decision reaffirmed the policy of enforcing criminal supervision of the corruption investigations to another
sentences even pending final review by the supreme judge, and there were calls for this to happen.
court. The new policy will affect the many defendants
charged with corruption offenses. Important legislation languishes as impeachment
and corruption charges dominate the agenda. In
New constitutional amendment seeks to limit May, immediately before her impeachment, President
public spending. In December, Congress approved Rousseff submitted a data protection law to Congress.
an amendment to the Brazilian constitution which will The draft data protection law had been under
place a 20-year ceiling on public spending. The new development and public comment for nearly six years.
amendment will limit what the Brazilian government may Reforms to pensions, also under consideration by
spend in future years to that budgeted in the previous congress, are seen as important to improving Brazils
year, corrected only for inflation. The rule will apply to precarious public finances. The proposed reforms
the executive, legislative and judicial branches of the include raising the minimum retirement age to 65, and
federal government. Adoption of the amendment was prohibitions on collecting multiple pensions.
accompanied by largescale protests by citizens fearful of
expected cuts in social, health and education benefits. Rio de Janeiro declares state of financial emergency.
In July, only weeks prior to the opening of the Olympic
City ban on Uber found unconstitutional. In October, Games, the governor of Rio state declared a state
a court in So Paulo state found the ban on use of the of calamity in financial administration. The governor
internet ride app, Uber, imposed by the municipality of sought federal assistance in the face of inability to pay
So Paulo in 2015 unconstitutional. The court found that for essential services, including security and hospitals.
the city was not legally able to ban the privately organized Although the declaration is normally used for natural
transport of passengers arranged through the app. As disasters, it allowed the state to secure federal loan
originally adopted, the ban provided for heavy fines and assistance without assembly approval. In September,
even confiscation of vehicles that used apps such as Uber. 14 other states reported that they face impending
bankruptcy if they do not receive federal assistance to fill
New antiterrorism law adopted in time for 2016 gaps in revenue.
Olympics. In March, a new law to combat terrorism
was enacted. Features of the new legislation include BUSINESS ENVIRONMENT
provisions that heinous crimes such as torture, narcotic
trafficking and terrorism should not be subject to bail, Brazil slipped somewhat in the World Banks ease of
clemency or amnesty. The law, intended to update Brazils doing business rankings, falling to 123rd place out of
terrorism laws in time for the Rio Olympic games, provides 190 nations in 2016. The bank did cite Brazils new
definitions for terrorist offenses, and allows for charging mediation law for making it easier to resolve contract
those responsible for terrorist acts, as well as those who disputes. Transparency International ranked Brazil 76th
recruit or finance them. Finally, the new law provides for in its 2015 Corruption Perceptions Index, a fall of seven
expanded penalties of between 12-30 years for those places from 2014. Brazil also slipped six places to 81 in
convicted of terrorist offenses. global competitiveness rankings. Crime continues to be
a problem, with 21 Brazilian cities appearing among the
Supreme Court judge supervising corruption worlds fifty most violent cities for 2015. Significantly for
investigations killed in January 2017 plane crash. the business environment, however, neither So Paulo
Judge Teori Zavascki died when his small plane crashed in nor Rio de Janeiro appeared on that list.
heavy rain while heading to a holiday destination west of
Rio de Janeiro. The death was significant because Judge
Zavascki had supervised aspects of the recent corruption
investigations which involved federal politicians. Under
Brazilian law, such investigations or prosecutions of federal
officials require the approval of the Supreme Court.
Although no evidence of foul play was found, the matter
is under investigation by federal aviation authorities.
Although President Temer will name a successor to
the judge, the Supreme Court itself could transfer the
34
Chile [=]

LowCcopper
H I L Eprices
[ = ]have set a limit on Chiles Figure 1. Chiles GDP growth tracks copper prices
near-term growth.
Low copper prices have set a limit on Chiles near-term
President
growth.Bachelet has made progress in
advancing her labor and pension reform agenda

butPresident Bachelet has


only incremental made progress
progress in advancing
on further reform
her labor and pension reform agenda
is likely ahead of Novembers elections.

Weak butpricesonly incremental


for Chiles majorprogress on further
export, copper, have reform is
limitedlikely aheadMichelle
President of Novembers Bachelets elections.
ambitious reform
agenda. Thus, it came as no surprise that the 2017
budget, submitted in late September, featured the lowest
Weak prices for Chiles major export, copper, have limited
annual increase in spending in 14 years. This
President Michelle Bachelets ambitious reform agenda.
disappointed her supporters, who have pushed for
Thus, it came as no surprise that the 2017 budget,
higher government spending, But Ms. Bachelet had little
submitted in late September, featured the lowest annual
choice. A weak economy has limited the revenues
increase in spending in 14 years. This disappointed her
available for spending increases. Some of her promises,
supporters, who have pushed for higher government Figure 2. Chiles public debt burden is low
such as that to provide free university educations to all
but thespending,
richest 20 butpercent
Ms. Bachelet of thehad little choice.
population, were A weak
not despite budget deficits
economy has limited the
likely to succeed even under more favorable economicrevenues available for spending
increases. Some of her promises,
circumstances. In addition, her approval rating is only such as that to provide
23% freelowuniversity
enougheducations to limit additionalto all butprogress
the wealthiest on 20%
President Bachelets agenda on education and even
of the population, were not likely to succeed pensionunder
reform. more favorable economic circumstances. In addition, her
approval rating is only 23% suggesting it will be difficult
for President
The proposed increaseBachelet to garner support
in government spending, for her agenda
while
modest, on will
education
mean that and pension
Chile will reform.
be running a budget
deficit for the fifth year in a row. The government
projectsThe proposed
that the deficit increase
will fall in government
to 1.1% of GDP spending, by 2021,while
following a fiscal rule that takes the
modest, will mean that Chile will be running a budget price of copper into
account. Chiles
deficit for the public
fifth debt
year in has been
a row. Therising as a portion
government projects
of GDP, but is still low at 21%, and Chiles
that the deficit will fall to 1.1% of GDP by 2021, following investment
grade abondfiscalrating
rule that ensures
takes the inexpensive
price of copper funding intocosts.
account.
Chiles public debt has been rising as a portion of GDP,
A dropbut in isChiles
still lowinflation
at 21%, and rateChiles
from 4.4% in 2015
investment to bond
grade
2.7% last year close to the mid-point of the central Chile: economic indicators
rating ensures inexpensive funding costs.
banks 2% to 4% target, has given the bank leeway to Avg. 2009-15 2015 2016e 2017f
cut its policy rate in January for the first time in two Real GDP, % change 4.6 2.1 1.6 2.1
years.AFurther
drop in Chiles
rate cuts inflation
are likelyrate from
during 4.4%2017. in 2015
The to 2.7% Consumer prices, % Dec/Dec 3.0 4.4 2.7 3.0
last year close to the
easier monetary policy stance, combined with coppermid-point of the central banks 2%
Government balance, % of GDP -0.2 -2.2 -3.0 -2.8
pricesto that4%appear
target, has to have givenbottomed
the bank leewayout and to cut
the its policy
modest
rate in January for the
upturn in growth the consensus expects in the first time in two years. Further rate Merchandise trade ($ bil)
cuts are likely during 2017.
developed world should result in a modest increase in The easier monetary policy Exports 76.3 62.2 59.1 62.5
growthstance,
in Chile combined
in the year withahead.
copper prices that appear to have Imports 68.9 58.7 55.8 59.0
bottomed out and the modest upturn in growth the
Current account balance, % of GDP -1.6 -2.1 -1.7 -1.6
consensus
This year, politicsexpects
in Chilein will the bedeveloped
dominated worldbyshould result in
a modest
jockeying aheadincrease in growth in Chile
of the presidential in the year ahead.
and legislative International reserves ($ bil) 38.6 37.2 38.9 39.1
elections to be held in November. Polls show that voter Total external debt ($ bil) 118 156 161 163
support Thisforyear,
the two politicsmajor parties,
in Chile will bethe ruling center-left
dominated by jockeying % of GDP 46 65 68 64
NuevaaheadMayora (NM) party and center-right
of the presidential and legislative elections opposition to be % of exports 123 196 212 206
Chile Vamos (CV) party, are at historic
held in November. Polls show that voter support for the lows, and turnout
in Octobers
two major municipal
parties, elections was low. The
the ruling center-left Nueva voterMayora
fatigue(NM)
likely reflects the weak economy
party and center-right opposition Chile Vamos and the
35
(CV) party, are at historic lows, and turnout in Octobers Chile adopts controversial new pensions law. In
municipal elections was low. The voter fatigue likely October, President Bachelet signed the pension reform
reflects the weak economy and the corruption scandals. law. The new law seeks to reform Chiles defined-
contributions pensions system, once acclaimed as an
LEGAL ENVIRONMENT example for other nations. Unlike other countries, Chile
has no unfunded pension obligations, but the privately-
funded pensions have proven to be insufficient for
Labor legislation passes, though weakened by court many peoples retirement living expenses. The new law
decision. In August, President Bachelet signed new a new will require a mandatory 5% contribution by employers
labor law that gives greater power to unions. The law is into a solidarity fund to help equalize pensions. The law
intended to improve working conditions and incentivize also seeks to expand competition by adding a state-
collective bargaining. Under the new law, unions can run pension fund manager. Another provision limits
decide which workers will share negotiated benefits. the commissions that can be charged by pension fund
The law also bans the use of replacement workers managers. However, the new law also expanded areas of
during strikes. The Constitutional Court had found that investment by pension funds, allowing investment into
a provision of the law which gave unions the exclusive real estate, closely held companies and infrastructure
right to conduct negotiations on behalf of workers concessions for the first time.
violated the right of all workers to bargain collectively and
freely. Ms. Bachelet vetoed the parts of the law found
unconstitutional. Some uncertainty remains under the Courts rule in human rights matters. In December,
new laws about negotiations between employers and the Supreme Court ruled that the government may seek
employees that do not occur under union auspices. extradition from the U.S. of two secret police agents who
were involved in a 1976 bombing in Washington D.C. in
which Orlando Letelier, a former Chilean foreign minister,
Competition law strengthened. In August, Chiles was killed. Last year, declassified U.S. documents that
congress passed an updated competition law. The new the bombing came on the orders of Chilean dictator
legislation provides for criminal penalties of up to 10 Augusto Pinochet. In another high-profile case, a Chilean
years in prison for collusion, together with prohibitions on court rejected a suit against three justices of the Israeli
involvement public or corporate management for those supreme court for war crimes over their decision to
convicted. The new law allows the national economic allow construction of a security fence in that country.
prosecutor to investigate and prosecute under the The suit had been founded on claims that Chile could
law. The law also provides for mandatory pre-merger exercise universal jurisdiction over human rights offenses
notifications to the national economic prosecutor of committed elsewhere in the world.
persons involved, as well as mandatory notifications in
the acquisition of minority stakes of more than 10% of an
entity. Under the two-part merger control provisions of BUSINESS ENVIRONMENT
the law, once the prosecutor has been notified, a merger
cannot be completed until the prosecutor or competition Chile remains one of the more business-friendly
court approve the transaction. The prosecutor is given up countries in Latin America, but it has fallen to fourth place
to 30 days to investigate the transaction, with the option in the region in the World Banks latest ease of business
of extending the investigation to 90 days. rankings. Transparency International ranks Chile at 21st
in the world for corruption in its 2015 rankings, just below
Copper reserves law made public. In November, Chiles Hong Kong, Ireland, and the United States. Chile is also
congress approved a law to make public information still the most competitive Latin American country, and
about the secret copper reserves law from the 1970s, is the most highly ranked Latin American country in the
under which the military received automatic funding 2016 Index of Economic Freedom.
based on earnings from copper exports. The law had long
been kept secret for reasons of state security, but the
secrecy drew criticism by adherents of open government,
who argued the lack of information facilitated corruption.

36
PA R A G U AY U R U G U AY [ = ]
Although the outlook for Paraguays economy is favorable Uruguay barely indicators
Paraguay: economic avoided recession last year as demand for
its GDP is expected to grow by 3.6% in 2017 its main agricultural exports remained weak. Growth should
Avg. 2010-14 2015 2016E 2017f
governance is becoming more difficult. The Senate pick up a bit in 2017 as growth resumes in Argentina and
rejected President Horacio Cartes proposal to amend the Real GDP,two
Brazil, % change
of its major trading partners, 7.0 but3.0will likely
3.7 remain
3.6
constitution to allow presidential re-election. In December, tepid.
ConsumerSlow
prices,growth
% Dec/Decwill mean lower revenues,
4.8 3.1 forcing
3.7 the 4.3
the president vetoed the 2017 budget because it featured government to make
Current account balance, spending cuts,-0.1raise -1.7
% of GDP taxes, and-0.7 -0.7
an unfunded increase in public salaries, interfered with scrap plans to reduce
Total external debt ($ bil) the fiscal deficit
15.9 16.2 14.4of 15.4
to below 2%
central bank independence, and limited sovereign bond GDP. As in most of Latin America, central government
issuance. Meanwhile, attacks by the Ejrcito del Pueblo
% of exports 128
debt in Uruguay has risen in recent years, but at 45% of
136 119 117
Paraguayo (EPP), a Marxist rebel group, have added to the GDP, remains manageable. Inflation, meanwhile, is likely to
instability. remain slightly above the central banks 3%-7% target,

Paraguay: economic indicators Uruguay: economic indicators


Avg. 2010-14 2015 2016E 2017f Avg. 2009-15 2015 2016e 2017f
Real GDP, % change 7.0 3.0 3.7 3.6 Real GDP, % change 4.9 1.0 0.7 1.3
Consumer prices, % Dec/Dec 4.8 3.1 3.7 4.3 Consumer prices, % Dec/Dec 8.1 9.0 8.9 8.3
Current account balance, % of GDP -0.1 -1.7 -0.7 -0.7 Current account balance, % of GDP -3.8 -3.5 -2.5 -1.6
Total external debt ($ bil) 15.9 16.2 14.4 15.4 Total external debt ($ bil) 23.1 28.7 21.4 22.4
% of exports 128 136 119 117 % of exports 172 232 168 172

New entrepreneurship law enacted. Intended to New criminal procedure law. Uruguay has adopted a
incentivize private business and bring it into the formal criminal procedure law to take effect in 2017. One main
economy, Paraguay
Uruguay: economic enacted its entrepreneurship law. The
indicators feature of the new law is a shift from the traditional
law establishes a national entrepreneurship agency, and inquisitorial system to an oral trial system that will feature
Avg. 2009-15 2015 2016e 2017f
allows for the establishment of small lending and other public oral trials. Uruguay is the latest of many Latin
Real GDP, %tools
financial change to assist new businesses.4.9 1.0 0.7 1.3 American countries to have made this shift to a model
Consumer prices, % Dec/Dec 8.1 9.0 8.9 8.3 which more closely resembles that used in the U.S. and
Current account
Farmers balance, % ofover
sentenced GDP police deaths
-3.8 in-3.52012-2.5
land -1.6 other common law countries.
dispute.
Total externalIndebt
July, a Paraguayan court23.1
($ bil) sentenced
28.7 11 21.4farmers
22.4
to up
% ofto 30 years in prison for the deaths
exports 172 of232six policemen
168 172 ICSID panel affirms tobacco advertising restrictions.
in 2012 land disputes. The clashes between the farmers The arbitration panel ruled in favor of Uruguays restrictive
and police left another 11 protesting farmers dead. The advertising law, including mandatory warnings and graphic
case is controversial in part because of the perceived lack images. Philip Morris argued the law violated a bilateral
of attention paid to the deaths of the farmers. The case investment treaty between Uruguay and Switzerland. The
also highlights continued inadequacies in the Paraguayan arbitration panel rejected Philip Morris claims, ordering the
justice system. The 2012 disputes with landless peasants company to pay Uruguay $7 million in legal fees.
was a catalyst for the impeachment of former president
Fernando Lugo. Uruguays business climate shows little change.
Uruguay benefits from strong institutions and a tradition
Paraguay saw a slight decline in its business climate. of political stability. It was ranked 90 in the World Banks
It is ranked 106 in the World Banks latest ease of latest ease of doing business ratings. In perceptions
doing business ratings. In perceptions of corruption, of corruption, it retained its 21st place position in
Paraguay improved to 130th in the world in Transparency Transparency Internationals rankings the highest
Internationals 2015 rankings, up from 150 in 2014. This ranking in Latin America and just below Japan. Freedom
is tied with Nicaragua, and higher only than Haiti and House ranks Uruguay third among Latin American nations
Venezuela in the Western Hemisphere. in its 2016 Index of Economic Freedom, behind only Chile
and Colombia.

37
38
TA B L E S

Table 1 GDP GROWTH, 2007-2017

Table 2 ANNUAL INFLATION, 2007-2017

Table 3 EXPORTS, IMPORTS & CURRENT


ACCOUNT BALANCE, 2012-2017

Table 4 TERMS OF TRADE, 2007-2016

Table 5 NET FOREIGN DIRECT INVESTMENT,


2007-2015

Table 6 TOTAL GROSS EXTERNAL DEBT,


2008-2017

Table 7 TOTAL GROSS EXTERNAL DEBT AS


PERCENTAGE OF IMPORTS, 2010-2017

Table 8 TOTAL EXTERNAL DEBT AS PERCENTAGE


OF GDP, 2007-2017

Table 9 FISCAL BALANCE, 2011-2016

Table 10 CURRENCY REGIMES & EXCHANGE RATES

Table 11 COUNTRY RISK & IMF RELATIONS

Table 12 SOCIAL ENVIRONMENT

Table 13 POLITICAL ENVIRONMENT

Table 14 LEGAL ENVIRONMENT

Table 15 BUSINESS ENVIRONMENT

39
40
Table 1
GROSS DOMESTIC PRODUCT
Annual Growth Rates
2007 2008 2009 2010 2011 2012 2013 2014 Average '06-'14 2015 2016e 1 2017f 1
NAFTA REGION
Mexico 3.2 1.4 -4.7 5.2 3.9 4.0 1.4 2.2 2.4 2.5 2.1 1.5

ANDEAN SOUTH AMERICA


Bolivia 4.6 6.1 3.4 4.1 5.2 5.1 6.8 5.5 5.1 4.8 3.6 3.7
Colombia 6.9 3.5 1.7 4.0 6.6 4.0 4.9 4.4 4.7 3.1 2.0 2.5
Ecuador 2.2 6.4 0.6 3.5 7.9 5.2 4.6 3.7 4.3 0.3 -1.9 0.6
Peru 8.5 9.1 1.1 8.3 6.3 6.1 5.9 2.4 6.1 3.3 3.9 4.1
Venezeula 8.8 5.3 -3.2 -1.5 4.2 5.6 1.3 -3.9 2.9 -5.7 -11.3 -3.2

BRAZIL & SOUTHERN CONE


Argentina 9.0 4.1 -6.0 10.4 6.1 -1.1 2.3 -2.6 3.4 2.4 -2.3 2.9
Brazil 6.1 5.1 -0.1 7.5 3.9 1.9 3.0 0.1 3.5 -3.9 -3.4 0.7
Chile 4.6 3.7 -1.0 5.8 5.8 5.5 4.0 1.9 3.9 2.1 1.6 2.1
Paraguay 5.4 6.4 -4.0 13.1 4.3 -1.2 14.0 4.7 5.3 3.0 3.7 3.6
Uruguay 6.5 7.2 4.2 7.8 5.2 3.5 4.6 3.2 0.5 1.0 0.7 1.3

CENTRAL AMERICA & THE CARIBBEAN


Costa Rica 7.9 2.7 -1.0 5.0 4.5 5.2 2.0 3.0 4.2 3.7 4.1 3.9
Cuba 7.3 4.1 1.5 2.4 2.8 3.0 2.7 1.0 4.1 4.4 0.5 1.0
Dominican Republic 8.5 3.2 0.9 8.3 3.1 2.8 4.7 7.6 5.5 7.0 6.2 4.9
El Salvador 3.8 1.3 -3.1 1.4 2.2 1.9 1.8 1.4 1.6 2.5 2.2 2.2
Guatemala 6.3 3.3 0.5 2.9 4.2 3.0 3.7 4.2 3.7 4.1 3.5 3.6
Haiti 3.3 0.8 3.1 -5.5 5.5 2.9 4.2 2.8 2.2 1.7 2.0 2.4
Honduras 6.2 4.2 -2.4 3.7 3.8 4.1 2.8 3.1 3.6 3.6 3.6 3.7
Nicaragua 5.3 2.9 -2.8 3.2 6.2 5.6 4.5 4.6 3.7 4.9 4.6 4.5
Panama 12.1 8.6 1.6 5.8 11.8 9.2 6.6 6.1 7.8 5.8 5.4 5.5

SOURCE:

Economic Commission for Latin America and the Caribbean, IMF

1 Consensus Economics, January 2017. Cubas estimate and forecast are from the EIU reproduced by permission of the Economist Intelligence Unit.
Table 2
ANNUAL INFLATION
(Percent change in CPI, December through December)

2007 2008 2009 2010 2011 2012 2013 2014 Av. '07-'14 2015 2016e 1 2017f 1
NAFTA REGION
Mexico 3.8 6.5 3.6 4.4 1.9 3.6 4.0 4.1 4.0 2.1 3.4 4.9

ANDEAN SOUTH AMERICA


Bolivia3 11.7 11.8 0.3 7.2 6.9 4.5 6.5 5.2 6.8 3.0 3.5 4.1
Colombia 5.7 7.7 2.0 3.2 3.1 2.4 1.9 3.7 3.7 6.8 5.7 4.4
3
Ecuador 3.3 8.8 4.3 3.3 5.4 4.2 2.7 3.7 4.5 3.4 1.6 2.0
Peru 3.9 6.7 0.2 2.1 4.0 2.6 2.9 3.2 3.2 4.4 3.2 2.9
Venezeula 22.5 31.9 26.9 27.4 24.0 29.5 56.2 68.5 35.9 180.9 590.6 544.3

BRAZIL & SOUTHERN CONE


Argentina 8.5 7.2 7.7 10.9 9.5 10.8 10.9 23.9 11.2 27.5 39.4 21.4
Brazil 4.5 5.9 4.3 5.9 5.4 5.8 5.9 6.4 5.5 10.7 6.3 4.9
Chile 7.8 7.1 -1.4 3.0 3.5 1.5 2.6 4.6 3.6 4.4 2.7 3.0
Paraguay3 5.9 7.5 1.9 7.2 4.9 4.0 3.7 4.2 4.9 3.1 3.7 4.3
Uruguay3 8.5 9.2 5.9 6.9 8.6 7.5 8.5 8.3 7.9 9.4 8.9 8.3

CENTRAL AMERICA & THE CARIBBEAN


3
Costa Rica 10.8 13.9 4.0 5.8 4.7 4.6 3.7 5.1 6.6 -0.8 0.8 2.8
Cuba 2 n/a n/a n/a n/a 1.3 5.5 6.0 5.3 4.5 4.2 4.7 4.8
Dominican Republic3 8.9 4.5 5.8 6.2 7.8 3.9 3.9 1.6 5.3 2.3 1.7 3.4
3
El Salvador 4.9 5.5 0.1 2.1 5.1 0.8 0.8 0.5 2.5 1.0 0.7 1.8
Guatemala3 8.7 9.4 -0.3 5.4 6.2 3.4 4.4 2.9 5.0 3.1 4.2 4.1
Haiti 10.3 10.6 7.8 3.6 4.7 6.3 5.9 4.6 9.0 14.1 15.9 10.3
Honduras3 8.9 10.8 3.0 6.5 5.6 5.4 4.9 5.8 6.4 2.4 3.5 4.1
Nicaragua3 16.9 13.8 0.9 9.2 8.0 6.6 5.7 6.5 6.5 3.1 4.4 6.2
Panama3 6.4 6.8 1.9 4.9 6.3 4.6 3.7 1.0 4.5 0.3 1.2 2.1

SOURCE:

ECLAC 2016 Statistical Yearbook for Latin America and the Caribbean

1 2016 estimates and 2017 forecasts are from Consensus Economics,except for Cuba, which are from EIU reproduced by permission of the Economist Intelligence Unit.

2 Period averages.

3 IMF database October 2016

41
42
Table 3
EXPORTS, IMPORTS, AND CURRENT ACCOUNT BALANCE
(Billions of Dollars)
2012 2013 2014 2015 2016e 2017f
Exports Imports C/Account Exports Imports C/Account Exports Imports C/Account Exports Imports C/Account Exports Imports C/Account2 Exports Imports C/Account2
NAFTA REGION
Mexico 387.5 401.9 -17.0 400.9 412.8 -31.0 418.8 433.9 -26.1 403.6 427.7 -33.2 397.8 420.4 -30.3 409.1 435.3 -30.1

ANDEAN SOUTH AMERICA


Bolivia 12.3 9.9 2.0 12.8 11.0 1.1 13.5 12.8 0.5 9.5 11.4 -1.9 7.8 10.8 -2.3 9.1 11.4 -2.0
Colombia 68.0 68.9 -11.2 67.2 69.8 -12.1 63.8 75.2 -19.5 45.2 63.5 -18.9 39.5 54.1 -13.8 44.0 56.1 -12.3
Ecuador 26.5 27.7 -0.2 27.6 29.6 -0.9 28.9 30.3 -0.6 21.4 23.9 -2.2 18.5 17.4 -0.2 21.6 20.0 -0.2
Peru 51.6 48.4 -5.1 48.1 50.0 -8.6 45.1 48.7 -8.2 40.1 45.4 -9.2 41.5 43.7 -6.6 44.7 46.0 -6.5
Venezeula 99.5 77.5 2.6 91.0 76.4 4.6 76.9 64.7 3.6 38.6 50.7 -20.4 28.0 29.3 -8.4 34.2 31.5 -3.0

BRAZIL & SOUTHERN CONE


Argentina 95.2 83.4 -1.4 90.6 89.6 -12.1 82.0 79.2 -8.0 70.6 75.0 -15.9 70.2 74.1 -14.8 74.5 81.8 -16.7
Brazil 281.1 302.2 -74.1 279.7 325.6 -74.8 264.1 318.8 -104.2 223.9 243.1 -58.9 220.5 203.1 -22.2 228.8 217.8 -27.4
Chile 90.2 90.6 -9.6 88.8 90.8 -10.3 85.9 83.4 -3.3 72.0 72.3 -4.8 68.9 68.8 -4.1 72.9 72.7 -4.1
Paraguay 12.5 12.0 -0.5 14.5 13.0 0.5 14.1 13.2 -0.1 11.8 11.4 -0.5 12.1 11.7 -0.2 13.1 12.9 -0.2
Uruguay 13.5 14.7 -2.6 13.9 14.8 -2.9 13.8 14.5 -2.6 12.1 11.9 -1.3 12.4 10.7 -0.8 12.7 11.8 -1.0

CENTRAL AMERICA & THE CARIBBEAN


Costa Rica 15.1 16.5 -2.4 15.8 16.8 -2.4 16.4 17.2 -2.4 16.8 17.2 -2.4 18.2 17.6 -2.2 19.7 19.2 -2.5
Cuba 18.6 14.9 2.4 18.6 15.6 1.9 17.2 n/a 1.9 18.6 12.5 1.8 18.3 11.5 2.1 18.6 12.2 1.7
Dominican Republic 15.0 20.6 -4.0 15.9 19.6 -2.5 16.9 20.1 -2.1 17.0 20.0 -1.3 17.2 20.2 -1.3 18.2 22.1 -1.7
El Salvador 6.1 10.5 -1.3 6.4 11.1 -1.6 6.5 10.9 -1.3 6.7 10.9 -0.9 6.6 10.5 -0.7 7.0 11.0 -0.9
Guatemala 12.5 18.3 -1.3 12.7 19.2 -1.4 13.8 20.1 -1.2 13.6 6.6 -0.1 13.7 19.6 0 14.8 21.7 -0.1
Haiti 1.3 4.2 -1.4 1.6 4.4 -1.3 1.7 4.8 -1.4 1.7 4.4 -0.7 1.7 4.1 -0.4 n/a n/a n/a
Honduras 6.7 10.3 -1.6 6.3 10.0 -1.8 6.6 10.0 -1.4 11.2 10.3 -1.3 10.9 13.9 -1.2 11.2 14.3 -1.2
Nicaragua 4.7 6.8 -1.1 4.7 6.9 -1.2 5.0 7.1 -0.9 4.8 7.0 -1.0 4.8 7.3 -1.2 4.4 6.4 -1.3
Panama 28.2 29.9 -4.2 29.8 31.5 -4.4 28.2 30.5 -4.8 27.3 27.0 -2.7 32.6 26.9 -2.7 33.5 28.6 -2.7

SOURCE:

ECLAC 2016 Statistical Yearbook for Latin America and the Caribbean
Exports and imports are of goods and services; current account is the balance of exports of goods, services, primary and secondary income, and the capital account.
2
Consensus Economics, January 2017.
Table 4
TERMS OF TRADE
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 1
NAFTA REGION
Mexico 103.3 104.6 92.9 100.0 106.8 102.9 102.8 97.6 92.6 92.2

ANDEAN SOUTH AMERICA


Bolivia 93.9 99.0 95.2 100.0 118.1 112.3 94.5 79.9 65.0 61.5
Colombia 86.2 91.3 86.1 100.0 114.6 108.2 100.5 91.6 69.1 65.4
Ecuador 89.0 103.7 86.7 100.0 112.4 112.1 113.2 106.7 80.0 72.5
Peru 95.0 84.6 82.6 100.0 107.2 105.0 99.0 93.6 87.7 85.8
Venezeula 93.6 115.5 84.1 100.0 120.2 121.4 118.9 111.8 66.1 57.5

BRAZIL & SOUTHERN CONE


Argentina 85.5 95.9 96.6 100.0 110.9 115.7 108.1 105.4 100.8 105.3
Brazil 85.3 88.5 86.2 100.0 107.8 101.5 99.4 96.1 85.5 86.4
Chile 91.7 78.4 82.0 100.0 101.3 94.8 91.9 90.1 86.2 84.8
Paraguay 95.3 102.3 100.0 100.0 102.4 103.4 102.8 103.3 107.5 109.8
Uruguay 87.1 94.1 100.5 100.0 102.4 106.3 108.1 112.3 114.5 118.2

CENTRAL AMERICA & THE CARIBBEAN


Costa Rica 104.7 100.8 104.1 100.0 96.3 95.8 96.1 97.0 102.3 105.5
Cuba n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a
Dominican Republic 100.5 96.0 103.8 100.0 94.7 93.8 91.5 93.3 100.9 104.0
El Salvador 104.0 94.1 105.9 100.0 97.5 98.0 96.3 99.6 111.3 116.0
Guatemala 95.1 92.6 100.5 100.0 99.1 93.7 91.8 92.3 96.4 97.4
Haiti 111.2 79.9 103.4 100.0 83.0 86.0 80.6 83.1 93.4 95.9
Honduras 97.0 91.1 97.3 100.0 108.4 94.6 88.6 90.4 95.3 96.3
Nicaragua 94.6 90.9 97.9 100.0 106.6 106.5 98.2 100.1 111.7 114.1
Panama 101.9 97.3 101.9 100.0 97.8 98.2 97.7 103.5 103.5 104.1

SOURCE:

ECLAC 2016 Statistical Yearbook for Latin America and the Caribbean

1 Estimates

43
44
Table 5
NET FOREIGN DIRECT INVESTMENT
(Billions of Dollars)
2007 2008 2009 2010 2011 2012 2013 2014 2015
NAFTA REGION
Mexico 24.2 27.9 8.3 11.4 11.0 -2.0 32.7 18.2 18.2

ANDEAN SOUTH AMERICA


Bolivia 0.4 0.5 0.4 0.7 0.9 1.1 1.8 0.6 0.5
Colombia 8.1 8.1 3.8 0.9 6.2 15.6 8.6 12.4 7.9
Ecuador 0.2 1.1 0.3 0.2 0.6 0.6 0.7 0.8 1.1
Peru 5.4 6.2 6.0 8.2 7.5 11.8 9.2 7.8 6.7
Venezeula 3.8 1.3 -3.6 -0.9 6.1 1.7 1.9 -0.7 2.6

BRAZIL & SOUTHERN CONE


Argentina 5.0 8.3 3.3 10.4 9.4 14.3 8.9 3.1 10.5
Brazil 27.5 24.6 36.0 61.7 85.1 81.4 54.2 70.9 61.6
Chile 8.3 7.5 6.2 6.0 3.1 7.9 9.5 9.4 4.7
Paraguay 0.2 0.2 0.1 0.2 0.6 0.7 0.1 0.3 0.3
Uruguay 1.2 2.1 1.5 2.3 2.5 2.5 3.0 2.1 1.6

CENTRAL AMERICA & THE CARIBBEAN


Costa Rica 1.6 2.1 1.2 1.4 2.3 1.8 2.8 3.7 2.7
Cuba n/a n/a n/a n/a n/a n/a n/a n/a n/a
Dominican Republic 1.7 2.9 2.2 1.6 2.3 3.1 2.0 2.2 2.2
El Salvador 1.5 0.8 0.4 -0.2 0.2 0.5 0.2 0.3 0.4
Guatemala 0.7 0.7 0.6 0.8 1.0 1.2 1.3 1.3 1.1
Haiti 0.1 0.0 0.1 0.2 0.1 0.2 0.2 0.1 0.1
Honduras 0.9 1.0 0.5 1.0 1.0 0.9 1.0 1.1 1.1
Nicaragua 0.4 0.6 0.5 0.5 0.9 0.7 0.7 0.8 0.8
Panama 1.8 2.2 1.3 2.4 3.0 3.3 3.6 4.0 4.5

SOURCE:

ECLAC 2016 Statistical Yearbook for Latin America and the Caribbean
Table 6
TOTAL GROSS EXTERNAL DEBT 1
(Millions of Dollars)
3 3
2008 2009 2010 2011 2012 2013 2014 2015 2016e 2017f
NAFTA REGION
Mexico 123.6 193.0 246.0 292 349 406 442 426 487 537

ANDEAN SOUTH AMERICA


Bolivia 5.9 5.8 5.8 6.1 6.6 8.1 8.8 9.8 10.6 13.3
Colombia 46.4 53.3 64.1 73.8 76.8 89.7 101.4 111.0 108.6 111.7
Ecuador 16.9 14.8 16.2 16.9 17.1 19.1 24.4 27.3 34.1 37.6
Peru 35.0 37.4 42.2 45.0 54.1 56.8 61.3 65.9 67.9 69.9
Venezeula 66.7 84.6 101.8 118.2 130.6 132.3 135.7 123.7 92.4 89.7

BRAZIL & SOUTHERN CONE


Argentina 125.9 133.7 126.6 139.5 136.5 146.6 145.0 159.7 182.1 192.9
Brazil 198.5 281.7 352.4 404.0 440.5 483.8 556.9 543.4 566.3 605.1
Chile 63.5 72.6 85.0 99.3 120.4 134.6 149.7 155.7 160.6 162.7
Paraguay 3.1 13.9 15.9 15.6 16.0 15.7 16.5 16.2 14.4 15.4
Uruguay 15.4 18.0 18.4 18.3 24.0 26.5 28.1 28.7 21.4 22.4

CENTRAL AMERICA & THE CARIBBEAN


Costa Rica 8.8 7.8 8.2 10.3 14.3 17.1 19.6 23.7 24.9 27.0
Cuba n/a n/a n/a n/a 23.5 25.0 25.1 26.0 26.3 28.6
Dominican Republic 2 7.2 11.9 13.5 15.1 22.1 24.0 26.3 26.6 26.2 26.9
El Salvador 1.0 10.4 11.1 12.0 13.0 13.5 14.5 14.7 14.8 15.1
Guatemala 11.2 14.8 15.0 16.2 15.1 17.3 19.3 20.2 20.2 20.2
Haiti 2 1.9 1.4 1.0 0.8 1.2 1.6 1.9 2.1 2.0 2.5
Honduras 3.5 3.8 4.0 4.4 5.1 6.8 7.3 7.6 8.1 8.5
Nicaragua 2 3.5 5.9 7.0 7.9 9.0 9.8 10.2 10.5 11.2 12.3
Panama 2 8.5 45.6 48.9 57.1 61.4 68.3 78.0 87.7 95.3 103.0

SOURCE:

ECLAC 2016 Statistical Yearbook for Latin America and the Caribbean

1 Includes debt owed to the International Monetary Fund.

2 Refers to external public debt.

3 University of Florida estimates and forecasts

45
46
Table 7
TOTAL GROSS EXTERNAL DEBT TO EXPORTS
(in percentage)
1 1
2010 2011 2012 2013 2014 2015 2016e 2017f
NAFTA
Mexico 75.7 77.6 87.1 98.5 102.7 103.5 120.0 141.0

ANDEAN SOUTH AMERICA


Bolivia 79.7 64.6 53.0 62.1 64.6 102.4 134.7 143.5
Colombia 127.2 107.4 105.7 124.8 148.5 220.4 242.1 228.1
Ecuador 73.5 61.5 59.0 63.7 78.2 116.1 182.9 172.8
Peru 107.8 102.2 103.7 119.3 133.1 152.1 151.6 145.3
Venezeula 151.9 125.8 132.5 147.4 177.0 322.0 333.1 264.5

BRAZIL & SOUTHERN CONE


Argentina 150.5 136.1 140.1 157.6 171.4 218.8 249.5 249.3
Brazil 140.7 127.9 152.0 165.8 201.2 230.4 244.0 251.9
Chile 95.5 97.8 122.4 138.4 158.6 196.2 212.4 205.7
Paraguay 171.5 115.9 127.9 107.8 116.7 135.9 118.7 117.1
Uruguay 165.0 136.5 173.2 187.0 200.3 232.0 168.5 172.3

CENTRAL AMERICA & THE CARIBBEAN


Costa Rica 63.7 71.4 92.7 106.6 117.3 138.9 134.9 135.2
Cuba n/a n/a 124.7 127.3 134.5 137.1 141.3 151.2
Dominican Republic 100.1 101.3 141.0 144.6 150.3 151.4 147.7 144.2
El Salvador 218.7 204.6 212.5 209.7 221.9 216.2 220.5 212.6
Guatemala 135.1 123.5 116.5 130.8 134.1 142.6 127.8 110.5
Haiti 120.2 58.7 85.5 93.9 115.3 118.8 114.6 139.0
Honduras 80.1 69.7 75.1 108.3 110.3 67.5 73.7 75.6
Nicaragua 207.3 189.1 188.0 209.2 203.0 218.5 232.0 231.8
Panama 257.3 226.4 217.1 228.9 275.7 322.2 293.2 308.6

SOURCE:

Calculated as total external debt/(exports of goods and services + primary income), in U.S. dollars.

1 University of Florida forecasts


Table 8
TOTAL EXTERNAL DEBT AS PERCENTAGE OF GDP
3
2007 2008 3 2009 2010 2011 2012 2013 2014 2015 2016e 4 2017f 4
NAFTA REGION
Mexico 12.3 11.8 21.6 23.4 25.0 29.5 32.3 34.1 37.2 28.7 28.7

ANDEAN SOUTH AMERICA


Bolivia 41.2 35.6 33.5 29.4 25.4 24.4 26.7 26.6 29.8 29.8 35.1
Colombia 21.5 19.0 22.9 22.3 22.0 20.8 23.6 26.8 38.0 38.5 36.0
Ecuador 34.2 27.4 23.7 23.3 21.3 19.5 20.1 24.2 27.0 32.6 36.1
Peru 32.5 29.0 13.4 11.4 10.0 9.9 12.1 13.5 14.3 17.5 18.2
Venezeula 23.2 16.9 25.7 42.5 37.3 34.3 35.6 32.9 26.0 17.5 15.0

BRAZIL & SOUTHERN CONE


Argentina 37.8 30.5 39.7 29.3 26.7 23.5 24.3 26.4 24.8 42.4 51.1
Brazil 14.1 12.0 16.9 16.0 15.5 17.9 19.6 23.0 30.6 34.0 32.7
Chile 32.2 35.8 42.2 39.1 39.6 45.4 48.6 57.9 64.8 66.3 62.6
Paraguay 19.8 16.9 87.6 79.5 62.0 65.2 54.2 53.4 58.3 53.8 54.4
Uruguay 63.5 50.8 56.8 45.7 38.1 46.8 46.1 49.1 53.7 43.9 43.6

CENTRAL AMERICA & THE CARIBBEAN


Costa Rica 32.1 30.5 25.8 21.9 24.3 30.8 34.5 39.5 44.7 47.1 49.3
Cuba 2 15.2 19.1 19.8 n/a n/a 32.1 32.4 31.1 29.9 28.4 29.3
Dominican Republic 1 56.3 50.0 24.6 25.1 26.2 36.5 38.6 40.3 39.1 37.0 35.5
El Salvador 46.5 46.6 50.1 51.7 51.9 54.8 55.5 57.9 56.7 55.7 55.6
Guatemala 32.0 28.5 39.3 36.4 34.1 30.0 32.0 32.9 31.6 29.0 27.1
Haiti 1 27.3 29.9 22.3 14.3 10.4 14.8 18.6 22.3 26.8 25.8 30.7
Honduras 25.8 25.0 26.1 25.2 24.8 27.9 37.3 38.6 37.5 38.7 39.7
Nicaragua 45.4 41.4 70.0 80.5 80.9 86.1 89.7 86.5 82.6 88.0 90.2
Panama 1 39.2 34.1 171.4 169.1 165.9 153.6 152.2 158.6 168.4 183.0 197.6

SOURCE:

ECLAC 2016 Statistical Yearbook for Latin America and the Caribbean, ECLAC 2014 Statistical Yearbook for Latin America and the Caribbean

1 Refers to external public debt.

2 Public external debt. From 2004 on, refers only to active external debt, excludes other external debt.
3 ECLAC 2015 Statistical Yearbook for Latin America and the Caribbean

4 University of Florida estimates and forecasts

47
48
Table 9
FISCAL BALANCE
(as percentage of GDP)
Primary Balance Overall Balance
2011 2 2012 3 2013 2014 2015 2016 2011 2 2012 3 2013 2014 2015 2016
NAFTA
Mexico -1.0 -0.7 -0.5 -1.2 -1.3 -0.4 -2.5 -2.6 -2.3 -3.2 -3.5 -2.9

ANDEAN SOUTH AMERICA


Bolivia4 -0.2 2.7 2.0 -1.7 -3.6 n/a -1.1 1.8 1.4 -2.5 -4.5 n/a
Colombia -0.3 0.1 -0.1 -0.4 -0.8 -0.7 -2.8 -2.3 -2.3 -2.4 -3.0 -3.9
Ecuador -0.7 -0.1 -4.5 -4.9 -2.0 n/a -1.6 -2.0 -5.7 -6.3 -3.8 n/a
Peru4 2.1 2.4 1.8 0.8 -1.2 -1.8 1.0 1.3 0.7 -0.3 -2.2 -2.9
Venezeula -1.8 -2.2 1.0 0.9 -0.2 n/a -4.0 -4.9 -1.9 -1.6 -1.8 n/a

BRAZIL & SOUTHERN CONE


Argentina -0.1 0.0 -1.3 -2.3 -1.9 -2.7 -1.9 -1.8 -2.5 -4.2 -3.8 -5.0
Brazil 2.2 1.9 1.5 -0.3 -1.9 -2.8 -2.4 -1.8 -2.6 -5.1 -9.2 -7.9
Chile 1.8 1.2 0.0 -1.0 -1.5 -2.3 1.3 0.6 -0.6 -1.6 -2.2 -3.0
Paraguay 1.0 -1.4 -1.4 -0.7 -1.2 -0.7 0.7 -1.7 -1.7 -1.1 -1.8 -1.5
Uruguay 1.8 0.4 0.9 -0.1 -0.5 -0.5 -0.6 -1.9 -1.5 -2.3 -2.8 -3.0

CENTRAL AMERICA & THE CARIBBEAN


Costa Rica -1.9 -2.3 -2.8 -3.1 -3.0 -2.6 -4.1 -4.4 -5.4 -5.7 -5.8 -5.5
Cuba n/a n/a n/a n/a n/a n/a 3.0 6.7 1.9 0.6 -0.4 n/a
Dominican Republic -0.1 -2.8 -0.4 -0.1 0.3 0.2 -2.1 -5.2 -2.7 -2.6 -2.4 -2.7
El Salvador -0.1 0.5 0.6 0.8 1.3 2.4 -2.3 -1.7 -1.8 -1.6 -1.1 -0.2
Guatemala -1.3 -0.9 -0.6 -0.4 0.1 -0.1 -2.8 -2.4 -2.1 -1.9 -1.4 -1.6
Haiti 1.9 2.0 -1.0 -0.5 0.3 0.8 1.6 1.7 -1.4 -0.9 0.1 0.6
Honduras -3.2 -4.3 -5.8 -2.1 -0.6 -0.3 -4.6 -6.0 -7.9 -4.4 -3.0 -3.2
Nicaragua 1.5 1.5 1.0 0.6 0.3 0.2 0.5 0.5 0.1 -0.3 -0.6 -0.9
Panama -1.1 -0.7 -1.9 -2.3 -2.1 -0.8 -3.3 -2.6 -3.8 -4.0 -3.9 -2.9

SOURCE:

ECLAC 2016 Statistical Yearbook for Latin America and the Caribbean

1 ECLAC 2013 Figures

2 ECLAC 2015 Figures

3 ECLAC 2016 Figures

4 General government

5 Federal public sector


Table 10

CURRENCY & EXCHANGE RATES


Currency 1 Exchange Regime 2 Dollar Exchange Rates 3
Exchange Rate Arrangement Exchange Rate Anchor Dec. 2015 Dec. 2016 % Change
NAFTA REGION
Mexico Peso Free floating Inflation-targeting framework 17.14 20.73 -17.32%

ANDEAN SOUTH AMERICA


Bolivia Boliviano Stabilized arrangement Other 6.89 6.93 -0.58%
Colombia Peso Floating Inflation-targeting framework 3329.45 3002.00 10.91%
Ecuador US Dollar No separate legal tender U.S. Dollar USD USD USD
Peru Sol Floating Inflation-targeting framework 3.38 3.36 0.60%
4
Venezeula Bolvar Conventional Peg U.S. Dollar 6.29 10.00 -37.10%

BRAZIL & SOUTHERN CONE


Argentina Peso Crawl-like arrangement Other 13.265 15.89 -16.52%
Brazil Real Floating Inflation-targeting framework 3.98 3.26 22.09%
Chile Peso Free floating Inflation-targeting framework 698.75 670.40 4.23%
Paraguay Guaran Floating Inflation-targeting framework 5821.90 5737.50 1.47%
Uruguay Peso Floating Monetary aggregate target 29.75 29.18 1.95%

CENTRAL AMERICA & THE CARIBBEAN


Costa Rica Coln Other managed arrangement Other 531.08 553.17 -3.99%
Cuba Cuban Peso/Convertible Peso Dual exchange rate U.S. Dollar 1.00 1.00 0
Dominican Republic Peso Crawl-like arrangement Inflation-targeting framework 45.57 46.66 -2.34%
El Salvador US Dollar No separate legal tender U.S. Dollar USD USD USD
Guatemala Quetzal Crawl-like arrangement Inflation-targeting framework 7.62 7.52 1.33%
Haiti Gourde Crawl-like arrangement Other 57.03 67.25 -15.20%
Honduras Lempira Crawl-like arrangement U.S. Dollar 21.41 23.49 -8.85%
Nicaragua Crdoba Crawling peg U.S. Dollar 27.84 29.32 -5.05%
Panama Balboa No separate legal tender U.S. Dollar USD USD USD

SOURCE:
1 The Economist Intelligence Unit: http://www.eiu.com/default.aspx

2 IMF 2014 Annual Report on Exchange Arrangements and Exchange Restrictions

3 Bloomberg Lab

4 Venezuela currently has another, lower official rate and an active black market for foreign exchange

49
50
Table 11
COUNTRY RISK AND IMF RELATIONS
Country Risk 1 Sovereign Spreads1 IMF Relations 2
Moody's S&P Fitch November '15 November '16
NAFTA REGION
Mexico A3 BBB+ BBB+ 125.283 183.5 New Flexible Credit Line of $88 Billion

ANDEAN SOUTH AMERICA


Bolivia Ba3 BB BB- n/a 88.6 Need to continue building domestic demand
Colombia Baa2 BBB BBB 96.38 195.8 New Flexible Credit Line of $11.5 Billion
Ecuador B3 B B n/a 664.1 $364 Million provided as Financial Support for earthquake relief
Peru A3 BBB+ BBB+ 125.23 124 Despite external conditions, activity is expected to accelerate
Venezeula Caa3 CCC CCC 41.55 2147.1 No consultation since 2004

BRAZIL & SOUTHERN CONE


Argentina B3 B- B n/a 489 Economy expected to rebound from 2016 recession
Brazil Ba2 BB BB 87.48 305.9 Recovery from recession remains weak and will be gradual
Chile Aa3 AA- A+ 97.73 72.5 Reforms have potential to lift growth and reduce inequality
Paraguay Ba1 BB BB n/a 246.9 Economy remains resilient despite regional slowdown
Uruguay Baa2 BBB BBB- 126.879 186.3 Baseline projection forsees temporary and moderate slowdown

CENTRAL AMERICA & THE CARIBBEAN


Costa Rica Ba1 BB- BB+ 84.915 350.6 GDP expected to return to potential over medium-term
Cuba Caa2 NR NR n/a n/a n/a
Dominican Republic B1 BB- B+ 128.715 388.9 Objective to strengthen resilience to external shocks
El Salvador B3 B B+ 85.469 523.2 Issues: Low growth, outward migration, and weak competitiveness
Guatemala Ba1 BB BB 128.167 286.6 Solid macroeconomic performance, new admin tackling corruption
Haiti NR NR NR n/a n/a US$ 41.6 Million approved for Hurricane Matthew relief
Honduras B2 B+ NR n/a 417 Outlook remains favorable, program performance satisfactory
Nicaragua B2 B+ B+ n/a n/a Economic outlook remains favorable
Panama Baa2 BBB BBB 123.578 137.5 Economic outlook remains favorable, uncertain external environment

SOURCE:

1 Bloomberg
2 IMF Country Pages:Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial
information, and discusses with officials the country's economic developments and policies.
Table 12
SOCIAL ENVIRONMENT
1
Avg. Pop. 1
GDP GD P P/C Income HDI Population Unemployment
Population 1 Literacy Rate 2 3 4 5 6 2
Internet
Growth Per Capita (PPP) Growth Inequality (World Rank) in Poverty Rate 2
(Millions) (% age 15+) Penetration
% (PPP $US) % (GINI Index) 2015 % %
NAFTA REGION
Mexico 123.2 1.15 95.1 17,276 1.2 51.8 74 (2012) 37.1 4.9% 57.4

ANDEAN SOUTH AMERICA


Bolivia 11.0 1.54 95.7 3,095 3.2 48.1 119 (2011) 36.3 2.7% 45.1
Colombia 47.2 1.02 94.7 6,056 2.2 53.8 97 30.7 10.1% 55.9
Ecuador 16.1 1.31 94.5 6,248 -1.2 46.7 88 33.6 4.6% 48.9
Peru 30.7 0.96 94.5 6,121 1.9 44.9 84 23.9 4.2% 40.9
Venezeula 30.9 1.28 96.3 n/a -6.9 39.8 71 32.1 8.6% 61.9

BRAZIL & SOUTHERN CONE


Argentina 43.9 0.93 98.1 13,431 1.4 42.4 40 (2012) 4.3 7 8.2% 69.4
Brazil 205.8 0.75 92.6 8,538 -4.6 51.8 75 18.0 6.8% 59.1
Chile 17.7 0.80 97.5 13,389 1.0 53.1 42 7.8 6.4% 64.3
Paraguay 6.9 1.17 93.9 4,160 1.7 44.4 112 40.7 4.5% 44.4
Uruguay 3.6 0.27 98.5 15,573 0.6 31.8 52 5.6 7.0% 64.6

CENTRAL AMERICA & THE CARIBBEAN


Costa Rica 4.9 1.19 97.8 10,629 2.6 51.6 69 17.7 8.3% 59.8
Cuba 11.2 -0.3 99.8 (2013) 6789 4.2 n/a 67 n/a 3.3% 31.1
Dominican Republic 10.6 1.21 91.8 6,373 5.8 46.8 101 40.7 15.0% 51.9
El Salvador 6.2 0.25 88.0 4,219 2 44.4 116 40.9 6.2% 48.9
Guatemala 15.2 1.79 81.5 3,903 2.1 53.8 128 (2006) 54.8 2.9% 27.1
Haiti 10.5 1.71 60.7 828 -0.1 n/a 163 n/a 6.8% 12.2
Honduras 8.9 1.64 88.5 2,495 2.2 52.5 131 (2010) 69.2 3.9% 20.4
Nicaragua 6.0 0.99 82.8 2,086 3.8 46.7 125 (2009) 58.3 5.3% 19.7
Panama 3.7 1.30 95.0 13,268 4.1 50.7 60 23.2 4.3% 51.2

SOURCE & NOTES


1 The CIA World Factbook October 2016 : Data refer to percentage of population aged 15 or older who can, with understanding, both read and write a short simple statement on their everyday life

2 World Bank: GDP per capita (Purchasing Power Parity in $U.S.). 1 PPP dollar has the same purchasing power in the domestic economy as 1 U.S. dollar has in the U.S. economy.

3 ECLAC, Economic Survey of Latin American & the Caribbean 2016

4 April 2016 IMF Regional Economic Outlook :The Gini index measures inequality over the entire distribution of income or consumption. A value of 0 represents perfect equality, and a value of 100 perfect inequality

5 UNDP, Human Development Report 2016 :The Human Development Index (HDI) measures a country's achievements in three aspects of human development: longevity (life expectancy at birth), knowledge (combination of literacy rate and enrollment ratio), and a decent standard
of living (GDP per capita - PPP in $U.S.). HDI rank is based on a total of 169 countries.
6 ECLAC, Statistical Yearbook 2015

7 Percent of urban population in poverty

51
52
Table 13
POLITICAL ENVIRONMENT
4
Level of Democratic Consolidation Current Government
Unscheduled
Election Inaugurating Control of
Head of State Political Rights 2 Civil Liberties 3 President/ PM Term
Democracy Legislature
Change
NAFTA
Mexico 2000 3 3 Pea Nieto 2012-2018 Govt. Coalition

ANDEAN SOUTH AMERICA


1
Bolivia 1980 7 3 3 Morales 2014-2019 Government
1
Colombia 1958 3 4 Santos 2014-2018 Govt. Coalition
1
Ecuador 1978 8 3 3 Correa 2013-2017 Govt. Coalition
1
Peru 1980 1 2 3 Kuczynski 2016-2021 Opposition
Venezeula 1958 6 5 5 Maduro 2013-2019 Opposition

BRAZIL & SOUTHERN CONE


1
Argentina 1983 4 2 2 Macri 2015-2019 Opposition
Brazil 1989 2 2 2 Temer 2016-2019 Govt. Coalition
Chile 1989 1 1 Bachelet 2013-2017 Govt. Coalition
Paraguay 1993 3 3 Cartes 2013-2018 Govt. Coalition
Uruguay 1985 1 1 Vzquez 2014-2019 Government

CENTRAL AMERICA & THE CARIBBEAN


Costa Rica 1949 1 1 Sols 2014-2018 Opposition
Cuba n/a 7 6 Castro 2013-2018 Government
Dominican Republic 1963 1 3 3 Medina 2016-2020 Government
El Salvador 1984 2 3 Snchez Cern 2014-2019 Shifting Alliances
1
Guatemala 1985 1 4 4 Aguirre 2015-2019 Opposition
Haiti 1986 6 5 5 TBD 1st round October 2016, 2nd round January 2017
Honduras 1982 1 4 4 Hernndez 2013-2017 Shifting Alliances
Nicaragua 1984 4 3 Ortega 2012-2016 Government
Panama 1994 2 2 Varela 2014-2019 Shifting Alliances

SOURCE & NOTES

1 Interrupted democracies

2 Freedom in the World 2015: https://freedomhouse.org/report/freedom-world/freedom-world-2015#.Vi5J5n6rTIU Freedom House definition: Those rights that enable people to participate freely in the political process. On this scale 1 represents the most free and 7 the least free

3. Freedom in the World 2015: https://freedomhouse.org/report/freedom-world/freedom-world-2015#.Vi5J5n6rTIU Freedom House definition: Freedoms to develop views, institutions and personal autonomy apart from the state. On this scale 1 represents the most free and 7 the least free.

4 CIA Factbook
Table 14
Legal Environment
1
Homicide Rate (Per Corruption Economic 4
Global Crime
Rule of Law 7 2 3 Property Rights 5 6
100,000) Perception Freedom Competitiveness Victimization
Rank 2016 2011-2015 Rank 2016 Rank 2015 Percentile Rank Rank % Yes
NAFTA
United States (for comparison) 90 4 18 11 80 3 n/a
Mexico 38 16 123 62 50 51 46

ANDEAN SOUTH AMERICA


Bolivia 11 12 113 160 10 121 30
Colombia 45 28 90 33 50 61 34
Ecuador 14 8 120 159 15 81 29
Peru 35 7 101 49 40 67 39
Venezeula 1 62 166 176 5 130 48

BRAZIL & SOUTHERN CONE


Argentina 22 8 95 169 15 104 41
Brazil 50 25 79 122 45 81 37
Chile 87 4 24 7 85 33 37
Paraguay 28 9 123 83 30 117 35
Uruguay 75 8 21 41 70 73 35

CENTRAL AMERICA & THE CARIBBEAN


Costa Rica 69 10 41 50 50 54 35
Cuba 30 5 60 177 10 n/a n/a
Dominican Republic 38 17 120 88 30 92 41
El Salvador 32 64 95 63 35 105 31
Guatemala 15 31 136 82 20 78 36
Haiti 10 10 159 150 10 n/a n/a
Honduras 17 75 123 113 30 88 38
Nicaragua 28 12 145 109 10 103 31
Panama 53 17 87 66 30 42 32

ASIA
China (for comparison) 44 1 79 144 20 28 n/a

SOURCE & NOTES

Up or down indicate, respectively, an improvement or a worsening of the environment from that reported in the 2016 LABER . The absence of an arrow indicates "no change" from the previous year.
1 As measured by the World Bank's Governance Indicators: 1966-2015 <www.worldbank.org>. The percentages measure the extent to which agents have confidence in and abide by the rules of society, including perceptions of the incidence of crime, the effectiveness and predictability of the judiciary, and the enforceability
of contracts

2 As measured by Transparency International, Corruption Perceptions Index 2016 <www.transparency.org>. Focuses on corruption in the public sector and defines corruption as the abuse of public office for private gain. The scores used in the index range from 10 (country perceived as virtually corruption-free) to almost 0
(country perceived as almost totally corrupt). The country ranks measure the corruption level in 177 countries as perceived by business people, risk analysts, investigative journalists and the general public.

3 As measured by the Heritage Foundation's 2016 Index of Economic Freedom . Scores are based on a 1 to 100 scale, 1 being an economic environment that is least conducive to economic freedom, 100 being the most conducive. Countries are also ranked in order of economic freedom, 1 being the most free.

4 As measured by the Heritage Foundation's 2016 Index of Economic Freedom . The percentages measure the degree to which a countrys laws protect private property rights and the degree to which its government enforces those laws. I00% indicates that private property is guaranteed by the government, 0% indicates
that private property is outlawed.

5 As measured by the Global Competitiveness Report 2016-2017 , produced by the World Economic Forum <http://www.weforum.or/reports>. This ranking is based on a total of 142 countries and is determined by measuring 12 pillars of competitiveness, including: Institutions, Infrastructure, Health & Primary Education,
Higher Education, Good Market Efficiency, Labor Market Efficiency, Financial Market Development, Technological Readiness, Market Size, Business Sophistication, and Innovation.

6 As measured by Latinobarometro 2015. "Have you, or someone in your family, been assaulted, attacked, or been the victim of a crime in the past 12 months?" Those who responsed "Don't know" or did not provide an answer were excluded from the results.

7 UN Office on Drugs & Crime, 2016. The rates reflect the most recent available data from 2011-2015

53
54
Table 15
BUSINESS ENVIRONMENT
Days Required to1 Paying Taxes2 Intellectual Property3
Trade Unlicensed Commercial Value
Start a Register Enforce Number of Hours Tax Rate
Across Software of Unlicensed
Businessa Propertyb Contractsc Paymentsa Requiredb (% Profit)c
Bordersd Usea Softwareb
NAFTA
United States (for comparison) 6 15 420 3 11 175 44 17 9,095
Mexico 8 42 341 28 6 286 52 52 980

ANDEAN SOUTH AMERICA


Bolivia 45 90 591 240 42 1,025 84 79 98
Colombia 9 16 1,288 172 12 239 70 50 281
Ecuador 49 38 588 120 8 664 33 68 137
Peru 26 7 426 96 9 260 36 63 210
Venezeula 144 52 610 147 70 792 65 88 402

BRAZIL & SOUTHERN CONE


Argentina 25 52 660 51 9 359 106 69 554
Brazil 80 31 731 67 10 2038 68 47 1,770
Chile 6 29 480 84 7 291 31 57 296
Paraguay 35 46 606 144 20 378 35 84 89
Uruguay 5 66 725 144 20 271 42 68 57

CENTRAL AMERICA & CARIBBEAN


Costa Rica 23 19 852 44 10 151 58 59 90
Cuba n/a n/a n/a n/a n/a n/a n/a n/a n/a
Dominican Republic 15 45 505 26 7 317 42 76 84
El Salvador 16 31 786 47 41 248 39 81 63
Guatemala 20 24 1,402 84 8 256 35 79 169
Haiti 97 312 530 50 47 184 40 n/a n/a
Honduras 13 22 920 136 47 184 40 75 36
Nicaragua 13 56 419 108 42 201 61 82 23
Panama 6 23 686 30 52 417 37 72 117

ASIA
China (for comparison) 29 20 453 47 9 259 68 70 8,657

SOURCE & NOTES

Up or down indicate, respectively, an improvement or a worsening of the environment from 2016 LABER. The absence of an arrow indicates "no change" from the previous year.
1 As measured by the World Bank Group's report Doing Business 2017 : a) Average time in calendar days spent registering a firm. b) Average time in calendar days spent completing the procedures to register property. c) Average time in calendar days from the moment a plaintiff files a
lawsuit in court until the moment of payment. d) Average time in hours necessary to comply with all procedures required to export goods.
2 As measured by the World Bank Group's report Doing Business 2017 : a) total number of tax payments per year b) time it takes to prepare, file and pay (or withhold) the corporate income tax, the value added tax and social security contributions c) total amount of taxes and mandatory
contributions payable by the business.
3 As measured by the Business Software Alliance, 2016 BSA Global Software Piracy Study (May 2016): a) Percentage of unlicensed software installed; b) Estimates are based on 2016 losses due to copyright business software piracy in millions of USD.
SELECTED Sources MONITORED FOR 2017 LABER

Agencia EFE (www.efe.com)


Amrica Economa (http://www.americaeconomia.com/)
BBC Mundo.com (http://news.bbc.co.uk/hi/spanish/news/)
Bloomberg.com: Latin America (http://www.bloomberg.com/news/regions/latinamerica.html)
Business News Americas (http://www.bnamericas.com/)
Brazil Focus: Weekly Report (Subscriptions available at fleischer@aol.com.br)
Buenos Aires Herald (www.buenosairesherald.com/)
Business Law Magazine (www.businesslaw-magazine.com/)
Christian Science Monitor (http://www.csmonistor.com)
Consensus Economics (http://www.consensuseconomics.com)
Council on Hemispheric Affairs Report (http://www.coha.org/)
Economist Intelligence Unit (http://www.eiu.com/)
The Economist (http://www.economist.com)
Finance & Development (http://www.imf.org/external/pubs/ft/fandd/2015/12/index.htm)
Financial Times (http://www.ft.com)
Global Arbitration News (http://globalarbitrationnews.com/)
Global Tax News (http://www.tax-news.com)
The Guardian (www.theguardian.com)
Infolatam (http://www.infolatam.com)
Insurance Journal (http://www.insurancejournal.com)
International Business Times (http://www.ibtimes.com)
Investment Arbitration Reporter (http://www.iareporter.com)
Journal of Commerce (http://www.joc.com)
Jurist (http://jurist.org)
Latin American Newspapers accessible through Latin American Network Information Center at:
http://www1.lanic.utexas.edu/la/region/news/
Latin America Advisor (Subscriptions available at: mailto:freetrial@thedialogue.org)
Latin American Caribbean & Central America Report (http://www.latinnews.com)
Latin American Andean Group Report (http://www.latinnews.com)
Latin American Brazil & Southern Cone Report (http://www.latinnews.com )
Latin American Herald-Tribune (http://laht.com/)
Latin American Mexican & NAFTA Report (http://www.latinnews.com)
Latin American Monitor (http://www.latinamericamonitor.com/)
Latin Correspondent (http://latincorrespondent.com)
Latinobarometro (http://www.latinobarometro.org)
Los Angeles Times (http://www.latimes.com)
Mercopress (http://en.mercopress.com)
Miami Herald (http://www.herald.com)
Mondaq Regional Business Briefing (http://www.mondaq.com)
Mining.com
National Law Review (http://www.natlawreview.com)
The New York Times (http://www.nytimes.com/)
PanAm Post (http://panampost.com)
Reuters
SUR1810 (www.sur1810.com)
Tico Times (http://www.ticotimes.net)
The Wall Street Journal (www.wsj.com)
World IP Review (www.worldipreview.com/)

55
PRIMARY DATA SOURCES
International Monetary Fund (http://www.imf.org/)

UN Economic Commission for Latin America and the Caribbean (ECLAC)


(http://www.cepal.org/default.asp?idioma=IN)

World Bank (www.worldbank.org)

ARTICLES CITED
Niso Abuaf, The International Cost of Capital: The Empirical Evidence, Salomon Brothers (June 1997).

Aswath Damodaran, Country Risk and Company Exposure: Theory and Practice, Journal of Applied Finance
(Fall/Winter 2003).

Mary Hallward-Driemeier and Lant Pritchett, How Business is Done in the Developing World: Deals versus Rules,
Journal of Economic Perspectives (Summer 2015).

Pablo Fernandez, Alberto Ortiz, and Isabel Acn, Market Risk Premium used in 71 countries in 2016: a survey with 6,932
answers, IESE Business School, University of Navarra (2016).

IMF, Exchange Rate Pass-Through in Latin America, Regional Economic Outlook: Western Hemisphere. Washington, D.C
(April 2016).

World Bank, Doing Business 2017. Washington, D.C. (2017).

56
57
Latin American Business Environment Program
Latin American Business Environment Program
Center for Latin American Studies
Center for Latin American Studies
UniversityofofFlorida
University Florida
PO Box
PO Box115530
115530
Gainesville, FL 32611-5530 USA
Gainesville, FL 32611-5330 USA
Tel: (352) 273-4723
Tel: (352) 273-4723
Fax: (352) 392-7682
Fax: (352) 392-7682
http://www.latam.ufl .edu/research-training/la-business-environment
www.latam.ufl.edu/research--training/la-business-environment

Center
Centerfor forGovernmental
Governmental Responsibility
Responsibility
University of Florida Fredric G. Levin College of Law
University of Florida Fredric G. Levin College of Law
PO Box 117629
PO Box 117629
Gainesville, FL 32611-7629
Gainesville, FL 32611-7629 USA
Tel: (352) 273-0836
Tel: (352) 273-0835
Fax: (352) 392-1457
Fax: (352) 392-1457
http://www.law.ufl .edu/academics/centers/cgr

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