Tepid cheer for signs of economic recovery

September 4, 2009

Latin American countries have begun to show signs of recovery amid the global economic crisis, according to the United Nations Economic Commission for Latin America and the Caribbean (ECLAC).

Citing Argentina, Brazil, Chile, Colombia and Peru among the countries whose prospects are looking up, ECLAC economic affairs officer Jürgen Weller told the newswire DPA, “All these countries show signs that they have overcome the crisis or are about to do so.” However, he added, the recovery will be sluggish.

In Costa Rica, finance officials also have signaled that the worst of the crisis may be over.

“While still in recession, the rate of (Costa Rica´s) economic contraction has begun to slow,” Central Bank analyst Elvia Campos told The Tico Times. For a recovery to begin, she said, the manufacturing sector, agriculture and commerce all must show positive growth, a turnaround the Central Bank expects to see within the second half of 2010, Campos said.

The Central Bank predicts Costa Rica´s gross domestic product (GDP) will grow by 2.6 percent in 2010 – not far below ECLAC´s outlook of 3 percent growth for the whole region.

Economic analysts have been picking apart the data to look for any semblance of a rebound.

“The ‘green shoots´ that have emerged in the United States seem to have had a positive impact on our exports,” said Luis Mesalles, president of economic think tank Academia de Centroamérica. Green shoots – a term used to refer to signs of recovery during an economic crisis – have sprouted in some of the world´s biggest economies, including France, Germany and Japan, all of which last week reported growth in the second quarter, according to international news outlets. The Associated Press reported that gains in U.S. worker productivity came in the spring as a result of companies´ cutting costs and capping employees´ wages.

However, analysts at the San José-based financial consulting firm Aldesa think the signs of a turnaround in Costa Rica aren´t tenable and believe it´s overly optimistic to be cheering on recovery´s arrival.

“We think it is too soon to conclude that the turnaround is sustainable,” said Eric Vargas, Aldesa´s manager of investment strategy. Vargas said Costa Rica has drained its liquidity to the point that it will be “a drag on the recovery, which in our opinion will lose strength in the coming quarters.”

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