Latin Manufacturing to Rebound Slowly

Latin American manufacturing production, which plummeted during the first quarter of 2009, will remain weak throughout this year but rebound in 2010, according to a report that analyzes trends in 16 major industries. The Manufacturers Alliance/MAPI "Latin America Manufacturing Outlook" report forecasts that overall manufacturing output in Latin America will decline by 7.7 percent in 2009, but will rebound to 3.6 percent growth in 2010.

Because Latin America's three largest economies -- Brazil, Argentina, and Mexico -- account for more than 80 percent of the manufacturing output in the region, the MAPI report focuses on those three countries. MAPI expects Brazil's manufacturing production to decline by 6 percent in 2009 because of steep contractions in the automotive, machinery and equipment, and electrical machinery and apparatus industries. Mexico's manufacturing production is forecast to drop by 9.9 percent in 2009 because of sharp declines in the machinery and equipment, and basic metals sectors. Argentina's manufacturing output is expected to drop by 7.7 percent in 2009, with severe weakness in the motor vehicles, electrical machinery and apparatus, and the non-metallic minerals sectors.

Nevertheless, the report forecasts a recovery in 2010. "We expect a rebound in overall industrial production during 2010 as our forecast envisions that all manufacturing sectors, with the exception of the wood products industry, will see production gains," said Fernando Sedano, an economic consultant at Manufacturers Alliance/MAPI, and the author of the report. "Latin America is better prepared to face the current global economic debacle than it was in previous episodes as the abundance of the past five years has not generated the type of macroeconomic vulnerabilities common in past cycles."

The report sees growth in only two of 16 industries in 2009, but growth in 15 of those 16 industries in 2010. Three industrial sectors -- food and beverages; motor vehicles; and machinery and equipment -- account for roughly 40 to 45 percent of the region's manufacturing output. Food and beverages production, the largest industry in the region, is expected to decline by 0.5 percent in 2009 and grow by 2.5 percent in 2010. The automotive sector will decline by 27.8 percent in 2009, but grow by 7 percent in 2010. Manufacturing in the machinery and equipment sector will drop by 14.8 percent in 2009 but rebound to 7 percent growth in 2010.

Source: JOC