A new report on the Latin American economy shows that 14 straight months of low oil prices has had a negative impact on the economy there. And that’s not the only source of financial woes. Latin America is a major exporter to China, and the stock market crash there will only compound the side effects of low oil prices.
“This decline in oil prices will be an additional threat to an already dangerous landscape, making 2015 a very challenging year for Latin America,” said Daniela Ordonez, a Euler Hermes economist.
The report claims that the huge drop in oil prices has been a “game changer” for many Latin American countries, which had become dependent on oil prices in the $100 a barrel range. Currently, prices are hovering around $46 a barrel, which is actually slightly up from record lows this summer.
So what’s the good news? The hit to the Latin American economy is being called a slow down, not a recession. Economists say regional growth will drop by .4% this year, while real GDP will slow by half a percent. And there are still areas of growth in the regional economy.
In the past decade, investment in mining has grown exponentially. In fact, in 2013 the region received 27% of worldwide exploration spending, and experts expect additional investments of $200 billion or more in the next five years.
Companies in the United States, Russia, and elsewhere are taking advantage of that boom, looking to buy and sell heavy equipment to the region. That means the economic slowdown will require some adaptation from U.S. exporters looking to trade farm and construction equipment. If you’re looking for more good news, just remember that oil prices are bound to go up in the coming years. To learn more, read this.
