The sharp manufacturing recession in Latin America during 2009 will be followed by a strong but uneven recovery, according to a report from the Manufacturers Alliance/MAPI.

The report focuses on Latin America's three largest economies -- Brazil, Argentina, and Mexico -- as these countries are responsible for more than 80% of the manufacturing output in the region.

MAPI forecasts that overall manufacturing output in Latin America will decline 7.9% in 2009, a slightly larger drop than the 7.7% decline forecast in the July 2009 report. Manufacturing production should rebound in 2010 with 5% growth, says MAPI, which is higher than the 3.6% growth predicted in July.

Brazil's manufacturing production is expected to decline 7.5% in 2009, influenced by sharp contractions in the automotive and machinery and equipment industries.

In Mexico, manufacturing production will drop 9.9% in 2009, dragged down by the tumbling automobile manufacturing sector, machinery and equipment, and basic metals industries.

Argentina's manufacturers are expected to reduce their output levels by 5% in 2009, also hindered by the underperformance of the motor vehicles and the machinery and equipment businesses.

Economic recovery, though, is in sight next year. "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, Ph.D., Manufacturers Alliance/MAPI economic consultant. "Latin America's economies are passing the trough of the recession and the focus now is on the strength of the recovery. Those countries attempting to export their way out of recession will experience a weaker rebound. Those countries with the right fundamentals for strong domestic demand growth, or those relying less on exports to developed countries, may see a more vigorous bounce back, absent policy slippage."

Sedano believes that Brazil's economy is probably in the best position to recover production levels relatively quickly, due in part to the surprising resilience of domestic consumption. Mexico, primarily because of its traditional links with the U.S. economy, has taken the highest toll from the global economic crisis and growth prospects are less promising given that country's worrisome fiscal situation. In Argentina, the consensus among analysts is that the recession has been relatively mild compared to its own past and to the performance of other economies in the region.

The report sees growth in only one of 16 industries in 2009, but growth in 15 of 16 industries in 2010. Three industries -- food and beverages; motor vehicles; and machinery and equipment -- account for roughly 40% to 45% of the region's manufacturing and, therefore, are keys to the forecast.

Food and beverages production, the largest industry in the region and one of the most stable, should decline by 0.2% in 2009 and grow by 2.3% in 2010. The automotive sector will see wide fluctuation in the next 12 months as it is forecast to decline by 25.7% in 2009 preceding 10.8% growth in 2010. The machinery and equipment industry should decrease production 18.5% in 2009 but rebound to 10.5% growth in 2010.