Brazilian Factories Are Leading Strong V-Shaped Rebound

Aug. 16, 2010
MAPI predicts 8.3% growth in 2010, 3.7% in 2011 for region

Latin America's economies are showing a sharp V-shaped recovery from last year's recession and, while growth is seen across the board, the drivers for the rebound differ, according to a new report by 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 grow 8.3% in 2010, a significant increase from the 5% advance forecast in the December 2009 report. The group anticipates that manufacturing production will decelerate to 3.7% growth in 2011.

Brazil's manufacturing production is expected to surge a sizable 11.5% in 2010, underpinned for the most part by vigorous internal demand, and to a lesser extent by robust exports.

In Mexico, manufacturing production will increase a more moderate 5% in 2010. Sedano writes that a U.S.-driven manufacturing upturn in Mexico is leading to immediate job creation with positive potential implications for consumer spending, raising the odds for a stronger rebound than previously anticipated.

Argentina's manufacturers are expected to increase their output levels by 6.8% in 2010 as its economy benefits from higher commodity prices as well as strong economic activity in China and Brazil.

The report anticipates that during 2010 manufacturing production in Latin America will surpass pre-crisis levels.

"The performance of the automotive sector, which accounts for a large share of Latin America's manufacturing, remains key to the outlook," Sedano said. "Production is ramping up across countries and stimulating growth in a broad number of sectors. Food and beverages production continues holding up well and is in line with expectations. Machinery and equipment production -- a major drag during last year's downturn -- is soaring as companies are investing to expand capacity to keep up with rising demand. As a result, industries such as basic metals and fabricated metal products, which supply the machinery and equipment and automotive sectors, are also expanding."

Three industries -- food and beverages; motor vehicles; and machinery and equipment -- account for roughly 40%-45% of the region's manufacturing and, therefore, are most important to the forecast. Food and beverages production, the largest industry in the region and one of the most stable, should grow by 4.3% in 2010 and rise by 3.6% in 2011. The automotive sector is forecast to improve by 22.5% in 2010 and further grow by 5.7% in 2011.The machinery and equipment industry should increase production by 26.7% in 2010 and by 5% in 2011.

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