Economic conditions for plastics manufacturers will remain challenging in Latin America through all of 2016.
The growth rates for real gross domestic product across the region will vary, but no country will experience any acceleration in growth when compared with 2015. Moderate rates of growth are expected for Peru and Colombia. Brazil's recession will continue, and the contraction in the Venezuelan economy will become more severe.
These forecasts are based on a continuation of the two biggest developments in the global economy that emerged at the beginning of 2015 and then gained momentum in the second half of last year.
The primary negative factor is the sharp decline in global commodity prices. This trend is blamed most heavily on the recent slowdown in the Chinese economy, which resulted in lower global demand for many commodities. But a major — and often underappreciated — contributor is the substantial increase in the supply of commodities that occurred from 2010 through 2014.
These years were also a time of large capital inflows into Latin America. Some of the countries in Latin America contributed to the increase in the global commodity production, but all too often, the large stream of incoming capital was directed to both consumer spending and government spending. This spurred a predictable increase in consumption and imports, but this was not matched by an increase in investments in the type of productive assets that raise the productivity of a nation's economy. Thus, economic growth in Latin America is still impeded by a need for appropriate infrastructure development and reformed fiscal policies.
The other negative factor for these emerging economies is that growth in consumer spending in the U.S. economy started to gain momentum, which prompted the central bank of the U.S. to begin the process of normalizing interest rates at the end of last year. In other words, the U.S. economy appeared to get stronger while the economies in all of the other regions of the world appeared to get weaker. The uncertainty caused by the combination of slower growth in the global economy and more solid economic growth in the world's safest economy resulted in a huge inflow of capital into American treasury notes and bonds