Latin America and the Caribbean in the World Economy: The region in the decade of the emerging economies

In mid-2011, conditions deteriorated in the industrialized economies. Early in the year, instability in North Africa combined with other factors pushed up fuel prices. Then, in March, the tragedy of the earthquake, tsunami and nuclear disaster in Japan damaged global production chains. Although the impacts of these factors eased in the second semester, concern mounted over the threat of default in Greece, Ireland and Portugal and the repercussions of such an event for larger European economies. In late July, the difficulties in securing congressional approval on the United States public debt ceiling added to the volatility prevailing in financial markets. The downgrading of the United States’ sovereign debt rating for the first time ever and lacklustre economic growth rates in the euro area and the United States added to the uncertainty. Volatility and uncertainty are again reaching worrying levels. International commodity prices are beginning to reflect this uncertainty and volatility and have declined sharply in a short time span, although they remain above their long-term trend, particularly in the case of metals and minerals. Leading composite indicators show that slower growth in the industrialized countries is starting to act as a drag on the main emerging economies. As growth slows in the emerging economies and the industrialized economies show increasing weakness, international commodity prices are likely to fall, affecting the trade and current account balances of net commodity exporters.