Still plagued by the seemingly perennial problems of high debts and inflation, Latin American nations showed a remarkable economic resiliency during 1977, regaining some of the ground lost over the past several years to high oil import prices and the backlash from recession in more developed parts of the world.
A healthy growth rate of from 5 to 5.5 per cent is expected for the region as a whole. Last year's dangerous balance of payments situation improved somewhat and many countries, including the non-oil producers, increased their reserves.
In many countries, including Brazil, Mexico and Argentina, moderate economic success was the result of severe austerity measures, and 1978 will be a year in which governments will try to consolidate improvements while attempting to keep in line the increasingly pinched working classes, who have born the brunt of the austerity.
Although aggregate economic figures lead him to "qualified optimism," Enrique Iglesias, head of the United Nations Economic Council of Latin America, noted that the "old fundamental problems, especially with regard to distribution of wealth" remain.
Poverty and income distribution remain the most serious and chronic problems in Latin America, Iglesias said, and there has been no perceptible improvement. Although economic progress has increased the size of the pie in absolute terms, any trickle-down has been minimal.
"We estimate there are 100 million Latin Americans in conditions of critical poverty," Iglesias said.
The severe impact of the energy crisis that threatened to cripple the non-oil-producing nations largely has been brought under control. Pointing to more diversified economies, better trained and more experienced economic planners and increased expertise in foreign lending markets, Iglesias noted the growing capacity of Latin America to "defend itself in the face of temporary economic problems."
Among the more notable exceptions to a generally improved situation were Jamaica and Peru. Foreign lenders - including a number of leading U.S. banks that advanced Peru $210 million in June, 1976 - now view that country's payback situation as critical, and default appears increasingly likely without a major refinancing agreement.
Originally burdened by enormous petroleum import prices, the Peruvian military government of President Francisco Moralez Bermudez borrowed heavily for extensive arms purchases intended to keep pace with weapons buildups in neighboring countries. Those purchases, along with falling prices for raw material exports and labor strife, have left Peru almost totally without foreign reserves.
In Argentina, where Economy Minister Jose Martinez de Eloz is under increasingly heavy fire from labor groups for his strict austerity program and cutbacks in public investment, improvement was slow but steady.
Although the inflationary decrease in Brazil was less spectacular, economists in Latin America's largest country were satisfied with a drop from 46 per cent in 1976 to less than 40 per cent for 1977. The slowdown was accomplished primarily through a planned reduction in the country's growth rate, which reached spectacular yearly heights of 10 per cent in the early 1970s.
High growth rates have become a source of national pride in Brazil, but the accompanying high inflation precipitated by the enormous cost of importing more than 80 per cent of the country's oil consumption necessitated a cutback. Through severely restricted public sector investments in 1977, the government expects growth for the year to go no higher than about 6 per cent, a level that one U.S. economist noted is more than respectable "anywhere but Brazil."
After undergoing its most severe economic crisis in two decades in 1976, when the value of the peso was cut in half, Mexico, under the new government of President Jose Lopez Portillo, imposed a strict austerity program with notable success in 1977. Inflation - which soared over 45 per cent in 1976 - is now down to about 20 per cent, and trade and budgetary deficits have been reduced substantially. Growth is expected to be a modest 2.6 per cent for 1977.
Continuing low copper prices and scant foreign investment have slowed what economists have called an "economic miracle" in Chile. While inflation, down to 70 per cent from a four-digit high several years ago, appears to be under control, a heavy debt burden consumed nearly 40 per cent of Chile's 1977 foreign earnings.
As the Chilean government continues to allow non-competitive industries to die, unemployment remains high and low wage levels have prohibited all but a small percentage of the population from purchasing myriad consumer imports brought by a drastic lowering of tariff barriers.
Central America was one of the year's economic success stories, primarily due to astronomically high coffee prices. With their tiny, short-term development plans, however, the governments of El Salvador, Guatemala, Honduras, Nicaragua and Costa Rica now are grappling with the problems of maximizing the long-range benefits of the income bonus.