Panama – Predicting behavior for economies has become a real challenge for analysts.  Projections vary each month and adjustments are becoming more pessimistic.
Since the financial crisis exploed – eight months ago – the work of analysts has become a real nightmare.
Predicting the short, medium, and long term performance of economies is now a challenge because not only are the reputations of financial analysts at stake, but also the stability of the economic sectors of the world that react according to their prognostications.
It doesn’t matter if they work for risk analysts, for a bank or for an international organization, the challenge is to be the most precise possible.
For that, they only depend on the results of each type of economic activity that throws own inexact data tainted by speculation and the nervousness that are typical for a crisis.

THE ROLLERCOASTER
Evidence that things aren’t so easy can be seen in the projections that have been published in past months, that are adjusted at least every 15 days, and are more and more pessimistic.
One of the many examples is given by the Economic Commission for Latin America and the Caribbean (ECLAC) that in January of 2009 calculated 1.9% growth for Latin America and in February re-adjusted their estimates to 0.3%.  The International Monetary Fund (IMF), the World Bank (WB) and the Organization for Economic Co-operation and Development (OECD) have all done likewise.
The Vicepresident for the WB for Latin America and the Caribbean, Pamela Cox, said last week that the growth for Latin America would fall to 0.3% in 2009.  Last year, 2.7% was predicted.
“Predictions have fallen so much that in January they were situated around 1% and now in February they have been lowered to 0.3%,” recognized Cox.
As for the IMF, it predicted last January that 2009 would have an economic growth of 0.5%, but John Lipsky, the number two of the financial institution, admitted early that this prediction would be corrected and lowered.
Another adjustment was made by the Spanish bank BBVA which predited growth of 4.3% for Latin America but corrected the figure to 1.8% due to predictions of a global economic recession.  In the midst of all of this, the consulting group Standard & Poor’s has said that in the region the signals are pointing to a marked deacceleration.

COMPLICATED PANORAMA
The question that many people are asking is what is really happening?  The answer still hasn’t arrived, but what many experts are recognizing is that there is a lot of speculation and fear in  markets and financial activities.  Beside that, they warn that the crisis still hasn’t reached bottom.  In fact, the IMF indicated two days ago that the recovery would be “slow and painful”.
The negative effects are noticeable in the slowing of international commerce and the dropping of prices for primary goods.
A strong drop in exports can be seen – that is striking prinicipally at open economies like those in Central America and Mexico; a reduction of remittances, reduced income from tourism – especially in the Caribbean and Central America; and a reduction in direct foreign investment.

THOSE WHO SUFFER THE MOST
According to the ECLAC, with the global crisis, the countries most affected will be Mexico (-2.0% in growth), Brazil (-1.0%), Costa Rica (-0.5%) and Paraguay (-0.5%), while Panama, Peru, Cuba and Bolivia could maintain postive growth of 3.0% or higher.
Meanwhile, Ecuador and Chile will have no growth in their GDPs in 2009.
Panama, will reflect an adjustment from the 9% growth reached in 2008, will still be the envy of the region with a rally that could reach 4%.
In the case of Panama, Guillermo Chapman, ex-minister of Planning and Economic Policy, recognized that changes in the projections are products of the crisis that is now affecting service exports that include the Panama Canal, re-exports from the Free Trade Zone of Colon, tourism, movement of containers, and banking services, among others.
WHAT TO DO?
The current juncture places countries in front of a need to implement countercyclical policies but, at the same time, confront economic authorities with a panorama characterized by the lack of macroeconomic space to implement measures.
Adjustments will depend on the strengths and weaknesses of each nation.  For that reason, the first step is to recognize that nobody will escape the crisis.
The latest meetings organized by the developed and developing countries seem to shed light on the right direction.  The short term proposals are oriented toward creating rescue plans to inject capital in the sectors that are in danger and, at all cost, maintain afloat as many companies as possible.  We still haven’t reached bottom but unemployment, right now, is more than sufficient.