Life after the commodity boom

Instead of the crises of the past, mediocre growth is the big risk—unless productivity rises
Mar 29th 2014 | LIMA | From the print edition
 Timekeeper 

ONE morning last month Louis Dreyfus, a big commodity-trading house, formally opened a new $10m storage depot in the Peruvian port of Callao. Two of its six bunkers were piled high with 55,000 tonnes of fine brown dust covered by white tarpaulins—copper and zinc concentrate, awaiting blending and shipment. The warehouse is “a bet that Peruvian mining will continue to be competitive,” says Gonzalo Ramírez, a Dreyfus manager. That looks like a sound wager. Blessed with high-grade ores and cheap energy, Peru’s output of copper—already the world’s third-largest—will more than double in the next three years (see article), thanks to the opening of several low-cost mines.

But rather than marking a new dawn, this burst of investment comes at the twilight of the great commodity boom occasioned by the industrialisation of China and India. By providing an unprecedented boost to the region’s terms of trade (the ratio of the price of its exports to that of its imports), this handed many Latin American countries a bounteous decade.


No longer. Oil and gas excluded, commodity prices are down by a quarter from their level of 2011, with prices of minerals falling by more than those of foodstuffs. After growing by an average of 4.3% in 2004-11, the region’s economies managed just 2.6% last year. Hopes of acceleration this year are being dashed. Brazil has had to raise interest rates sharply to contain inflation, and is unlikely to beat its 2013 growth of 2.3%. Mexico, although less commodity-driven than South America, is unlikely to do much better. Data suggest that Chile is growing at its slowest rate for four years. Even Peru, along with Panama the region’s star economy of the past decade, felt the cold draft: it expanded at 5% in 2013, down from an average of 7% since 2005.

Longer: Extenso

Since: Desde

Slowest: Muy lento

Data: Dato

Covered

Low cost: Bajo costo

http://www.economist.com/news/americas/21599782-instead-crises-past-mediocre-growth-big-riskunless-productivity-rises-life?zid=305&ah=417bd5664dc76da5d98af4f7a640fd8a