South American economies flat-lining, with few bright spots

Argentina: Official statistics issued by the government remain at odds with information disseminated by private institutions. According to the Argentine Industrial Union (UIA) industrial output in March fell 6.6% from the month before and 10.1% for Q1. The worst performances were recorded in the automotive and metal production sectors, which  declined a combined 31.4% in March. The only bright spot for the Argentine automotive industry remains exports to Brazil, where government incentives have bolstered car sales. Argentina's steel production totaled 279,000 mt in April or 44.3% less than last year. In the first four months of 2009 1.1 million mt were produced or 42.3% less than last year

Brazil: Acknowledging the serious economic situation, the Central Bank cut the overnight lending rate by a full percentage point to 10.25%. More interest cuts are expected. The latest GDP figures still show a slight increase in Q4 over 2007 but growth fell by 13.6% when compared to Q3 2008. Central Bank officials still cling to the hope that the second half of this year will see a four percent growth and that the year will close with only a slight reduction of 0.5%. Steel production totaled 1.729 million mt in April or 40.4% less than last year. In the first four months of the year 6.73 million metric tons were produced or 41.7% less than last year.

Chile: After another drop in the overnight interest rate to 1.25%, the Central Bank has revised its GDP forecast for 2009 to a range of -0.75% to +0.25%. In other words: growth will be flat. On the brighter side, it was announced that the inflation rate will drop to 0.6% for the year, which is substantially lower than the 7.1% last year. Some analysts believe that the Central Bank is a bit too optimistic, however. Steel production totaled 90,000 mt (e) in April (-37.5% compared to last year). In the first four months of the year 336,000 mt were produced or 42.0% less than last year.

Venezuela: The economy grew a mere 0.3% in Q1, its slowest pace since 2003. Falling oil revenues have an adverse impact on economic growth as well as on the budget. The oil sector shrank 4.8% in Q1, its first contraction in four quarters. The continuing high inflation rate of around 30% has deeply affected many consumers who are seeing their purchasing power evaporate daily. Furthermore, the government's relentless drive of expropriations in the oil, banking, steel and cement sectors have eroded foreign investors' confidence and could seriously hurt foreign direct investment. Steel production totaled 360,000 mt (e) in April (-0.8% compared to last year). In the first four months of the year, 1.452 million mt were produced or 10.3% more than last year.