Overview: Economic growth in Latin America and the Caribbean region slowed sharply in 2012, making the region the second slowest performer, after developing Europe and Central Asia, amongst all developing regions of the world. A weak external environment and a contraction in domestic demand were largely responsible for a tepid regional GDP growth estimated at 3 percent in 2012 (4.3 percent in 2011). Growth in Brazil, the region’s largest economy, decelerated markedly to an estimated 0.9 percent in 2012, from an already-modest 2.7 percent in 2011, while Argentina’s economic growth contracted to 2 percent, from 8.9 percent the previous year. The slowdown was modest in Central America and the Caribbean, while growth in Mexico, the region’s second largest economy, remained robust expanding by an estimated 4 percent in 2012 despite its strong links to the fledgling US economy. Elsewhere in the region, growth was relatively buoyant, albeit weaker than 2011. Chile posted a brisk performance with growth estimated at 5.8 percent in 2012, as did Panama (10 percent), and Peru (6.3 percent).

Economic activity in the region provided a mixed picture in 2012. Industrial production slowed, though not uniformly, in the first half of the year but rebounded in 3Q 2012 with signs of weakness reappearing in 4Q again. Growth of remittances decelerated due to weak labor market conditions in the main migrant destinations of the US and Europe, while the region received the largest share of gross capital flows (international bond issuance, cross-border syndicated bank loans, and equity placements) to developing countries, accounting for 33 percent of the $412 billion global gross capital flows in the first 10 months of 2012.

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