GDP per Capita of Latin America's 7 Largest Economies

GDP per Capita of Latin America’s 7 Largest Economies


The post-recession trends in GDP per capita of South America’s seven largest economies have varied over the last decade. All economies were affected differently by the 2008 financial crisis but all recovered to pre-crisis levels of GDP per capita by 2010, bar Venezuela which took 1 year longer. Venezuela, Argentina, Mexico and Peru‘s GDP per capita fell initially, although by no means drastically. Argentina was worst hit in terms of GDP per capita, largely due to continued fragility after the 2002 South American Crisis. Similarly their GDP continued to rise steeply following the momentary blip in 2008, as it had since 2002. Colombia, Brazil and Peru, were less affected. During 2013/14 a few of the economies experienced falls in their GDP per capita as a result of the dip in oil prices, following a relatively successful decade for the majority of continent.

What does the chart show?

The chart shows the GDP per capita of the seven largest economies in South America over the last decade, adjusted for purchasing power parity (PPP) and indexed at 2008. The UK’s GDP per capita has been added to use as a reference, and is shown by the dashed black line. All of the countries have a larger GDP per capita than they did following the crash, the largest increase being Peru (green)now 50% larger than 2008. The Venezuelan line (light blue) has stopped in 2014, this is due to the government stopping the release of national account data, discontinuing most official statistics and rendering many figures past this point unreliable.

Why is the chart interesting?


Peru’s GDP per capita has increased by 50% since 2008, the largest increase of the economies shown. The economy has grown consistently over the past decade with an average growth rate of 5.9%. GDP growth slowed between 2014 and 2017, the World Bank attributed this to a fall in international prices of their biggest export, copper, causing reduced investment and consumption. Despite this, GDP per capita has proved resilient. According to the IMF, poverty has been reduced from 58.7% living under national poverty line in 2004 to 20.7% in 2016. However, inequality is still widespread and Peru’s Gini coefficient of 43.8 in 2016 was 9th worst in the global World Bank index.



Chile is considered to be the most stable and prosperous nation in South America. Their economy is heavily dependent on copper, with mining constituting 49% of their exports, 44.8% of which is copper. They are the world’s largest producer of the metal, supplying over one third of global output, aided by government regulations which have attracted high levels of foreign investment. They were the first South American country to join the OECD in 2010. GDP only rose by 1.8% in 2014, its slowest in the previous 5 years, due to a fall in investment in the Chilean mining sector. The OECD forecast that Chilean growth will accelerate to 3.6%, as well as predicting significant rises in real wages which they anticipate will increase private consumption and reduce income inequality.



Colombia has enjoyed a similar trend to Peru, despite GDP falling by almost $90 billion current USD between 2014 and 2016. Colombia was vulnerable to the reduction in oil prices, which constitute over 45% of Colombia’s exports. The IMF, although predicting growth of 2.7% in 2018, have stressed the need for the economy to diversify. Colombia has the fastest growing information technology industry in the world and the longest fibre optic network in Latin America following President Juan Manuel Santos’ ‘Vive Digital’ initiative. They are also promoting tourism, with the sector growing by 12% on average every year and predicted to rise to over 15million plus tourists by 2023. In addition, the IMF have highlighted Colombia’s need to reduce trade barriers to continue to build on their export market in order to sustain growth.



Mexico’s GDP per capita has grown by 25% since 2008, reflecting growth at half the pace of other emerging economies. Improvements in the service sector as well as in manufacturing and agriculture led to accelerated economic growth in the first quarter of this year. They have suffered from uncertainty concerning NAFTA, which bolsters the majority of their exports. The USA is the recipient of 82.7% of Mexico’s 409.5 bn USD worth of exports. This  uncertainty is harming investment in the short term, although private investment should increase if an agreement is reached. The Mexican peso has depreciated over the last few years, increasing their competitiveness. An uptick in US industrial production has also been a boon to Mexican exports. The government offered Mexico’s oil fields in 2013 to private investors, selling 100 contracts. Progress on FDI has been hampered by cumbersome bureaucracy, for example permit reviews taking almost 18 months, something the government is keen to reduce.



Argentina’s GDP per capita continued to fall into 2009, but recovered to pre-crisis levels by 2010 and continued to rise steeply into 2011. Growth has since slowed, fluctuating yearly although increasing overall. Following their worst drought in 50 years, which affected the harvest of important exports, this year has been particularly difficult for Argentina. They are also in the midst of a currency crisis, the Argentine peso is now the worst performing currency in the world due to a fall in investment in emerging markets. Despite the central bank increasing interest rates to 40%, their currency continued to fall and they are now set to receive the largest IMF credit line in history. Despite currently suffering from inflation of nearly 30%, Argentinian inflation has fluctuated, even reaching over 40% in early 2016.



Brazil, the largest economy in Latin America, was not affected significantly by the financial crisis with GDP only contracting by $29 billion between 2008-2009. The devaluation of their currency in 2002 led to a nearly fivefold increase from 558.3 billion to 2.616 trillion USD. In a similar pattern to most other hosts of large sporting events, the 2014 World Cup in Brazil failed to bolster their economy. Through 2014, overall tourism declined, despite the World Cup attracting a million tourists. Relatedly, businesses made smaller profits due to a high percentage of workers taking time off to enjoy the games. Falling commodity prices, lack of consumer confidence and the political corruption scandal involving oil firm Petrobras led to an economic crisis from 2014-2016. By 2017, their economy had contracted by 8% compared to the beginning of the crisis, unemployment rose to 12% and inflation reached 11%. Brazil also hosted the Olympics in 2016, when inflation rose to above 10%. Since this time, GDP per capita has grown, reflecting an increase in investment following the settling of Brazil’s political landscape.



Venezuela’s economy fared the worst since the crash, although it began to recover from 2010 to 2013, before beginning its steep decline. The government has stopped releasing national account data, following hyperinflation that is set to become one of the worst crises in modern history. Although the collapse has been chiefly driven by political decisions, economic factors such as the collapse in oil price and sanctions have also contributed. Venezuela is the world’s fifth largest oil exporter and oil represents over 90% of total exports. Domestic production of oil has almost halved since 2015, its lowest the 1980s. Knock-on effects include falling FDI, indeed net US FDI was negative for the first time. International reserves of their currency now stand at one third of 2013 levels prior to Maduro’s rise to power. Venezuela appears to be seeking new international allies and have recently secured an investment of $250m with the China Development Bank and China National Petroleum Corporation.

Posted by Aimée Allam