What is the recession and how has it affected Latin American economies?

The winds of economic recession are beginning to knock on the doors of the Latin American economies. Is internationalization an option to deal with this phenomenon?

Recession is the result of an economic crisis caused by a series of factors that put the economy of a country or region at risk. The main cause of this phenomenon is a significant drop-in economic activity, translated into production, employment, real income, and is measured through the interannual rate of real Gross Domestic Product (GDP).

‍ There are some symptoms in the economy of a country that allow us to predict a recession. Let's see what they are and analyze these phenomena in some Latin American countries.

1. 01Increase in unemployment.
2. 02Decrease in consumption. (Private consumption in Latin America)
3. 03Increase in the overdue portfolio of loans.
4. 04GDP decline.
5. 05Inventory increase

This table allows us to see how different components of the economy stimulate an economic crisis that in some countries, such as Peru, resist, but in others they are a common denominator, especially when we talk about interest rates.

World Bank Group President David Malpass assured that this phenomenon is a consequence of “The war in Ukraine, the lockdowns in China, the disruptions in the supply chain. The risk of stagflation affects growth. And he added that "for many countries, it will be difficult to avoid recession."

What to do to face this phenomenon?

Driving transformation, as summarized by the International Monetary Fund (IMF), as a strategy to deal with this crisis that increased with the war in Ukraine and that brought with it a drop in supplies, not to mention the expenses and economic fractures left by the pandemic.

It is important, says the entity, that governments grant loans to small and medium-sized companies, in order to revitalize the economy and the consumption of citizens: "in the face of this challenge, central banks should act decisively, constantly taking the pulse of the economy and adjusting policies accordingly. And, of course, by clearly communicating them,” said Kristalina Georgieva, Managing Director of the IMF in Washington, DC.

Finally, is it possible to internationalize your company in the United States? Many Latin American entrepreneurs believe that behind the creation of a company in the USA there is a lot of bureaucracy, that it is impossible to do it, that an American visa is needed, among other requirements; however, it is simpler than it seems. Not in vain is it one of the countries with the most flexible openness policies in the world.

There is even a government entity designed to promote the creation of companies, not only for American citizens, but for foreigners. About this we wrote a blog: How to contract with the US government? 9 federal and state programs where you can apply