Colombia Overtakes Peru Becoming The Region’s Fastest-Growing Big Economy

As he prepared to begin a second term as Colombia’s president on August 7th, the first name that Juan Manuel Santos inked in for his cabinet was Mauricio Cardenas, who keeps his job as finance minister. That was no surprise: helped by an investment boom, the country’s economy grew by 6.4% in the first quarter compared with the same period last year. Mr Cardenas says the second quarter was strong, too. The government will be raising its growth forecast for this year from 4.7%.

This is a welcome exception to a regional trend: Latin America as a whole looks likely to grow by less than 2% this year, the worst figure since 2009 (see chart). The end of the commodity boom that lifted the region for more than a decade, the fading of the era of cheap money as central banks in the rich world prepare to raise interest rates and a series of home-grown factors have all taken their toll.

The fall has been especially abrupt in Peru, where the economy is suffering what Luis Miguel Castilla, the economy minister, calls a “hiccup”. Even if it rebounds in the fourth quarter as he expects, predictions of growth of more than 4% this year seem too rosy. For a country that has enjoyed Asian-style growth averaging 6.4% a year in 2003-13, the slowdown is a nasty surprise. Colombia has overtaken Peru to become the fastest-growing of the bigger Latin American economies.

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