🔍 Projected Revenue Decline in 2023

Fiscal projections for Latin American countries indicate a decline in total revenue for 2023, attributed to slower economic activity and decreasing international commodity prices 🌎💰.

📉 Expected tax revenues are set to drop from 16.2% of GDP in 2022 to 15.8% in 2023.
📉 Early data shows tax revenues (excluding social contributions) contracting by over 10% in several countries.
📉 This downturn is in stark contrast to 2022's growth, which exceeded 20% in nations like Chile, Colombia, and Peru.

⛽ Impact on Non-Tax Revenues and VAT Collection

The decline extends beyond tax revenue, affecting non-tax income sources, particularly from hydrocarbon exploration and production in:

🔹 Brazil
🔹 Ecuador
🔹 Mexico

Falling oil and gas prices have significantly reduced government revenue from these sectors 🛢️⬇️. Additionally, weakening private consumption and declining import values have led to a drop in value-added tax (VAT) receipts across the region.

Country-Specific Factors Intensifying the Issue:
⚠️ Chile: Increased tax rebates, including VAT refunds for CODELCO.
⚠️ Panama: VAT payment deferrals until January 2023.
⚠️ Several nations: Significant drops in VAT revenue from imports, linked to:
🔸 Falling international oil prices ⛽
🔸 Lower import volumes of capital goods and industrial inputs 🏭📉

📊 A Shifting Fiscal Landscape

The region’s economic vulnerability to external shocks—such as fluctuations in oil and gas prices—highlights the need for robust fiscal policies and economic diversification 🔄📈.

Key Takeaways:
✅ Governments must strengthen fiscal resilience to counter revenue fluctuations.
✅ Diversification of economies is crucial to reducing dependency on commodities.
✅ Sustainable growth strategies are essential for long-term stability.

⚠️ 2025: Persistent Challenges and Resistance to Change

Even as we move into 2025, the structural issues remain largely unresolved 🚨.

🔹 Revenue instability continues due to slow economic recovery and global commodity price fluctuations.
🔹 Many governments still prioritize short-term compliance over long-term fiscal reform.
🔹 Resistance to adopting innovative economic policies has slowed progress, leaving many nations vulnerable to future financial shocks.

💡 Despite advancements in policy recommendations, the pace of change remains sluggish. To ensure financial stability, Latin American countries must:

🔹 Accelerate economic diversification efforts 🏗️
🔹 Strengthen tax collection efficiency 📊
🔹 Adopt proactive fiscal policies to mitigate future downturns 🔄

The need for decisive action is greater than ever. Governments must shift from reactive crisis management to forward-thinking economic strategies to navigate the evolving global financial landscape and secure long-term prosperity 🌎📈.

Reference: Economic Commission for Latin America and the Caribbean ECLAC. (2023). Economic Survey of Latin America and the Caribbean 2023. Financing a sustainable transition: Investment for growth and climate change action. ECLAC. https://hdl.handle.net/11362/67990