IMF and Latin America: Measures to Profit from Economic Prosperity

The International Monetary Fund (IMF) published its Regional Economic Outlook update today, where it referred to Latin America’s salient growth and warned this growth will not last forever and advised countries to introduce specific measures to profit from economic prosperity today. Alejandro Werner, Director of the Western Hemisphere Department, stated that, given the current situation, it is of key importance to profit from present benefits to strengthen future economies and continue to grow.

Prosperity and Economic Growth for the Near Future

Due to favourable financing conditions and an increase in the demands of raw materials, countries in Latin America and the Caribbean can expect to grow 3.4 per cent this year, and 3.9 per cent in 2014. The IMF has also stated that, in general, inflation has been kept under control in the different countries.
Latin America has also managed to significantly reduce its public debt in relation to its gross domestic product. Argentina leads this group of countries, followed by Ecuador, Peru, Panama and Colombia. According to EAE Business School in Barcelona, these Latin American countries’ debt is currently lower than that of the major European economies.

Taking Measures for a Rainy Day

The International Monetary Fund warned about the future deterioration of the conditions which allow for the present growth of Latin American economies. It anticipated a reversal of the easy financing conditions and, in addition, a slower growth rate in emerging Asian countries with its consequent reduction in the price of raw materials.
To face this possible situation, the IMF established a division between the different economies and its functions in each country. In the case of those like Brazil, Colombia and Mexico, which are financially integrated within international markets, new macroeconomic policies should be established, such as a more moderate tax policy.
In the case of countries such as Argentina, Venezuela and Ecuador, whose economies are based on raw material exports and are less integrated within international markets, the IMF recommends they save to protect the country from possible fluctuations in prices.
Lastly, those countries in Central America and the Caribbean which still have high debt should seize economic growth to consolidate their fiscal position.
Apart from structural reforms, the IMF also took into account the need to foment a positive business environment, promote competition within the economies and improve human capital’s formation and productivity.