Posted on November 27, 2013 by iMFdirect
By Martin Kaufman and Mercedes García-Escribano
(Version in Español and Português)
Since the early 2000s, Brazil’s economy has grown at a robust clip, with growth in 2010 reaching 7.5 percent—its strongest in a quarter of a century. A key pillar of its hard-won economic success has been sound economic policies and the adoption of far-reaching social programs, which resulted in a substantial decline in poverty.
In the last couple of years Brazil’s growth slowed down. Although other emerging market economies experienced a similar slowdown, the growth outturns in Brazil were particularly disappointing. And the measures taken to stimulate the economy did not produce a sustained recovery. This is because unleashing sustained growth in Brazil requires measures geared not at stimulating domestic demand but at changing the composition of demand towards investment and at increasing productivity.
Filed under: Advanced Economies, Economic outlook, Economic research, Emerging Markets, Español, Finance, Fiscal policy, growth, IMF, International Monetary Fund, Latin America, Português, Public debt | Tagged: Article IV, Brazil, BRICs, fiscal consolidation, infrastructure, macroeconomic policy, recovery, unemployment | Leave a Comment »
Posted on October 16, 2013 by iMFdirect
By Alejandro Werner
(Version in Español & Português)
For many Latin American and Caribbean economies, clouds have appeared on the economic horizon. As the global growth momentum shifts from the emerging to the advanced economies, the strength of domestic economic policies will be crucial for how countries can cope with the combination of lower commodity prices and tighter external financing conditions.
Lower commodity prices have already started to affect the region’s commodity exporters. Even though prices remain high by historical standards, countries can no longer count on the tailwind from ever-improving terms of trade, which had propelled economic activity over the past decade.
Meanwhile, longer-term U.S. interest rates have started to rise, with knock-on effects for emerging markets. Across all of the financially integrated economies of Latin America, bond yields have increased, equity prices have fallen, and currencies have depreciated since May, when the U.S. Fed first mentioned the possibility of tapering its bond purchases later this year. Financial conditions remain fairly benign for now, but the strong tailwind from ultra-low external financing costs may also be gone for good.
Filed under: Economic outlook, Economic research, Emerging Markets, Español, Finance, IMF, International Monetary Fund, Languages, Latin America, Public debt | Tagged: fiscal balances, infrastructure, lending, Regional Economic Outlook: Western Hemisphere | Leave a Comment »
Posted on May 29, 2013 by iMFdirect
By Sebastián Sosa, Evridiki Tsounta, and Hye Sun Kim
(Versions in Español and Português)
Latin America has enjoyed strong growth during the last decade, with annual growth averaging 4½ percent compared with 2¾ in the 1980s and 1990s. What is behind this remarkable economic performance and will this growth be sustainable in the years ahead?
Our recent study (see also our working paper) looks at the supply-side drivers of growth for a large group of Latin American countries, to identify what’s behind the recent strong output performance.
Filed under: Economic research, Emerging Markets, Employment, Español, Fiscal policy, growth, IMF, International Monetary Fund, Latin America | Tagged: capital, employment, GDP, growth, IMF, iMFdirect, International Monetary Fund, Labor, Latin America, output, productivity | Leave a Comment »
Posted on March 27, 2013 by iMFdirect
By Carlo Cottarelli
(Versions in Español, 中文, Français, 日本語, and Русский)
Let’s face it. Everybody loves cheap energy. Almost all human activities require energy consumption and, if something is so basic, it seems pretty obvious that it should not be denied to anyone and government should make it as cheap as possible to both households and companies, including through subsidies. This can help households avoid paying exorbitant energy bills at the end of the month, something that the poor may not be able to afford even for basic needs like heating and cooking.
Companies may also need energy subsidies to help them stay competitive. Energy subsidies appear even more appropriate, and even the obvious thing to do, in countries that have a large supply of energy, like oil producers. After all, this natural wealth in the form of energy belongs to the people; why shouldn’t it be cheap?
Filed under: Africa, Economic research, Español, Finance, Financial Crisis, Fiscal policy, Français, growth, Inequality, International Monetary Fund, Low-income countries, Middle East, Politics, عربي | Tagged: education, energy subsidies, energy taxes, environment, fiscal policy, GDP, infrastructure, reform | Leave a Comment »
Posted on December 6, 2012 by iMFdirect
By Christine Lagarde
(Version in Español)
Next week, I will travel to Latin America—my second visit to the region since November 2011. I return with increased optimism, as much of Latin America continues its impressive transformation that started a decade ago.
The region remains resilient to the recent bouts in global volatility, and many countries continue to expand at a healthy pace. An increasing number of people are escaping the perils of poverty to join a growing and increasingly vibrant middle class.
Filed under: Economic Crisis, Emerging Markets, Español, Fiscal policy, growth, IMF, Inequality, International Monetary Fund, Latin America, Public debt | Tagged: advanced economies, Asia, business leaders, capital flow management measures, capital flows, Central America, Chile, Civil Society, Colombia, commodity exporters, competitiveness, debt levels, demand, domestic demand, Economics, education, emerging economies, Europe, exports, external financing conditions, financial sector, financial supervision and regulation, fiscal balances, fiscal cliff United States, fiscal consolidation, fiscal policy, global crisis, global risks, growth, high commodity prices, iMFdirect, inequality, infrastructure, International Monetary Fund, Mexico, middle class, monetary policy, policymakers, poverty, productivity, reforms, students, tailwinds, taxes | 5 Comments »
Posted on November 19, 2012 by iMFdirect
By Nicolas Magud and Evridiki Tsounta
(Version in Español)
Many Latin American countries have strengthened their monetary policy frameworks in recent years to keep the rate of inflation in check. Some of them have adopted an inflation target and use the policy interest rate as the main tool to achieve that target.
But how do central bankers know whether monetary policy is expansionary or contractionary? Policymakers would need to know how the current policy rate compares to a benchmark or neutral rate.
The neutral interest rate is the real interest rate consistent with the economy operating at full employment and stable inflation. If the economy is operating above its potential capacity and inflation is rising, policymakers should increase the policy interest rate above the neutral level to cool down the economy. Conversely, if the economy is operating below its full employment level, interest rates may need to be lowered below the neutral level.
Filed under: Economic research, Emerging Markets, Employment, Español, Finance, growth, Inequality, Latin America, Low-income countries, Politics, Public debt | Tagged: Brazil, business cycle, Chile, Colombia, Costa Rica, EMBI, Evridiki Tsounta, Guatemala, inflation targeting, interest rates, Mexico, monetary policy, neutral rate, Nicolas Magud, Paraguay, Peru, the Dominican Republic, Uruguay | 3 Comments »
Posted on June 17, 2012 by iMFdirect
By Gustavo Adler and Camilo E. Tovar
(Version in Español)
Latin America has a long history of accidents that have occurred while navigating turbulent financial international waters. With risks looming over the world economy, should the region worry about new global financial waves?
Global financial markets have seen frequent bouts of severe stress since 2008, although this isn’t really anything new for the region. Global financial shocks have occurred on average every 2½ years since 1990, with significant effects on Latin America.
But how costly are these shocks in terms of domestic output, and is Latin America better placed to cope with them this time?
In Chapter 3 of the IMF’s latest Regional Economic Outlook: Western Hemisphere, we analyze whether changes in underlying fundamentals have made the region more or less vulnerable over time. The analysis, which complements our work on the effects of terms-of-trade shocks, looks at what country features and policies make a difference. We focus here solely on the impact of the financial shocks by isolating the effect from commodity prices and global demand shocks.
Filed under: Economic Crisis, Economic outlook, Economic research, Emerging Markets, Employment, Español, Financial Crisis, Globalization, growth, Investment, Latin America, Politics | Tagged: boom and bust, Brazil, Camilo E. Tovar, exchange rate, financial integration, Gustavo Adler, Latin America, Mexico, regional economic outlook, shock, simulations, terms of trade, Western Hemisphere | 2 Comments »
Posted on May 29, 2012 by iMFdirect
By Gustavo Adler and Sebastián Sosa
(Version in Español)
The risks that policies and shocks in major economies can spillover on other countries and regions have become a matter of renewed concern since the global crisis of 2008–09. Brazil is South America’s giant; how important is its influence on neighboring countries?
Brazil accounts for 60 percent of South America’s output and its economic fluctuations are closely correlated with those of many of its neighboring countries. This would appear to suggest that economic activity in Brazil’s neighbors is strongly influenced by Brazil’s business cycle.
But these close comovements could also reflect common global factors that affect all South American countries similarly, such as commodity prices, international financial conditions, and global demand.
Our latest Regional Economic Outlook: Western Hemisphere examines this question, quantifying the importance of spillovers from Brazil to the rest of South America.
Filed under: Economic outlook, Economic research, Emerging Markets, Employment, Español, Finance, Globalization, growth, IMF, Inequality, International Monetary Fund, Investment, Latin America, Politics | Tagged: Andes, Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Gustavo Adler, Mercosur, Paraguay, Peru, regional economic outlook, Sebastián Sosa, shocks, South America, Southern Cone, spillovers, transmission, Uruguay, Venezuela | 2 Comments »
Posted on February 10, 2012 by iMFdirect
By Nicolás Eyzaguirre
(Version in Español)
The IMF has sharply marked down its forecast for world growth and it now expects a mild recession in the euro area. Naturally, weaker world growth will affect economic activity in Latin America and the Caribbean.
Concretely, the Fund expects the world economy to grow by just 3¼ percent in 2012, ¾ percentage points lower than our September forecasts.
In contrast, our forecast for the U.S. economy for 2012 is unchanged, as incoming data signal a stronger—but still sluggish—domestic recovery that will offset a weaker global environment. Commodity prices will be affected by ebbing global demand, with oil projected to fall about 5 percent and non-oil commodities about 14 percent.
Filed under: Economic outlook, Economic research, Español, Financial Crisis, International Monetary Fund, Latin America | Tagged: bank lending, bond spreads, commodity prices, euro area, exchange rate flexibility, external financing, financial system stress, fiscal credibility, global demand, IMF, iMFdirect, International Monetary Fund, monetary policy, public debt, recession, sovereign spreads, world growth | 2 Comments »