The Key to Raising Business Investment: Keep Pushing the Accelerator


David Lipton By David Lipton 

Why have businesses in advanced economies not been investing more in machinery, equipment and plants? Business investment is the largest component of private investment, and its weakness has puzzled many of us.

Some believe that the key to more business investment is less uncertainty about fiscal policy, regulation, and structural reforms. Some believe that it is providing better financing, including for small and medium-sized enterprises (SMEs).

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Raising Long-Run Growth in Latin America and the Caribbean—A Complex(ity) Issue


By Fabiano Rodrigues Bastos and Ke Wang

(Versions in Español and Português)

Growth in Latin America and the Caribbean has weakened significantly over the last few years. Part of this weakness appears to be here to stay, and IMF economists have marked down medium-term growth projections. This story sounds eerily familiar, given the region’s past difficulties to improve its comparative growth performance.

Abstracting from the “golden decade” from 2003 to 2011, when rising commodity prices powered a strong expansion, why has the region been unable to sustain sufficiently high growth rates to catch up with more advanced economies? Part of the answer is Latin America’s modest success in branching out into more sophisticated—or complex—goods.

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A Watershed Moment for Latin America: Nine Takeaways from our High-Level Conference


Alejandro WernerBy Alejandro Werner

(Versions in Español and Português)

Latin America has reached a critical moment. So much better off than two decades ago, and still facing deep-seated problems that get in the way of sustained strong growth and economic development. To better understand these problems from countries’ perspectives, and explore ways the IMF and others can help address them, we brought together experts from the region and beyond—central bankers, finance ministers, and academics—for a high-level conference in Washington, D.C. earlier this week.

Under the theme of “Rising Challenges to Growth and Stability,” participants engaged in lively debates about the current difficulties facing Latin America and the policy priorities for now and the future.

Here are my main takeaways from the event:

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Once in a Generation


Jeff Hayden altBy Jeff Hayden

World leaders will come together three times—in July, September, and December—to press for progress in the fight against poverty and to forge partnerships in support of better-quality life around the world.

In July, government officials and representatives from civil society organizations, donor groups, and the private sector will meet in Addis Ababa, Ethiopia, to secure the financing needed to lift millions out of extreme poverty.

The global community assembles again in New York in September to review progress under the Millennium Development Goals (MDGs), which expire this year, and to adopt new ones—the Sustainable Development Goals (SDGs)—that map out development through 2030.

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Reigniting Strong and Inclusive Growth in Brazil


2014MDNEW_04By Christine Lagarde 

(Versions in Español and Português)

Brazil has made remarkable social gains over the past decade and a half. Millions of families have been lifted from extreme poverty, and access to education and health has improved thanks to a series of well-targeted social interventions, such as Bolsa Familia, the conditional cash transfer program. I was privileged to see some of this tangible progress during my visit to Brazil last week.

I met with Tereza Campello, Brazil’s Minister for Social Development, who explained the network of social programs in the country, and guided us on a visit to Complexo do Alemão—a neighborhood and a group of favelas in the North Zone of Rio de Janeiro. We got there after a ride on the recently built cable car, which links several neighborhoods on the hills to the North Zone. This is a great example of infrastructure that has contributed immensely to improving the economic opportunities of people, who now have a quick way to move around and connect to the larger city. The stations themselves are also focal points of the efforts aimed at improving the daily lives of the people of Rio de Janeiro, since they house important services such as the youth center, a social assistance center, a public library, a training center for micro-entrepreneurs, and even a small branch of the bank that distributes the Bolsa Familia monthly grants.

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Securitization: Restore Credit Flow to Revive Europe’s Small Businesses


By Shekhar Aiyar, Bergljot Barkbu, and Andreas (Andy) Jobst

If financing is the lifeblood of European small businesses, then the effect of the financial crisis was similar to a cardiac arrest. The flow of affordable credit from banks was choked off and small and medium-sized enterprises (SMEs) were hit hardest. Today, with bank lending still recovering from that shock, smart policy actions could open up securitization as a source of financing to help small businesses start up, flourish and grow.

SMEs are vital to the European economy. They account for 99 out of every 100 businesses, two in every three employees, and 58 cents of each euro of value added of the business sector in Europe. Improving access to finance would therefore not only revive small businesses, but also support a strong and lasting recovery for Europe as a whole.

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Latin America and the Fiscal Stimulus: A Mild Hangover, Not Yet an Addiction


Alexander KlemmBy Alexander Klemm

(Versions in Español and Português)

Latin America is heading for tougher times. Regional growth is expected to dip below 1 percent in 2015, partly as a result of the drop in global commodity prices. How well placed is the region for the coming lean times?

Countries face this slowdown from much weaker fiscal positions than when the global financial crisis hit. Then, Latin America responded strongly with expansionary fiscal policies, including explicit fiscal stimulus programs in many countries. But, as growth has recovered, this increase in spending has proved difficult to reverse.

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