Continued economic growth forecast for Latin America; Chile, Colombia, Ecuador and Peru are bright spots

Oct 26, 2013

The economic future is bright for most Latin American countries according to the director of the International Monetary Fund’s Western Hemisphere division.

“Overall, we are expecting positive growth and a stable financial environment,” Alejandro Werner said Friday at a forum in Miami sponsored by the Latin Trade Group. He did however note that there has been a pull-back in growth in many of region’s economies.

Werner, sounded a caution, however and said that Latin American nations must be careful in managing their economies. The slowdown of the Chinese economy, falling commodity prices, high fuel prices and upcoming changes in U.S. monetary policies that will affect the domestic market, could all have a negative impact on the region’s fragile economies.

China has become a major player in many Latin American countries within the last decade, providing tens of billions of dollars in loans and investments in the region.

“The region is kind of slowing down to more normal and sustainable rates of growth, but this has to be handled prudently,” Werner said. “The policy framework should recognize that this is a new reality and not try to push through policy, fiscal or monetary, to achieve growth rates that are not aligned with potential growth.”

Among those who are doing relatively well he said, are Chile, Colombia, Ecuador and Peru. Those who could be doing better include Brazil and Mexico, which analysts say could still achieve it’s expected 3 percent growth rate. Slowdowns in construction and manufacturing and other reforms have put Mexico at just 1.2 percent, which is contributing to an overall lower than expected growth rate for Latin America, Werner said.

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Meanwhile the tourism-dependent Caribbean is also a concern even as the U.S. and Europe are on the mend. So far, those economies are growing at a paltry 1 percent, with a number of Caribbean nations including Jamaica having to turned to the Fund for financial help.

“The tourism dependent Caribbean faces a very difficult challenge of jump starting growth,” Werner said.

The Fund is also keeping an eye on Haiti, whose finance minister recently traveled to D.C. to meet with fund members. While Haiti’s economies is growing, concerns over the business environment remains. The parliament recent rejected the budget for this fiscal year, which included many new taxes and the Customs just reopened after a strike that went on for nearly two weeks.

“The region is decelerating a bit as the economy goes back to a more normal sustainable growth level,” he said.

Credit: Parts of the article are reposted from the Miami Herald, www.miamiherald.com

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