Latin America needs higher, more durable growth

• Pages: 17-22

Page 17

Latin America has recently made great strides in boosting growth and reducing inflation, and several countries have been able to repay loans to the IMF ahead of schedule. In an interview, new IMF Deputy Managing Director Murilo Portugal discusses Latin America's political economy landscape and how its repayment of IMF loans will change its relationship with the IMF. He says higher growth is essential to improve social conditions and support sound economic policies.

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Latin America needs still higher but durable growth

In December 2006, Murilo Portugal of Brazil joined the IMF's four-member management team as Deputy Managing Director, with broad responsibilities in running the IMF -including overseeing the technical assistance [TA] initiative.

Portugal, who until recently was Brazil's deputy finance minister, had previously served as an IMF Executive Director (1998-2005) representing a Latin American constituency and as a World Bank Group Executive Director (1996-2000). He shared his thoughts with Laura Wallace of the IMF Survey on Latin America's economic outlook and the TA effort.

IMF Survey: The whirlwind round of about a dozen presidential elections in Latin America is nearly over, just Argentina later this year. How do you see the political economy landscape shaping up? Any thoughts on negotiating programs with Peru and Nicaragua, now headed by 1980s presidents who had been extremely vocal critics of the IMF?

portugal: Democracy is thriving in Latin America-in fact, it's one of the most positive changes in the region of the past two or three decades-and presidential elections are a vital part of the process. Elected leaders not only have greater legitimacy, but they also have greater political strength to implement needed reforms. And the strengthening of democracy has gone hand in hand with better macroeconomic management and sound macroeconomic policies. Inflation has fallen, the increase in the public debt has been halted and even started to be reversed in many countries, and the region is more open and integrated with the world economy.

In addition, there's a widespread understanding that to improve social conditions a country needs to maintain macroeconomic stability. This thinking has held up even when there's been a shift in political power to more left-leaning governments, as in Chile, Uruguay, and Brazil. The two leaders you mentioned-President Garcia of Peru and President Ortega of Nicaragua-also exemplify this situation because they've both given very encouraging statements about the need to maintain macroeconomic equilibrium as a basis to continue to make progress on social issues. In fact, the IMF just concluded negotiations with the new Peruvian authorities on a new precautionary loan (see story on page 19). And we've had very good initial contacts with President Ortega.

IMF Survey: When Uruguay last year followed Brazil and Argentina in paying the IMF off early, there was talk of Latin America choosing to distance itself from...