Tough Choices as Well as Opportunities for Latin America

SUMMARY

Despite the challenges posed by the ongoing economic slowdown in Latin America, the current difficulties may also open up new opportunities for tackling deep-seated problems, participants said at a conference on Latin America.

 
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  • Growth continues to slow in Latin America, modest recovery expected in 2016
  • Conference examines key issues confronting the region and policy priorities
  • Region should focus on policies that promote productivity and investment
  • The high-level conference on “Rising Challenges to Growth and Stability in Latin America in a Shifting Global Environment” was held in Washington, D.C. on June 1.

    The one-day gathering, hosted by the International Monetary Fund, brought together regional experts, leading academics, senior policymakers, as well as IMF staff to discuss the current difficulties facing Latin America and policy priorities for the region. The conference is part of a series of IMF-related events in Latin America in preparation for the 2015 IMF and World Bank Annual Meetings in Lima, Peru.

    “The conference is an important opportunity to take things forward: to hear your views so that together, we can frame an agenda for Lima that can help us navigate the challenges we face—and claim the brighter future that awaits the region,” said IMF First Deputy Managing Director David Lipton in his opening remarks to the conference.

    Slowing growth, despite some divergence across countries

    Economic activity in Latin America has been slowing down for several years. Regional growth is expected to dip below 1 percent in 2015, followed by a modest recovery in 2016, said Alejandro Werner, Director of the IMF’s Western Hemisphere Department.

    Panelists pointed out that, despite the slowdown, there are significant differences across the region. Arminio Fraga, former President of the Central Bank of Brazil, argued that countries with strong macroeconomic fundamentals generally had more favorable prospects in the current environment. Countries in the north would also benefit from their strong ties to the United States, while South America is suffering because of its dependency on commodities, explained Guillermo Ortiz, former governor of the Bank of Mexico.

    Charles Collyns, Chief Economist and Managing Director at the Institute of International Finance, added that it was likely that three of the largest economies in Latin America—Argentina, Brazil, and Venezuela—will be in a recession this year. Mario Blejer, former governor of the Central Bank of Argentina, warned that Latin America, like emerging markets more generally, has “lost its dynamism.”

    Managing the slowdown

    The conference considered the reasons behind the slowdown in Latin America and discussed looming...

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