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Rising Latin American Corporate Risk: Walking a Tightrope

By | May 25th, 2016|Emerging Markets, Fiscal, IMF, International Monetary Fund, Latin America, Uncategorized|

By Carlos Caceres and Fabiano Rodrigues Bastos

Versions in Português (Portuguese) and Español (Spanish)

The rapid increase in Latin American corporate debt—fueled by an abundance of cheap foreign money during the past decade—has contributed to an increase in corporate risk. Total debt of nonfinancial firms in Latin America increased from US$170 billion in 2010 to US$383 billion in 2015. With potential growth across countries in the region slowing, in line with the end of the commodity supercycle, it will now be more difficult for firms to operate under increased debt burdens and reduced safety margins.

In this environment, Latin American firms are walking a tightrope. With external financial conditions tightening, the walk towards the other side—notably through adjustment and deleveraging—while necessary, has become riskier. After making good progress, the crossing has also become more perilous due to strong headwinds—including slower global demand and bouts of heightened market volatility.

Continue reading “Rising Latin American Corporate Risk: Walking a Tightrope” »

Learning to Adjust: The Effects of Currency Depreciations on Inflation in Latin America

By | May 11th, 2016|Advanced Economies, banking, International Monetary Fund, Uncategorized|

By Yan Carrière-Swallow and Bertrand Gruss

(Versions in Español and Português)

Falling global commodity prices and the normalization of monetary policy in the United States have contributed to widespread currency depreciations in Latin America. In theory, a falling currency is expected to create inflation by driving up the price of imported goods and services—triggering what economists call exchange rate pass-through.

Continue reading “Learning to Adjust: The Effects of Currency Depreciations on Inflation in Latin America” »

Imagine What Fiscal Policy Could Do For Innovation

By | March 31st, 2016|Fiscal, Fiscal policy, IMF, International Monetary Fund, technology|

By Vitor Gaspar and Ruud De Mooij

Versions in عربي (Arabic), 中文 (Chinese), Français (French), 日本語 (Japanese), Русский (Russian), Español (Spanish)

Imagine how three-dimensional printing, driverless cars and artificial intelligence will change our future. Or think of how developments in information technology, e-commerce and the sharing economy are already changing the way we learn, work, shop, and travel. Innovation drives progress and, in economic terms, determines productivity growth. And productivity growth, in turn, determines prosperity. It impacts our lives and well-being in fundamental ways: it determines where and how long we live; it determines our quality of life. Continue reading “Imagine What Fiscal Policy Could Do For Innovation” »

Elif Ture

By | February 8th, 2016|

Elif Ture-IMFElif Ture is an Economist in the Fiscal Affairs Department of the IMF, currently covering the fiscal sector for Afghanistan. She was previously an Economist in the IMF’s Western Hemisphere Department, taking part in the Bolivia, Chile and Uruguay teams. At the IMF, she worked on policy issues and analytical projects related to sustaining strong and inclusive growth, and fiscal risk from contingent liabilities. Her research areas include financial sector and macro-financial linkages.

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Latin America and the Caribbean in 2016: Adjusting to a Harsher Reality

By | January 22nd, 2016|Economic outlook, growth, IMF|

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Alejandro Werner

By Alejandro Werner

(Versions in Español and Português)

It’s been a rough start to 2016, as seen by the recent bouts of financial volatility, stemming from uncertainties related to the slowdown in China, lower commodity prices, and divergent monetary policy in advanced economies.

The global recovery continues to struggle to gain its footing, with strains in some large emerging market economies weighing on growth prospects. For Latin America and the Caribbean, growth in 2016 is now expected to be negative for the second consecutive year—the first time since the debt crisis of 1982–83, which triggered the “lost decade” for the region (see table). Continue reading “Latin America and the Caribbean in 2016: Adjusting to a Harsher Reality” »

Corruption: A Hidden Tax on Growth

By | November 5th, 2015|Annual Meetings, Economic outlook, Economic research, Emerging Markets, Financial regulation, Global Governance, Globalization, Government, IMF, International Monetary Fund, Latin America, Middle East, Politics, Reform|

By Vitor Gaspar and Sean Hagan

(Versions in Español عربي中文Français日本語, Русскийعربي)

In recent years, citizens’ concerns about allegations of corruption in the public sector have become more visible and widespread. From São Paulo to Johannesburg, citizens have taken to the streets against graft. In countries like Chile, Guatemala, India, Iraq, Malaysia and Ukraine, they are sending a clear and loud message to their leaders: Address corruption!

Policymakers are paying attention too. Discussing corruption has long been a sensitive topic at inter-governmental organizations like the International Monetary Fund. But earlier this month at its Annual Meetings in Lima, Peru, the IMF hosted a refreshingly frank discussion on the subject.  The panel session provided a stimulating debate on definitions of corruption, its direct and indirect consequences, and strategies for addressing it, including the role that individuals and institutions such as the IMF can play. This blog gives a flavor of the discussion.

Continue reading “Corruption: A Hidden Tax on Growth” »

Trading Out of Trouble in Latin America

By | November 4th, 2015|Advanced Economies, Economic Crisis, Economic outlook, Economic research, Emerging Markets, Español, Fiscal policy, growth, IMF, International Monetary Fund, Investment|

By Natalija Novta and Fabiano Rodrigues Bastos

(Versions in Español and Português)

Growth in Latin America and the Caribbean is suffering a double whammy—economic activity has slowed down sharply and the medium-term outlook continues to deteriorate. It is therefore not surprising that policymakers across the region are eagerly searching for ways to revitalize growth.

One answer may be more trade—both within the region and with the rest of the world. Our new study analyzes the export performance in developing and emerging market regions over the past two decades to assess the potential for future export growth in Latin America. We find evidence that most countries in the region “undertrade” compared to what standard models would predict. This has been an entrenched problem for almost a quarter of a century, partly as a result of the region’s geography and a legacy of protectionist policies.

Continue reading “Trading Out of Trouble in Latin America” »

Yan Carrière-Swallow

By | October 20th, 2015|

Yan Carriere-Swallow.IMFYan Carrière-Swallow is an economist in the Regional Studies Division of the IMF’s Western Hemisphere Department, where he conducts research and analysis on Latin America and the Caribbean. Prior to joining the IMF in 2012, he was an economist at the Central Bank of Chile in Santiago. His research focuses on international macroeconomics and emerging markets, and has explored the topics of investment under uncertainty, the determinants of monetary policy autonomy, the design of macroeconomic policy frameworks, and methods for nowcasting macroeconomic variables.

 

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How to Manage the Commodity Roller Coaster

By | October 7th, 2015|Advanced Economies, Annual Meetings, Asia, Economic Crisis, Economic outlook, Economic research, Emerging Markets, Financial Crisis, Fiscal policy, growth, IMF, International Monetary Fund, Latin America, Public debt|

Vitor Gasparby Vitor Gaspar 

(Versions: عربي中文FrançaisРусский, and Español)

The world economy is experiencing important transitions and associated uncertainties.

  • Commodity prices have fallen sharply, with adverse consequences for exporting countries.
  • China’s rebalancing and the prospect of U.S. interest rate increases are having important and costly spillover effects on other economies.
  • And these and other factors are posing important fiscal challenges, especially for emerging markets.

Continue reading “How to Manage the Commodity Roller Coaster” »

Uncertain Times, Difficult Choices

By | September 28th, 2015|Advanced Economies, Annual Meetings, Economic Crisis, Economic outlook, Emerging Markets, Español, Financial Crisis, Fiscal policy, Globalization, growth, IMF, International Monetary Fund, Investment|

By Vitor Gaspar and Alejandro Werner              

(Versions in Español and Português)                                         

Latin America under stress

After a period of strong growth, economic activity in Latin America has slowed sharply. Growth among the six larger, financially-integrated economies—Brazil, Chile, Colombia, Mexico, Peru, and Uruguay—is expected to be negative this year. With heightened financial market pressures and limited policy space, the credibility of policy makers is being seriously tested. In this challenging environment, policy-makers in these six countries face some difficult questions: how to strike the right balance between smoothing the adjustment and strengthening credibility? What role should fiscal policy play in this new, uncertain and rapidly evolving environment?

These and other questions will be addressed at the Annual Meetings in Lima, Peru next week.  As we prepare for these meetings, we offer our thoughts on some of the pressing issues for Latin America.

Continue reading “Uncertain Times, Difficult Choices” »

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