Navigating Through Global Cross Currents: Latest Outlook for Latin America and the Caribbean

Event onlyBy Alejandro Werner

Versions in Português (Portuguese), and Español (Spanish)

The global landscape has changed since our last update in October 2016. These changes have been mainly shaped by:

  • An anticipated shift in the U.S. policy mix, higher growth and inflation, and a stronger dollar. In the United States—while potential policy changes remain uncertain—fiscal policy is likely to become expansionary, while monetary policy is expected to tighten faster than previously expected because of stronger demand and inflation pressures. As a result, growth is projected to rise to 2.3 percent in 2017 and 2.5 percent in 2018—a cumulative increase in GDP of ½ percentage point relative to the October forecast. The expected change in the policy mix and growth has led to an increase in global long-term interest rates, a stronger dollar in real effective terms, and a moderation of capital flows to Latin America.
  • Improved outlook for other advanced economies and China for 2017–18, reflecting somewhat stronger activity in the second half of 2016 as well as projected policy stimulus.
  • Some recovery in commodity prices, especially metal and oil prices, on the back of strong infrastructure and real estate investment in China, expectations of fiscal easing in the United States, and agreement among major petroleum producers to cut supply.

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Citizenship for Sale

By iMFdirect

A suitcase filled with multiple passports? That’s not just the stuff of spy movies anymore. Increasingly, a growing number of high-net worth individuals are looking to have a passport portfolio. This has led to a proliferation of so-called citizenship-by-investment or economic citizenship programs that allow individuals from all over the world to legitimately acquire passports.

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Unemployment: Troubles Ahead for Emerging Markets

By Prakash Loungani and Zidong An

Version in Español (Spanish)

Forecasts of real GDP growth attract a lot of media attention. But what matters more to the person on the street is how growth translates into jobs. Unfortunately, the mediocre growth outlook of recent years may lead to a disturbing outlook for jobs, particularly among fuel-exporting countries and in the Latin America and Caribbean region.

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

Event only

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). (more…)

By | January 22nd, 2016|Economic outlook, growth, IMF|0 Comments

Trading Out of Trouble in Latin America

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.

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The Road to Lima: Paved with Blogs

By iMFdirect

This year’s IMF Annual Meetings are going on the road…to Lima, Peru.  All the big debates will focus on economics, finance, inequality, financial inclusion, emerging markets, commodities and many more.

Since you’ve been reading gossip magazines at the beach busy this summer, we thought you might like a handy refresher on some of our blogs in recent months about Latin America.

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From Windfall to Windmill: Harnessing Asia’s Dynamism for Latin America

By Andre Meier and Fabiano Rodrigues Bastos

(Versions in Español and Português)

Latin America’s recent economic fortunes highlight the region’s closer economic ties with Asia. China, in particular, has grown into a crucial source of demand for Latin American commodities over the past two decades, providing significant gains to the region. The flip side is that the ongoing structural slowdown of Chinese investment is weighing considerably on the prices of those commodities, and the countries that export them.

But Asia can be much more than just a source of episodic windfall gains (and losses) for Latin America. Like a windmill, Asia could help to power a stronger Latin American economy—by providing an example of successful regional trade integration and through greater direct links across the Pacific that benefit both sides. However, securing these benefits will require clear and realistic objectives, a long-term strategy, and attention to the political and social implications of greater economic integration. 

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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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Commodity Blues: Corporate Investment in Latin America

Nicolas MagudBy Nicolás Magud

(Versions in Español and Português)

Private investment has been decelerating throughout emerging markets since mid-2011, and Latin America has been no exception (see Chart 1). This trend has raised concerns not only because weaker investment has played an important role in the broader regional slowdown, but also because Latin America’s investment rates were lower than in most other regions even before the slowdown began.

Slide1

This blog looks at the drivers of corporate investment and highlights the extent to which falling commodity export prices have contributed to lower capital spending. Given the poor outlook for commodity prices and what our analysis suggests, this does not bode well for countries in the region going forward unless they can tackle some of the long-standing obstacles to increase investment.

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