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.