WASHINGTON – Latin American countries have a weak fiscal position and less room to maneuver than before in responding to the current recessionary climate, the chief economists for the region from the International Monetary Fund and the World Bank said on Thursday.
All of the region’s economies are in a weaker fiscal position than they should be, Alejandro Werner, the IMF’s Western Hemisphere director, said during a panel discussion on the region’s economic prospects at the 20th annual conference of the Development Bank of Latin America, or CAF, in Washington.
Werner said that situation was generating significant risks now that the China-led commodities boom has abated and after Latin America’s political class grew accustomed to governing in times of abundance in the previous decade.
During that recent period of high prices for raw materials, governments did not concern themselves greatly with public spending efficiency, Werner said, adding that it is important to review efficiency levels in the current economic cycle and implement structural reforms.
In July, the IMF forecast that Latin America would contract by 0.4 percent this year, its second straight year of negative growth.
The World Bank’s chief economist for Latin America and the Caribbean, Augusto de la Torre, also said the countries of the region had less room to maneuver on the fiscal front, though adding that the situation was not the same in every country.
He said Argentina was taking a gradual approach to correcting its budget deficit while warning that Brazil will not achieve solid growth without a major fiscal adjustment.
De la Torre added that the fiscal situation of Chile, Peru and Colombia was less problematic and they therefore have more room to maneuver in terms of spurring growth.
The World Bank economist said Latin America was facing the problem of charting an export-oriented path to growth at a time when the global trend is against trade liberalization.
Also taking part in the panel were Alicia Barcena, executive secretary of the United Nations Economic Commission for Latin America and the Caribbean; Chilean former Finance Minister Alejandro Foxley; and CAF President Enrique Garcia.