Press Release: Statement at the Conclusion of the XII Regional Conference on Central America, Panama, and the Dominican Republic
November 22, 2013Press Release No. 13/468
November 22, 2013
The following statement was released today in San José, Costa Rica, by the First Deputy Managing Director of the International Monetary Fund (IMF), Mr. David Lipton; the President of the Central American Monetary Council, Ms. Marta Evelyn de Rivera; the President of the Central American Council of Superintendents of Banks, Insurance, and Other Financial Institutions, Mr. Alberto Diamond; and the Governor of the Central Bank of Costa Rica and host of the conference, Mr. Rodrigo Bolaños,
“The central bank governors, ministers of finance, and financial sector superintendents of Central America, Panama and the Dominican Republic, and representatives of the IMF met in Costa Rica November 21-22 to discuss the regional economic prospects and policies for mitigating vulnerabilities and raising sustainable growth. The conference focused on the challenges facing the region from weaknesses in the global economy; the importance of strengthening macroeconomic policies to manage downside risks; and the role of structural reforms to foster higher and more inclusive growth in the region.
“This year’s conference took place against a background of modest global expansion. Growth in advanced economies will likely remain in low gear in the near term, as these economies need to pursue fiscal consolidation, repair further their financial systems, and strengthen job growth. Participants agreed that the region will face continued moderate growth in external demand and tighter global financial conditions associated with the normalization of monetary policy in advanced economies. In this context, the region as a whole was then expected to expand at a moderate pace in coming years.
“Prudent policies taken by the countries of the region have safeguarded macroeconomic and financial stability, and supported a recovery in output in the aftermath of the 2008-09 global crisis, allowing the region to operate at near capacity in more recent years. Despite these achievements, participants shared the view that countries need to strengthen their policy frameworks and enhance their capacity to respond to future adverse shocks. There was agreement that countries should prioritize policies that lower fiscal deficits and secure public debt sustainability, while providing more assistance to the poor. To this end, and drawing on the Colombian economic experience, participants discussed the benefits of fiscal consolidation rules, including improvements on tax policy and adoption of medium-term expenditure frameworks. For the non-dollarized economies, participants felt that stronger foreign reserves, together with greater exchange rate flexibility, are essential to reinforce defenses against adverse shocks, and that greater financial autonomy for central banks would help consolidate low inflation in the region. While capital buffers remained adequate in the financial system, it is also important to strengthen financial safety nets and modernize supervision to cover for potential credit risks.
“Participants underscored the importance of raising living standards in the region towards the levels prevailing in advanced economies. Anchored on stronger policy frameworks, well-designed structural reforms need to increase domestic investment and boost job creation, which are essential to raise sustainable growth and reduce poverty in the region. With this goal in mind, discussions focused on how to enhance productivity and diminish informality through policies that both reduce distortions in labor markets and modernize business regulation.
“Participants commended the continued support provided by the IMF to the regional conference, which is an integral part of the policy dialogue between the region and the IMF. They also commended the technical assistance and training provided by the Central America-Panama-Dominican Republic Regional Technical Assistance Center (CAPTAC-DR), which has been made possible with the financial support of the Center’s sponsors. Lastly, participants conveyed their gratitude to the Costa Rican authorities for their hospitality and support to the success of the conference, and also to El Salvador for offering to host the next regional conference.”
IMF COMMUNICATIONS DEPARTMENT