Transcript

Washington, D.C.
October 11, 2013

Alejandro Werner, Director, Western Hemisphere Department
Jose Lizondo, Associate Director, Western Hemisphere Department
Miguel Savastano, Deputy Director, Western Hemisphere Department
Adrienne Cheasty, Deputy Director, Western Hemisphere Department
Gian Maria Milesi-Ferretti, Deputy Director, Western Hemisphere Department
Raphael Anspach, Communications Officer, Media Relations Division, Communications Department

MR. ANSPACH: Good afternoon. Welcome to this press conference on the update of the Regional Economic Outlook for the Western Hemisphere. This press conference is live and on the record, and we're also being webcast on IMF.org.

We have simultaneous interpretation in Spanish and English and Portuguese.

Before we start, let me introduce the speakers of today.

Right in the center, we have Mr. Alejandro Werner, who's the Director of the Western Hemisphere Department at the IMF. To his immediate right, we have Mr. Saul Lizondo, who's the Associate Director of the same department.

To the right of Saul, we have Miguel Savastano, who's Deputy Director in the Western Hemisphere Department.

To the left of Alejandro, we have Gina Maria Milesi-Ferretti, also a Deputy Director in the Western Hemisphere Department.

And finally, to his left, Ms. Adrienne Cheasty, also from the Western Hemisphere Department, also Deputy Director in that same department.

Before we start with your questions, Alejandro will have some brief introductory remarks.

Thank you.

MR. WERNER: Thanks, Raphael, and thank you for being here.

Welcome to the press conference. It is my understanding that the Regional Economic Outlook is already out and has been in our Web. So, let me go first to the global outlook.

As you know, from the World Economic Outlook, global growth is projected to remain at 3 percent in 2013, picking up to 3.5 next year, and the growth momentum, as has been repeatedly mentioned in these meetings, is shifting from the emerging markets to the advanced economies.

In the United States, growth is expected to pick up by 1 percentage point next year as the recovery in housing prices supports private demand, and the fiscal drag subsides.

Japan has seen a vigorous rebounding activity, and the euro area is finally emerging out of its recession. It will show positive growth going forward.

On the opposite side, growth in emerging markets has decelerated from cyclical peaks and is projected to remain below the high rates we have seen in the last decade.

China's economy, for instance, is now projected to grow at 7.25 next year. Still a very high rate, but significantly below the--I mean, north to 10 percent rates that we used to see in that country, and that's obviously very significant for the Region.

With respect to Latin America and the Caribbean, growth in this Region remains in low gear, held back but a less supportive external environment and, in some countries, domestic supply side constraints.

Overall, the Region is expected to grow by 2.75 by 2013, the lowest rate in four years, with domestic demand remaining the main driver. Growth is projected to pick up in 2014 to 3 percent, and we'll remain well below the cyclical rates we have seen in the aftermath of the global financial crisis.

Going to some of the large economies in the Region in Brazil, we are seeing a recovery from the low rate of growth that we saw in 2012 and the slowdown that started in 2011. We're expecting growth at 2.5 percent for this year and this growth will be maintained relatively constant for 2013.

In Mexico, growth in the first half of 2013 has also surprised on the downside, reflecting weak external demand and unexpected decline in construction, and in construction and a contraction in public spending. Most of these factors are expected to be transitory and growth to go back to an expected level of 3 percent next year.

In the rest of the Latin America, growth has continued to moderate on the back of both cyclical and structural factors.

Economic activity has been affected by sluggish external demand and, in some cases, domestic supply constraint.

At the same time, external current account deficits have widened further in many economies, even though, I mean, commodities have adjusted, we are observing historically very high commodity prices.

What are the downside risks to the outlook that we are seeing? We think that the Region remains vulnerable to declining commodity prices.

Commodity prices have softened this year, but, remain at relatively high levels and very sensitive to changes in growth perspective in emerging Asia.

Furthermore, uncertainty about the pace of normalization of monetary policy in the U.S. could trigger new bouts of financial volatility.

As the past few months have shown, markets may react sharply to perceived changes in the policy outlook, creating large swings in capital flows and asset prices. Today, the Region is much better placed to withstand these types of shocks than what we saw in the past.

However, these recent developments have highlighted the sensitivity of funding costs in many countries to changes in the global environment.

In addition, failure to promptly erase the debt ceiling in the U.S. next week could inflict serious damage to the global economy.

What are the main policy challenges? The first one is to preserve macroeconomic and financial stability in a much more complex external environment.

Over the past decade, growth in the Region was propelled by two strong tailwinds: record high commodity prices and extremely low funding costs. Both of these factors have started to change. They still remain pretty supportive for growth, but they're moving in the opposite direction.

To adjust to these new environments, macroeconomic policies need to be calibrated appropriately. Even though growth is moderating, output levels are close to potential. We saw some limited spare capacity in most of the financially integrated economies in the Region.

Policymakers, therefore, should resist the temptation for adopting expansionary policies to counter growth moderation. Fiscal stimulus at the current juncture would merely weaken public finances and further increase external account deficits.

Instead, the focus should be on building strongly fiscal buffers which will allow countries to respond to adverse shocks that may come in the future.

Meanwhile, flexible exchange rate, as many countries have been using them to adjust to the increasing international interest rates and monetary policy where there is space and the inflationary outlook permits it, should provide the first line of defense to downside risks.

Second, strong and proactive financial sector regulation and supervision will be crucial to safeguard domestic financial stability in an environment of slower growth and more volatile capital flows, exchange rates, and interest rates.

As I said before, I think a key difference with the past is a flexible exchange rate environment that we're leaving that helps to buffer the impact of volatile portfolio flows in a very efficient way and allows the elimination of the one-way bets we used to see in our Region in the past.

I mean, we cannot repeat enough that strong fundamentals and strong, credible policy frameworks will remain the key factors to withstand this change in the global environment.

Also, structural reforms to raise productivity to increase savings and increase investment individually will be key. To substitute for these external tailwinds that are subsiding and to the fact that these economies are very close to potential, what we need to do is to increase potential GDP growth and for that, I mean, a structural reform should be key.

In the non-financial integrated commodity exporters, particularly those with weaker policy frameworks, policies should aim at normalizing the highly expansionary policies implemented since the international financial crisis, strengthening monetary and fiscal policy and frameworks will be key. And also, I mean, it cannot be stressed enough, that reconstruction, the institutional setup of these economies will also be very important to reestablish policy credibility.

In Central America, gradual fiscal consolidation is crucial to reduce public debt and increase fiscal space in most countries. Efforts should focus on containing current expenditure and focusing on untargeted energy subsidies that are extremely high in some countries. In some cases, mobilizing revenue to meet infrastructure and social needs will also be important. Greater exchange rate flexibility should also be sought to adjust to the more volatile financial landscape, and efforts to available local financial markets and lift barriers to competition, especially in agriculture and electricity, would be very important to boost productivity and potential GDP growth.

Finally, on the Caribbean, fiscal, external, and financial vulnerabilities remain significant in a number of economies, especially those that are highly dependent on tourism. What is needed is a comprehensive growth agenda built around structural reforms to increase competitiveness. Fiscal consolidation is essential to put these countries' debt in a sustainable and declining path.

Another priority is to strengthening the financial sectors, consolidating supervision, and monitoring the evolution of balance sheets of their institutions.

Summarizing, the main challenge for our region in the coming years is to preserve macro and financial stability in a less favorable external environment and to build strong foundations of sustainable growth, focusing on the micro aspects of the growth process.

In our complete Regional and Economic Outlook that is being posted in the website, we have, the detailed forecast and descriptions of the main trends that we have just discussed.

With that, I will conclude these opening remarks, and we can move to the Q&A.

MR. ANSPACH: Thank you very much, Alejandro.

I would like to open the floor for questions.

QUESTIONNER:

I have two questions. One, in general, has to do with the report from yesterday. I had a question about the tone given by the World Bank on the Region. Some people are seeing it as being rather more optimistic, and it would seem that the IMF, perhaps, has a different view than the World Bank. So, I'd like to understand how you view the growth and whether perhaps you are less optimistic than the World Bank.

My second question relates to Argentina. A few days ago, you spoke about the dialogue taking place with the authorities concerning the price index, and I'd like to ask what progress has been made. You have indicated that you're reviewing the information received, so I wondered if there's any update or any news on that?

MR. WERNER: On the first question --maybe it was Augusto de la Torre who presented it —and maybe he's a little bit more cheerful, but I think when you look at the numbers, we basically share the same view for the Region, both qualitatively and in terms of projections.

So, I think it's a very similar outlook. Let me perhaps qualify our view. I mean, we're saying that tailwinds are subsiding. These countries are going to be facing a less benign external environment. But from a historical perspective, we will still be facing very low interest rates, international interest rates, and we think supply of capital, and still very high commodity prices, and a U.S. economy that will be doing better.

So, it's more an issue of recognizing these changes in the trends and adjusting to them, but it's still less supportive environment for Latin America.

However, what we have seen in the last few years is that in this very benign environment, there have been significant increases in government expenditure. In the last few years, some deterioration on the fiscal balances, et cetera.

So, these trends should not continue in an environment in which external factors are less benign, and I think that's very important to highlight, [that] we also have to accommodate to the fact that GDP growth will continue to be high by historical standards, but not as high as we have seen on average in the last eight years. That's an expansion of what we said, and I think in general it's similar to the way the World Bank is looking at the Region.

With respect to the dialogue whit the Argentinean authorities, the dialogue has continued, the exchange of information has continued, [and there] has been a constructive dialogue. With all the information that we have gathered, and our understanding of the advances that are being made in the construction of the national CPI, we will be writing our report to the Board that has to be ready in mid-November. And after that, the Board will eventually schedule their discussion, and once the Board reaches a decision on how to move forward, we will communicate it. That is the state in which these discussions are, there has been a constructive dialogue, and we will continue exchanging information while we write this report.

And going back just one point to the Region, in 2013, the two largest economies in Latin America are experiencing relatively low growth, and that obviously is generating that the Region as a whole is experiencing this very low growth as a whole. We have Brazil with 2.5 [percent] and Mexico that we are expecting growth to be at 1.2 percent. So, that significant influences the average for the Region.

MR. ANSPACH: Thank you, Alejandro.

We'll go on the left side. So, continue with Sylvia and then the lady in the back, please.

QUESTIONNER: I would like to know if the work that is being conducted right now, do you believe it's possible that in November or late next year, the censure motion against Argentina might be lifted?

My other question is whether there's any dialogue taking place, if some progress has been made concerning Article 4 for Argentina or has that not been addressed?

MR. WERNER: [Through interpretation] With regards to the consumer price index, it's what I said. There's been an exchange of information and the Board will have to decide--[in English]-- with a report that will be written how to move forward. So, there's nothing more to add in that respect.

With respect to, let's say, a more policy-oriented dialogue, we haven't had any type of interchange. We basically have been working only on the CPI issue.

QUESTIONNER: [Through interpretation] I have several questions concerning some Caribbean countries.

Let me begin with Grenada. If you'd kindly give us an update as to the letter of intent, how the discussion is evolving and whether the IMF has any problem with the parri passu issue. We'd like to understand your views.

And with regards to Mexico, how do you qualify the country's response and could the Fund perhaps address the issue of the climate crisis.

And with regards to the Dominican Republic, could you tell us what view you have about the development of the electrical sector.

MR. WERNER: On Granada, the team is working with the authorities and we will not comment on the ongoing dialogue that is taking place between us and them.

With respect to Mexico and these weather-related events, we think the country has all the instruments to respond to these events. They have done it quite efficiently and they have worked on weather insurance, catastrophe insurance themselves, with the World Bank, as well, et cetera.

In the dialogue that the teams have with them, it has not been an issue with them in the relationship with the IMF. We think the government has responded well to the situation.

And as I said, basically, they have been working for a long time to set up a financial and budgetary instruments to address these elements.

With respect to the Dominican Republic, maybe Miguel can get a little bit more in the details of the electricity subsidies and the energy sector.

MR. SAVASTANO: Sure. Well, the government of President Molina [took office] last year said they were going to work on developing a strategy for the sector.

The recommendations from the World Bank and from the International Monetary Fund as to how to reform the sector where available to him and he said he would take it into consideration and develop a new one.

So far, he's trying to reform the sector without making changes into the pricing system by allowing new firms to go to the generation of electricity.

And but, so that strategy is the one in which they seem to have embarked on, and it might generate results in terms of expanding the supply of electricity, but in the meantime, the costs to the budget of the subsidies are still there. So, that's something that the government has to still to reckon with.

QUESTIONNER: [Through interpretation]

I'd like to ask about Venezuela. I'd like to understand why the forecast has improved to 1 percent compared to April, which was .1. What was the factor that led to this improvement?

Also, I'd like to know if, under the new administration, under President Maduro, is there any change, any perspective of there being an Article 4?

And is there any policy recommendation, or has the devaluation carried out thus far been sufficient or not?

MR. WERNER: Let me make a general comment, and maybe Adrienne can comment a little bit more on the specific [question on the data].

On the specific projections for Venezuela, just we're seeing macroeconomic imbalances in Venezuela get wider and wider. Inflation numbers have been creeping up significantly, and shortages and bottlenecks in the economy have gotten more acute. We share the view that I think is generalized between international observers, that the situation is getting more and more complicated, and that eventually a significant adjustment will be needed, and whatever that has been done up until now is not sufficient.

We [say] that based just on the information that we have available, because as you know, we haven't had an [Article IV] consultation with them in a long time, and we are open to reengage in a dialogue and help the Venezuelan authorities whenever they deem it appropriate and they want to reach out to us.

Maybe Adrienne can comment a little bit on the specific projection, but in the general context, I think in the economy we're seeing increasing inflation, huge balance of payment pressures, and a very significant decline in the rate of growth from what we were seeing a few years ago.

MS. CHEASTY: Specifically on the change in the projection, after the presidential election, we had expected more of a retrenchment on the fiscal side than has actually happened.

And so, the somewhat higher growth is driven by the engine of public spending that still remains high, but as Alejandro said, it's a difficult situation. It probably is not sustainable.

QUESTIONNER: [Through interpretation] Good morning. My question is the following: In the World Bank yesterday it was said that the exchange rate was going to work to absorb the crisis, what is coming, but in Central America, it may not be as effective in terms of managing foreign exchange policy.

Costa Rica has a problem of high indebtedness, 40 percent of GDP. What would you recommend for Costa Rica taking into account that, on the fiscal side, not much can be done, on the side of exchange policy, neither. And in terms of monetary policy, we have the dollar inflow and the--given the money laundering, which means that it affects the currency. What would be your specific recommendations for Costa Rica and Central America?

MR. WERNER: [Through interpretation] Some initial comments and then my colleagues will expand in terms of the various countries.

To focus on the question on Costa Rica, I would say one is what the recommendation is and another thing is what could be viable, given the political situation or the present circumstances.

Our recommendation has to be based on what we think the economy needs, and then the authorities will have to decide and the political and social situation in the country will determine how and when these measures are implemented. In that regard, I would say that the most important issue in the Costa Rican economy today is the fiscal issue. And fiscal consolidation is what we have been recommending in our consultations and what we see as the most appropriate.

Secondly, in terms of the exchange rate, we think, and we have said so in the past, that you have to continue with higher [inaudible] and bearing in mind inflation, and it has to be done gradually, as other countries in the Region did. And as you mentioned, the exchange rate is not as effective, as it was not in the economies of Colombia, Mexico, Chile 12 or 15 years ago. In those economies, we also saw what at that time was called fear floating, and there were many concerns, also, in terms of the changes in the balance sheets of corporations in terms of inflation, expectations, confidence in the economy. And these countries, over a long period of time and establishing an institutional scheme for monetary policy, they were able to decouple the exchange rate based on expectations and the feeling of consumer confidence, investor confidence, et cetera, also, workers, in terms of setting salaries.

And I think that that is the direction which should be followed by those countries which consider that having a flexible exchange rate is the best option for their countries, and I would emphasize that, for most Central American countries the most important challenge in the short and medium term is the fiscal challenge, obviously together with the growth challenge. These are economies which have grown little in the last few years, and the agenda has to be focused on a clear strategy of economic growth.

But we cannot leave aside necessary fiscal adjustments, especially when we see that international capital markets are going to be more complex and will probably go back to better discriminating among countries. There was a time when that differentiation was less given the low interest rates and high liquidity, but we're now going back to a period of greater discrimination among countries [by markets].

MR. LIZONDO: I don't have much more to add, , in terms of the need for some fiscal adjustment and fiscal consolidation, say, that you can find in Honduras, for example, or El Salvador.

So, this is something that is one of the issues in the Region, and also the question about flexibility in the change market is also something that we've been recommending for a while.

And while it's true that at some point one can say it's difficult to undertake fiscal consolidation, you reach the point in which the market forces you to do something.

QUESTIONNER. In order to analyze seriously, a question that has to do with social pressures in Brazil. We've seen it in the last three or four months. At the same time, we have an energy crisis in Argentina, with important energy deficits, which account for the fact that the country needs more economic resources, a strong currency to continue to operate.

My question is, how do you view the question of monetary issuance in these countries, Brazil and Argentina, to face up the social problems as well as the energy problems, and which affect the inflation rate for next year?

MR. WERNER: [Through interpretation] On the question of Brazil, perhaps I said this in the initial comment, the way we look at the Brazilian economy, we see an economy which is recovering from 1 percent to 2.5 percent. It's recovering in 2013. It is low growth, but it is what we see, given the levels of investment and to GDP, which are about 18 or 19 percent, that is quite low for the Region.

The growth we have seen in productivity, we see that, given the structure of the Brazilian economy today, we would be expecting for 2014 and onward rates between 3 and 3.5 percent later on once the infrastructure program begins to show considerable effects on economic growth.

For ten years, from 2003 to now, there has been high economic growth in Brazil, over 4 percent on average. The Government of Brazil made important efforts to address important social problems. Poverty indicators decreased significant. New middle classes emerged, depending on how we look at it. This was also a significant development.

And in that regard, in periods where have had good economic performance, we see it in the indicators, but there's also a higher demand for services, which did not exist before. And basically, that is a very important challenge for countries to address these economic as well as social and political imbalances and to take public policy initiatives which improve the levels of education, the levels of public services, public transportation in Brazil, which was the trigger leading to many of these movements.

And clearly, we have a society which demands a lot more in terms of the quality of public services, and that is a good thing. At the end of the day, we have increased expenditures of many social and educational programs and so forth which are not at the appropriate levels of quality. We saw this in Chile, also people in the streets a few years ago. But then, today, we see it at the political sphere how to improve educational--the quality of education in that country.

And we have seen this in economies which have achieved macroeconomic stability, a higher level of economic growth but, at the same time, they have more Democratic societies, societies which are demanding more and more equality in public services.

In the case of Argentina, the situation is different. As I've said before, we did not have a policy dialogue, economic policy dialogue, with the authorities because of the balance of payment situation.

Today is generating considerable pressures which lead to the rationing of some products and services which can come from abroad and which create important supply side constraints, which can affect economic growth.

Yesterday, we were at an important forum. The Finance Ministers were there and Presidents of Latin American Central Banks.

They are looking at the public-private partnerships, but in Latin American countries, we are looking at these PPPs and they also--they have corruption, and we are speaking of poverty at these meetings, but corruption in Latin America is also making progress.

MR. WERNER: Well, in the public sphere, as well as in the public private sphere--the question of corruption and compliance are issues which are present and which governments have to address.

I couldn't comment beyond that. I think that it is an important question for the Region, and several governments are fighting it at different levels of intensity. I think that progress with respect to transparency is very important. But as we have more transparency and more participation on the part of civil society, I think that we will make significant progress.

QUESTIONNER: [Through interpretation] I would like to ask about Mexico. Is it possible to have fiscal reform as the one that is taking place to expand the base? How do you view that?

The Monetary Fund has recommended on many occasions the need to increase fiscal revenues and to reduce the dependency on oil revenues. Is this a good possibility and why are we seeing a return to rates of 3 percent for next year after the fall we saw this year?

MR. WERNER: [Through interpretation] Well, I'll answer quickly and perhaps Adrienne can go into further detail.

In terms of growth, we think that many other factors which explain the lower growth this year are temporary. An important part of the poor performance of the economy during the first quarter of this year has to do with the sluggish movement in international manufacturers, and this was country was severely affected by this. As I've said, the question of construction which is associated with the fall and public expenditures, this is explained somewhat by the changes which are traditionally seen in changes of administrations in Mexico, with delays at the beginning, especially in the construction sector.

But in that area, we see that the government has made important strides. In terms of manufacturers in the third quarter, we are seeing important recovery at the global level, and we therefore believe that that is a temporary phenomenon, and we are going--we are reverting to the rate of growth that we had forecast before the 3 percent surprise for next year. In terms of fiscal reform, we think that the government has made an important effort to expand the tax base, to increase non-oil revenues, and to continue strengthening the tax system. We will have to wait and see what is approved in Congress to enter into a more detailed analysis, and this will--is related to our Article 4 for Mexico.

I think that's November.

QUESTIONNER:

The Fund along the week recommended that Brazil has to boost investment in order to regain traction and expand at higher rates.

As you mentioned, there are capitals available in the world at low rates, and Brazil has huge infrastructure projects. Why hasn't Brazil been able to boost investment and regain traction in your opinion? Is there a lack of confidence in the Brazilian economy by businessmen and companies and investors?

And what are the roles that the fiscal constraints have been playing in this difficulty in raising investments?

MR. WERNER: I think the low investment rate in Brazil is a historical issue. Brazil has had low investment and low savings rates for a long time.

So, I think what we had in Brazil is a [longer] period of very good growth driven by many factors. However, we're going back to a situation in which the potential growth of the economy that it's determined by the growth in its capital is strong, driven by investment, and the growth in its labor force, driven by demographics, and the labor market, and it's already tight, imposes the scenario that we are looking forward.

In the last few years--and we have said this in the past, some policy uncertainty might have had some effect on the margin, on the slowing down the recovery of investment. We saw some pickup in the first half of this year in the investment ratio. And then, we think that the efforts that the government is doing to boost infrastructure will help improve the investment outlook and the investment climate in non-infrastructure, because it will significantly reduce transactions costs and improve logistics in the country.

Having said that--and you're right, the start of the infrastructure program has taken a long time. We have seen those types of problems in all of Latin America. Getting the projects ready, doing the concession auctions, et cetera, has run into severe problems in all of Latin America, because countries did not have the institutional capacity to launch the programs.

And also, once you have it, sometimes you get hit by international capital market shocks where infrastructure financing has become a little bit more complicated. And I think in Brazil we are seeing that eventually the program, as it is happening, will get off the ground, and we will have the medium-term effects that we think will be significant to put Brazil, as I was saying, in a few years, in a slightly higher growth path.

MR. ANSPACH: Thank you.

We have time for three more questions. I have this gentleman right there, and the gentleman with the glasses right there, and this gentleman here.

QUESTIONNER: For this year, we see a very different ranking of countries in terms of the growth of the Region, and I'd like to know whether you can group together countries in terms of how the Fund views those who are doing better work and those who are not doing as good an effort.

A lot has been said about necessary reforms, now that the tailwinds are not as strong. What countries require reform more? And what would these reforms be? Thank you.

MR. SAVASTANO: [Through interpretation] Well, Latin America, as you all know, is a very heterogeneous Region, and that's due to many factors, integration into capital markets, economic structure, dependency on raw materials, the size of the economies.

Then, this makes it very complex to try to group countries together by--or using any of these criteria for the grouping, and you didn't mention economic policies, which is another distinguishing factor.

But for many years, in various reports, we have tried to group them based on certain characteristics, and the groups we are using now are based on commodities--metals, in particular, which basically encompass all of South America and Mexico because of the oil.

The second factor is integration into the capital markets, and there the selection is larger. All the Latin America economies have access to capital markets, but there are six which have a more fluid access: Brazil, Colombia, Chile, Peru, Uruguay, and Mexico. Within these two, Brazil and Mexico, are 60 percent of the Regional economy or perhaps more. So, what happens in Brazil and Mexico, when we look at an aggregate, will always be reflected in the total.

And then, we have three other groups. One is Central America. Central America does not export metals, basically. Its raw materials are basically food and its dependence--its access to capital markets is very limited as compared with South America, but it depends enormously on the demand in the United States and therefore the situation in the United States.

Then, you have the Caribbean, and its main area is services, tourism, and it depends on the tourists who come.

And some countries I have not mentioned in South America, and you know which ones they are--which export raw materials but which are not very integrated into capital markets, basically because the policies they have followed have separated them from the capital markets.

This long explanation is because those which are not integrated into the capital market are the first ones who are not doing things right, because there is no other structural reason or, based on size, why these countries could not benefit from access through the capital markets.

Within the other groups, the six countries I mentioned integrated into the capital markets and with raw material exports, in recent years, have been doing things quite well. There are fluctuations which we have discussed, but their performance is really very good and, in some cases, exemplary.

Then, we have Central American economies which, as was mentioned a moment ago, those economies have not benefitted from these positive winds, but since the global crisis, they have tried to mitigate the effects of the absence of American demand, of U.S. demand, through fiscal policies. And the situation is more complex than in the rest.

And the Caribbean, we find a more complex situation because they entered the global crisis with a very compromised fiscal situation, and many of those economies have grown very little or nothing at all, and the fiscal situation continues to be as complex as before.

QUESTIONNER: [through interpretation]

What financing options are available to the government of Honduras in the short term? There has been talks about placing more bonds in foreign markets?

And then, my second question is what growth prospects are there when coffee prices have dropped, which is the main export--one of the main exports--of the country?

MR. LIZONDO: Concerning financing, the government is thinking about having access to international markets or domestic market.

There's also the possibility of obtaining financing through the central bank.

Insofar as financing is done via access to international markets, this perhaps could address the problem. And with regards to using the central bank financing, this would entail additional complications.

So, on the one hand, as I said a moment ago, there is a situation that relates to the fiscal deficit and the need for fiscal consolidation.

On the other hand, the financing problem is more of a short-term issue and that is what needs to be tackled in the near future.

Concerning growth, yes, the economy has suffered the impact from what's occurring in the international scenario, and also given the problem with coffee harvest due to rust, and what we anticipate for next year is growth similar to this year and that is somewhat under 3 percent.

QUESTIONNER: Good afternoon.

First, in Kitts and Nevis, the country has implemented the IMF program for the last few years, has been reporting well on that, and that program ends next year.

What would you suggest for a country like St. Kitts and Nevis, a very small country, to avoid doing so as not to return to the previous debt situation?

Also, if you could give us--if the IMF is aware of the state of unemployment in St. Kitts and Nevis where we haven't been getting figures locally. So, we just wanted to know if IMF has received or been monitoring that situation.

Regarding Nevis, they had a government change earlier this year. They took some measures to reduce expenditure; however, there have been concerns from other forces, opposition forces that the expenditures have actually gone up. Can you say whether or not indeed, based on the general overview of Nevis if--whether or not the government has increased expenditure at the start of the year?

MS. CHEASTY: Thank you for that question.

St. Kitts and Nevis have done very well under the program. The fiscal deficit has come down. In fact, there's a surplus this year.

And so, our advice would be to continue on this very good track of maintaining prudent fiscal policies. The debt is coming down and we hope this continues. The debt is still very high.

On unemployment, we don't have great figures, either. That's--labor statistics are a difficulty in the Caribbean, but what we do see is that growth is returning. Construction has gone up a lot, and we've heard specific information about various projects where employment has increased a lot.

On Nevis, we've been assured by the government that expenditure is being reduced this year. And so, we believe their finances are strengthening, as well.

MR. ANSPACH: Okay.

Well, with that, I would like to conclude. I apologize to those that didn't have an opportunity to pose a question, but as you saw, there were many.

Thank you.