Introductory Remarks at the IMF’s Western Hemisphere Department Press Briefing

IMF News, October 17, 2025

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The Regional Economic Outlook reviews how Latin America and the Caribbean have fared amid a changing and uncertain global environment and highlights challenges ahead.
Key date: October 17, 2025.
Press contact: PRESS OFFICER: Julie Ziegler. Phone: +1 202 623-7100. Email: MEDIA@IMF.org.

Growth in Latin America and the Caribbean:
- "projected to remain steady at 2.4 percent in 2025 and moderate slightly next year, with risks tilted to the downside."
External conditions described as "broadly supportive" with specific factors:
- Commodity prices have stabilized after a brief period of volatility;
- Financial conditions have eased amid declining sovereign spreads and a weaker US dollar;
- Regional exports have kept pace with global trends.
Labor markets remained robust, generally supporting private consumption in most economies.
Low trade exposure of many economies to the United States and lower tariffs compared with other emerging economies have provided buffers.

Macroeconomic policy calibration remains a challenge in several countries.
Fiscal positions:
- "most countries are expected to strengthen their fiscal positions, structural primary balances are projected to be lower than anticipated, indicating unwelcome delays in fiscal consolidation."
Public debt ratios are rising, increasing the importance of fiscal consolidation to mitigate risks of decompression in risk premiums.
Insufficient fiscal effort complicates debt sustainability and the effectiveness of monetary policy.

Inflation status:
- "inflation remains above target in some countries, amid relatively balanced risks."
- Inflation expectations are stable but "also remain above targets."
Monetary policy response:
- "Central banks have responded appropriately, remaining data driven."
- Continued caution is warranted, especially where economic slack is not evident and inflation remains above targets.
Exchange rate developments:
- Recent exchange rate appreciation is helping disinflation in some cases.
Interaction with fiscal policy:
- High public debt and deficits can constrain monetary policy effectiveness.
- To safeguard price stability, countries must advance fiscal consolidation and improve fiscal frameworks.
- "Lower debt levels make monetary policy more effective, aiding convergence to inflation targets."

The region’s potential growth:
- "remains stuck in its low historical average and lagging its peers."
Contributing factors:
- slowing labor force expansion;
- low capital accumulation;
- stagnant productivity.
Productivity barriers identified:
- persistent resource misallocation;
- sluggish productivity growth among firms;
- more productive firms face barriers to expand.
Policy frictions to address:
- size-based regulations;
- financial constraints;
- limited competition.

Study 1 — monetary-fiscal interactions:
- Finds reforms enhancing central bank independence have helped achieve price stability.
- Highlights how high public debt and deficits can constrain monetary policy.
- Policy implication: advance fiscal consolidation and improve fiscal frameworks to strengthen monetary policy effectiveness.
Study 2 — drivers of low total factor productivity:
- Uses firm-level data to show resource misallocation and sluggish firm-level productivity growth.
- Policy implication: reforms to reduce frictions that hinder firm expansion.

The Fund remains closely engaged through policy advice, capacity development, and financial support.
Program developments since April:
- Barbados completed its arrangement under the Extended Fund Facility and the Resilience and Sustainability Facility;
- A new Flexible Credit Line (FCL) has been launched with Costa Rica;
- Colombia canceled its FCL.

Reinforce policy frameworks, rebuild fiscal buffers, and foster growth opportunities.
Quotation framing the recommendation: "countries may not control the winds, but they can adjust their sails. Reinforcing policy frameworks, rebuilding fiscal buffers, and fostering growth opportunities are the sails to adjust."

Rodrigo Valdés will be leaving the Western Hemisphere Department "by the end of this month, moving to the Fiscal Affairs Department."
New WHD director: Nigel Chalk — "sitting here" — who already supervises several countries and activities and guarantees a seamless transition.

Introductory Remarks at the IMF’s Western Hemisphere Department Press Briefing — Rodrigo Valdés, October 17, 2025