## Latin America: Making the Good Times Better

_IMF Blog, February 25, 2011_

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## Bibliographic details
- Authors: Dominique Strauss-Kahn
- Published: February 25, 2011

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### Context and framing
- Author: Dominique Strauss-Kahn
- Date: February 25, 2011
- Theme: Latin America has enjoyed tremendous economic dynamism and a rising quality of life in recent years, but faces new challenges to sustain progress.
- Framing questions the author will discuss on travels through Panama, Uruguay, and Brazil:
  - Can there be too much of a good thing? (una época de vacas gordas)
  - Are countries equipped to handle future times of lean? (la época de vacas flacas)
  - How best to share these times of plenty—across society, and with future generations? (Como compartir—y prolongar—la época de las vacas gordas?)

### Near-term macroeconomic risks and policy responses
- Findings and risks:
  - Latin America’s economies are growing rapidly, buoyed by good access to external financing and high commodity prices.
  - Potential signs of overheating: rising inflation, rapidly growing credit, and booming stock markets.
  - Boom-to-bust dynamics are a key near-term risk if policymakers do not act early.
- Policy recommendations:
  - Withdraw macroeconomic stimulus adopted during the global crisis; some countries are already doing so.
  - Begin adjustment with fiscal policy to reduce the burden on monetary policy.
  - In some cases, take action on both fiscal and monetary fronts when inflationary pressures rise.
  - Preserve exchange rate flexibility; appreciation can help temper capital inflows by making foreign investors think twice about future exchange rate risk.
  - Tighten prudential measures to protect financial stability.
  - Capital controls may be useful temporarily in some cases, but should not substitute for macro or prudential measures.

### Readiness for future shocks
- Findings:
  - The global financial crisis (2008-2009) is only just receding; the global economy remains exposed to downside risks.
  - Latin America bounced back from the crisis much better than most other regions, benefiting from policy buffers and reduced vulnerabilities built in times of plenty.
  - Over the last decade, countries across the region have:
    - strengthened their policy frameworks,
    - lowered public debt,
    - increased foreign reserve buffers,
    - allowed greater exchange rate flexibility,
    - improved financial supervision and regulation.
- Policy priorities going forward:
  - Rebuild fiscal space; bring debts down to safe levels where needed (Panama cited as already working in this direction).
  - Strengthen financial stability frameworks:
    - Develop better tools to monitor risks within and across institutions.
    - Empower regulators and supervisors to take early preventive action.
    - Strengthen macroprudential financial regulations (Brazil cited as an example).

### Sharing prosperity and structural reforms
- Findings:
  - The region has lifted tens of millions out of poverty over the past decade.
  - Uruguay example: the poverty rate has fallen by 10 percentage points since 2004.
  - The region remains profoundly unequal, with about a third of its people living in poverty.
- Policy recommendations to sustain and share growth:
  - Pursue reforms that boost productivity, including revitalizing infrastructure and improving education and training.
  - Improve the business climate and strengthen governance for a pro-growth strategy.
  - Enhance social protection:
    - Make the social safety net more effective.
    - Support innovative conditional cash transfer programs—example: Brazil’s bolsa familia program.
    - Raise social spending and improve the quality of service delivery in education, health, and public infrastructure.
- Strategic imperative:
  - Capitalize on today’s favorable conditions to transform countries to the next level and ensure the benefits of growth are more widely shared.

*Source: IMF blog post “Latin America: Making the Good Times Better,” Dominique Strauss-Kahn, February 25, 2011.*

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## Content in this bundle

- **América Latina: Como transformar o bom de hoje no melhor de amanhã**
  - [América Latina: Como transformar o bom de hoje no melhor de amanhã (Markdown version)](/external/lang/portuguese/np/vc/2011/022511p.pdf.md){rel="alternate" type="text/markdown"}
  - [América Latina: Como transformar o bom de hoje no melhor de amanhã (PDF)](/external/lang/portuguese/np/vc/2011/022511p.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/blogs/articles/2011/02/25/latin-americas-better-tomorrow_