Latin America—Taking the Helm

IMF Blog, November 25, 2011

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The IMF has "187 members," and the Managing Director is engaging regions to "discuss, to listen, to learn."
The euro area "storm" casts a long shadow over the global economy, but Latin America has achieved "sustained growth with reduced vulnerabilities."
Recent performance credited to "strong fundamentals, sound policy frameworks, and prudent macroeconomic policies."

Latin America was highly exposed in the past; the "2008-09 global financial crisis" would previously have triggered major upheavals.
Now the region offers lessons for advanced countries: "saving for a rainy day" and ensuring "risks in the banking system are under control."
The IMF "stands ready to support and assist countries with sound macroeconomic management that might be affected by the global crisis as bystanders."

No country is immune in an interconnected world; countries should "take all necessary precautions and make all needed preparations."
Fiscal policy guidance:
- "Continue rebuilding buffers, including by maintaining prudent fiscal policies—this would create room for maneuver should the economic situation turn sour."
- "Fiscal consolidation should not come at the expense of either needed social programs or productive investment in education or infrastructure."
- "Explore the scope for mobilizing more revenues, where tax collections are low, or making spending more focused and efficient."
Country-specific near-term focuses:
- Mexico: "keep a keen eye on conditions in the United States and Europe, and implement structural reforms to unleash its growth potential."
- Brazil: "increase domestic savings to reach higher and sustained growth."
- Peru: "continued reforms to achieve more inclusive growth while preserving its hard-won macroeconomic stability."

"Growth alone is just the first step"; the region "needs more socially inclusive growth" to build "fairer societies based on shared opportunities and social justice."
Inequality historically has "been the bane of Latin America," hindering broad sharing of growth and contributing to social and political instability that harms economic prospects.
IMF research indicates "more equal societies are associated not only with greater economic stability, but with more sustainable growth over time."
Social programs and outcomes:
- In Brazil and Peru, "indicators of poverty, inequality, and human development have improved dramatically over the past decade or so."
- Brazil’s "Bolsa Familia" and Mexico’s "Oportunidades" have "enjoyed particular success in breaking the intergenerational transmission of poverty" and are "now models for the rest of the world."

The Managing Director visited "three important countries in Latin America—Brazil, Mexico, and Peru" coinciding with the "transfer of leadership in the Group of 20 to Mexico."
Mexico and Brazil described as "major global economic engines."
- Mexico: "about to take the helm of the Group of 20" and positioned to "shape our collective economic destiny over the coming year."
- Brazil: "one of the world’s leading emerging markets," "deeply integrated into the global economy," and central to global economic debate and cooperation.
- Peru: "a new rising star—surely among the new wave of leading emerging markets."
Concluding assessment: "Latin America is now on a firm foundation, and can look ahead to lasting prosperity and stability that can lift the living standards of all."
From the IMF vantage: "a new partnership with a new Latin America" is anticipated.

Source: Latin America—Taking the Helm (Christine Lagarde, November 25, 2011).