{
  "title": "After a Golden Decade, Can Latin America Keep Its Luster?",
  "publication": "IMF Blog, May 6, 2013",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2013/05/06/after-a-golden-decade-can-latin-america-keep-its-luster",
  "canonical": "https://www.imf.org/en/blogs/articles/2013/05/06/after-a-golden-decade-can-latin-america-keep-its-luster",
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  "summary": "Latin America continues to be one of the fastest growing regions in the world, even though growth slowed down a bit in 2012.",
  "sections": [
    {
      "heading": "Regional outlook and recent performance",
      "content": "- Latin America continues to be one of the fastest growing regions in the world, even though growth slowed down a bit in 2012.\n- Many economies in the region are operating at or near potential, inflation remains generally low, and unemployment is at historically low levels.\n- Near-term drivers: easy external financing and relatively high commodity prices.\n- IMF May 2013 Regional Economic Outlook projection: the region will expand by about 3½ percent in 2013.\n- Brazil: economic activity is strengthening, driven by improving external demand, measures to boost investment, and the impact of earlier policy easing.\n- Rest of Latin America: output growth is expected to remain near potential."
    },
    {
      "heading": "Managing the commodity windfall",
      "content": "- The income windfall from persistently high commodity prices averaged 15 percent of domestic income on an annual basis, and close to 90 percent on a cumulative basis.\n- The windfall spurred rapid growth and enabled substantial improvement in government and external balance sheets.\n- Efforts to save the windfall have eroded since the 2008 global crisis; in many countries, public debt at end-2012 remains above pre-crisis levels and fiscal balances are much weaker.\n- Recommendation: increase fiscal savings to better manage the likely fading of external tailwinds and to help narrow external current account deficits."
    },
    {
      "heading": "Higher capital inflows and financial stability risks",
      "content": "- Easy monetary conditions in advanced economies and stronger fundamentals in the region fueled large private capital inflows.\n- Net capital flows to financially integrated economies in Latin America more than doubled from an average of below 2 percent of GDP during 2005–07 to about 4 percent in 2010–12, driven mainly by higher net portfolio flows.\n- Financial indicators of concern: bank credit continues to grow at a relatively fast pace; asset prices have increased significantly (including housing prices in key metropolitan areas).\n- Policy responses suggested:\n  - Tighter fiscal policy to prevent inflows from generating financial excesses.\n  - Use exchange rate flexibility to discourage speculative flows.\n  - Consider faster reserve accumulation where currencies are on the strong side of the range consistent with fundamentals.\n  - Deploy prudential measures such as tighter loan-to-value ratios, higher capital requirements, and limits on sectoral exposure to prevent buildup of financial vulnerabilities."
    },
    {
      "heading": "Sustaining high growth through productivity",
      "content": "- Growth during 2003–12 was driven by increases in physical capital and labor; productivity growth also picked up but remains well below other fast growing regions.\n- Quantitative contributions during 2003–12: labor and capital accumulation contributed 3¾ percentage points to Latin America’s annual GDP growth, while total factor productivity contributed around ¾ percentage points.\n- With labor participation at historically high levels and very low unemployment rates, future growth must rely increasingly on productivity gains.\n- Policy measures conducive to higher productivity:\n  - Higher investment in infrastructure and human capital.\n  - More modern legal frameworks.\n  - More efficient and competitive product and labor markets.\n- Near-term priority: calibrate macroeconomic policies based on a realistic assessment of the supply potential of the economy."
    },
    {
      "heading": "Key policy takeaway",
      "content": "- The region should use still-favorable external conditions to consolidate gains of the past decade by:\n  - Strengthening fiscal positions further.\n  - Prudently managing capital flows to avoid financial excesses.\n  - Pressing ahead with structural reforms to increase productivity and potential growth.\n\nAlejandro Werner, May 6, 2013\n\n---\n\n Content in this bundle\n\n- Após uma década de ouro, conseguirá a América Latina manter o seu brilho?; 6 de Maio de 2013\n  - Após uma década de ouro, conseguirá a América Latina manter o seu brilho?; 6 de Maio de 2013 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Após uma década de ouro, conseguirá a América Latina manter o seu brilho?; 6 de Maio de 2013 (PDF){rel=\"external\" type=\"application/pdf\"}\n- Regional Economic Outlook -- Western Hemisphere: Time to Rebuild Policy Space; May 2013\n  - Regional Economic Outlook -- Western Hemisphere: Time to Rebuild Policy Space; May 2013 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Regional Economic Outlook -- Western Hemisphere: Time to Rebuild Policy Space; May 2013 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- https://www.imf.org/wp-content/uploads/2013/05/whd-reo-spring-lac-real-gdp-growth-chart1.jpg\n- https://www.imf.org/wp-content/uploads/2013/05/whd-reo-spring-lac-windfalls-chart2.jpg\n- https://www.imf.org/wp-content/uploads/2013/05/whd-reo-spring-lac-capital-flows-chart3.jpg\n\nSource: https://www.imf.org/en/blogs/articles/2013/05/06/after-a-golden-decade-can-latin-america-keep-its-luster"
    }
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    "Authors: Alejandro Werner",
    "Published: May 6, 2013",
    "Latin America continues to be one of the fastest growing regions in the world, even though growth slowed down a bit in 2012.",
    "Many economies in the region are operating at or near potential, inflation remains generally low, and unemployment is at historically low levels.",
    "Near-term drivers: easy external financing and relatively high commodity prices.",
    "IMF May 2013 Regional Economic Outlook projection: the region will expand by about 3½ percent in 2013.",
    "Brazil: economic activity is strengthening, driven by improving external demand, measures to boost investment, and the impact of earlier policy easing.",
    "Rest of Latin America: output growth is expected to remain near potential.",
    "The income windfall from persistently high commodity prices averaged 15 percent of domestic income on an annual basis, and close to 90 percent on a cumulative basis.",
    "The windfall spurred rapid growth and enabled substantial improvement in government and external balance sheets.",
    "Efforts to save the windfall have eroded since the 2008 global crisis; in many countries, public debt at end-2012 remains above pre-crisis levels and fiscal balances are much weaker.",
    "Recommendation: increase fiscal savings to better manage the likely fading of external tailwinds and to help narrow external current account deficits.",
    "Easy monetary conditions in advanced economies and stronger fundamentals in the region fueled large private capital inflows.",
    "Net capital flows to financially integrated economies in Latin America more than doubled from an average of below 2 percent of GDP during 2005–07 to about 4 percent in 2010–12, driven mainly by higher net portfolio flows.",
    "Financial indicators of concern: bank credit continues to grow at a relatively fast pace; asset prices have increased significantly (including housing prices in key metropolitan areas).",
    "Policy responses suggested:",
    "Growth during 2003–12 was driven by increases in physical capital and labor; productivity growth also picked up but remains well below other fast growing regions.",
    "Quantitative contributions during 2003–12: labor and capital accumulation contributed 3¾ percentage points to Latin America’s annual GDP growth, while total factor productivity contributed around ¾ percentage points.",
    "With labor participation at historically high levels and very low unemployment rates, future growth must rely increasingly on productivity gains.",
    "Policy measures conducive to higher productivity:",
    "Near-term priority: calibrate macroeconomic policies based on a realistic assessment of the supply potential of the economy.",
    "The region should use still-favorable external conditions to consolidate gains of the past decade by:",
    "**Após uma década de ouro, conseguirá a América Latina manter o seu brilho?; 6 de Maio de 2013**",
    "**Regional Economic Outlook -- Western Hemisphere: Time to Rebuild Policy Space; May 2013**",
    "[https://www.imf.org/wp-content/uploads/2013/05/whd-reo-spring-lac-real-gdp-growth-chart1.jpg](https://www.imf.org/wp-content/uploads/2013/05/whd-reo-spring-lac-real-gdp-growth-chart1.jpg)",
    "[https://www.imf.org/wp-content/uploads/2013/05/whd-reo-spring-lac-windfalls-chart2.jpg](https://www.imf.org/wp-content/uploads/2013/05/whd-reo-spring-lac-windfalls-chart2.jpg)",
    "[https://www.imf.org/wp-content/uploads/2013/05/whd-reo-spring-lac-capital-flows-chart3.jpg](https://www.imf.org/wp-content/uploads/2013/05/whd-reo-spring-lac-capital-flows-chart3.jpg)"
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