## Transcript of Western Hemisphere Department Press Briefing

_IMF News, April 21, 2017_

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## Bibliographic details
- Published: April 21, 2017

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### Regional outlook and medium-term projections
- The region is "recovering slowly" from the recession of the previous year and from very low or negative growth in 2015.
- Average growth:
  - 2017: expected average growth of 1.1% (after a negative 1% in the prior year).
  - Medium term: projected to stabilize around 2.6%.
- Structural assessment:
  - Growth potential for the region is estimated to be "substantially lower" than in the previous decade.
  - Key structural priorities to raise medium-term growth: eliminate bottlenecks to investment, increase productivity, accumulate human capital, improve education quality, improve infrastructure, boost female labor force participation, and strengthen anti-corruption legal reforms.

### Country-level summaries and forecasts

- Argentina
  - 2016: economy contracted "a little more than 2%".
  - 2017: IMF expects growth of 2.2%.
  - Inflation debate: IMF cited Argentina inflation expectations in the WEO as "around 21%" (government targets "around 17%"); Argentina ranks as the sixth country with highest expected inflation in the WEO table.
  - Fiscal approach: IMF supports a steady, well-communicated fiscal adjustment accompanying disinflation; pace should avoid excessive demand withdrawal while restoring fiscal sustainability.
  - External stability: authorities should be conscious of potential capital flow reversals; IMF supports reserve accumulation.

- Brazil
  - Deep recession prior years: contractions of about 3.8% in 2015 and 3.6% in 2016 referenced in discussion (earlier in remarks another figure for 2016 contraction was 3.5%).
  - 2017: IMF projection of 0.2% growth.
  - 2018: IMF baseline projects 1.7% growth (Finance Minister publicly stated 3% for 2018; IMF views this as unlikely given leveraged household and corporate balance sheets).
  - Pension reform:
    - IMF baseline assumes a "good" pension reform will be passed soon.
    - Minister Meirelles said a reform reaching 75% of the original proposal implies savings of $600 billion over 10 years; IMF will assess strength and exact parameters during the Article IV mission.
  - Political/corruption context: "Lava Jato" and related issues have affected confidence/liquidity; stronger, higher-quality reforms produce larger gains for confidence and growth.

- Mexico
  - Growth: IMF anticipates 1.7% in 2017 versus 2.3% in 2016.
  - Factors restraining growth: NAFTA renegotiation uncertainty affecting investment; weaker real wage growth (higher inflation) affecting consumption.
  - Public debt: around 55% of GDP.
  - Policy priorities: preserve strong macro framework (fiscal discipline, inflation targeting), diversify products and trading partners (including Asia and Europe), consider somewhat more ambitious fiscal targets to reduce public debt.

- Chile
  - 2017: growth expected to remain at 1.7%.
  - Recent episodes: mining strikes likely produced a technical recession in the latest quarter; underlying conditions point to recovery once supply disruptions end.

- Colombia
  - Adjustment following a near 50% decline in the value of exports.
  - Policy: timely restrictive policies produced an orderly deceleration; inflation spike (around 8%) viewed as transitory and returning toward target.

- Ecuador
  - 2017: IMF projects a contraction of 1.6%.
  - Rationale: sustained adjustment following the collapse in oil prices; slightly milder contraction than previous WEO due to somewhat higher oil prices and more accommodative financing conditions.

- Venezuela
  - 2016: economy contracted 18%.
  - 2017: IMF estimated contraction of 7%.
  - Inflation: IMF noted inflation "moving at four-digit rates" and "walking toward hyperinflation"; IMF had projected 720% (earlier number mentioned), while the WEO reported a consumer price inflation of 274% December-over-December from the Central Bank of Venezuela (acknowledged as the official, lower-end estimate); IMF highlighted a severe humanitarian crisis.

- Caribbean
  - Prospects improving with recovery in commodity-exporters and tourism-dependent economies.
  - 2016: significant recessions in commodity exporters (e.g., Surinam, Trinidad and Tobago).
  - Jamaica: stabilization programs showing positive results and accelerating growth.
  - Vulnerability: public sector debt remains an important regional vulnerability.

- Central America
  - Growth: maintaining an average around 4%, helped by Panama and the Dominican Republic.
  - Sustainability: IMF judges the growth performance in Central America to be sustainable, though averages are influenced by high-growth outliers.

### Risks, spillovers, and macro-financial guidance
- Political/electoral risk
  - Upcoming electoral cycle across the region (elections in Argentina, Chile, Mexico, Brazil, Venezuela, Paraguay within ~18 months) increases uncertainty, which can delay investment and consumption and dampen near-term growth.
  - IMF concern centers on uncertainty effects rather than specific policy ideology.
- Corruption and governance
  - Corruption episodes (e.g., Odebrecht, "Lava Jato") have macroeconomic implications via liquidity, confidence, and investment channels; addressing corruption is a priority for macro stability and growth.
- Spillovers from Venezuela
  - Migration is the principal spillover channel; trade and financial linkages are limited, so direct economic contagion has been limited to date.
- Exchange rate regime guidance
  - IMF view: exchange rate flexibility has served the region well and should be the first line of defense against shocks.
  - Where countries opt for less flexible regimes, they must offset with consistent policies (e.g., strong fiscal positions, supporting policies).
- Reserves and capital flows
  - Countries (e.g., Argentina) should remain mindful of capital flow volatility and consider reserve accumulation as insurance against global reversals.

### Policy recommendations and priorities emphasized by IMF officials
- Strengthen medium-term growth by:
  - Removing structural bottlenecks to investment.
  - Raising productivity and human capital accumulation.
  - Improving education quality and infrastructure.
  - Increasing female labor force participation where low.
  - Continuing legal reforms to strengthen anti-corruption frameworks and governance.
- Fiscal policy guidance:
  - Pursue steady, well-communicated fiscal consolidation paths that avoid abruptly contracting demand during fragile recoveries.
  - For countries with fixed or less flexible exchange rate regimes, ensure complementary macroeconomic policies (strong fiscal stance, etc.).
- Structural reforms:
  - Pension reform is critical in Brazil to sustain the expenditure cap and fiscal sustainability; reform strength matters for confidence and growth.
  - Diversify trade partners (including with Asia and Europe) to reduce reliance on any single market.
- Crisis and contingency planning:
  - Accumulate reserves as insurance against capital flow reversals.
  - Closely monitor political/electoral developments for their potential to generate investment wait-and-see effects.

### Key statistics and projections (as stated in the briefing)
- Regional average growth:
  - 2017 expected: 1.1%
  - Medium-term projection: 2.6%
- Country highlights:
  - Argentina: 2016 contraction "a little more than 2%"; 2017 projected 2.2%.
  - Brazil: 2016 contraction about 3.5% (also referenced 3.6%/3.8% for 2015/2016); 2017 projected 0.2%; 2018 baseline projection 1.7%.
  - Mexico: 2016 growth 2.3%; 2017 projected 1.7%; public debt around 55% of GDP.
  - Chile: 2017 projected 1.7%.
  - Colombia: exports fell "almost 50%"; inflation spike to about 8% was transitory.
  - Ecuador: 2017 projected contraction of 1.6%.
  - Venezuela: 2016 contraction 18%; 2017 projected contraction 7%; WEO consumer price inflation reported as 274% December-over-December (official Central Bank of Venezuela number); IMF earlier projection cited 720% in discussion.
  - Central America: maintaining average growth "around 4%".
- Pension reform in Brazil: minister referenced a 75% version of the proposal equating to savings of $600 billion over 10 years (IMF will assess exact impacts during the Article IV mission).

*Transcript of Western Hemisphere Department Press Briefing, Washington D.C., April 21, 2017 — IMF Communications Department*

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## References

- [People's Republic of China and the IMF](http://www.imf.org/external/country/CHN/index.htm)
- [Argentina and the IMF](http://www.imf.org/external/country/ARG/index.htm)
- [Brazil and the IMF](http://www.imf.org/external/country/BRA/index.htm)
- [Chile and the IMF](http://www.imf.org/external/country/CHL/index.htm)
- [Colombia and the IMF](http://www.imf.org/external/country/COL/index.htm)
- [Ecuador and the IMF](http://www.imf.org/external/country/ECU/index.htm)
- [El Salvador and the IMF](http://www.imf.org/external/country/SLV/index.htm)
- [Mexico and the IMF](http://www.imf.org/external/country/MEX/index.htm)
- [República Bolivariana de Venezuela and the IMF](http://www.imf.org/external/country/VEN/index.htm)
- [Trinidad and Tobago and the IMF](http://www.imf.org/external/country/TTO/index.htm)
- [United States and the IMF](http://www.imf.org/external/country/USA/index.htm)
- [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)
- [The IMF and Good Governance -- A Factsheet](https://www.imf.org/en/about/factsheets/sheets/2023/the-imf-and-good-governance)
- [Transcripts](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
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_Source: https://www.imf.org/en/news/articles/2017/05/01/tr042117-transcript-of-western-hemisphere-department-press-briefing_