## Transcript of the April 2023 Western Hemisphere Department Press Briefing

_IMF News, April 13, 2023_

## Source details

**Canonical URL:** [Transcript of the April 2023 Western Hemisphere Department Press Briefing](https://www.imf.org/en/news/articles/2023/04/14/tr41423-april-2023-whd-press-briefing)

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## Bibliographic details
- Published: April 13, 2023

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### Regional growth and resilience
- The Western Hemisphere "has proven to be very resilient" to multiple shocks and "growth has repeatedly surprised on the upside."
- Regional growth path:
  - Grew by 7 percent in 2021.
  - Grew by 4 percent in 2022.
  - Expected to decelerate to 1.6 percent in 2023, with most of the region expected to avoid a recession.
- Drivers of the slowdown:
  - Main trading partners are slowing.
  - "The favorable terms of trade that we saw in the aftermath of COVID" have lessened somewhat.
  - Global financial conditions are "less friendly than they were a year ago."

### Inflation and monetary policy
- Inflation dynamics and distribution:
  - High inflation "disproportionately hurts lower-income households" and has been concentrated in large increases in food prices.
  - Headline inflation in the largest Latin America economies: peaked at around 10 percent in mid-2022; decelerated to around 7 percent in March.
  - Core inflation in these economies averaged 8.4 percent in February.
  - "For most countries, inflation remains well above the Central Bank’s target range."
- Central Bank response and outlook:
  - Central Banks responded "quick and assertive[ly]"—effective in anchoring medium-term inflation expectations.
  - Expectation that full impact of interest rate increases will be seen "during the course of this year."
  - Central Banks "will need to remain resolute" until inflation is "unambiguously heading down towards target."
  - Interest rates in the region will "likely remain high for much of this year and, in some cases, even well into next year."

### Fiscal policy stance and recommendations
- Current stance:
  - Fiscal policy in 2023 is expected to be "broadly neutral in most countries" despite low unemployment, constrained capacities, and unresolved wage and price pressures.
- Recommended rebalancing:
  - Fiscal policy should play a bigger role via a "more contractionary fiscal stance this year and next" to:
    - Bring demand back into line with supply.
    - Lower public debt that increased abruptly due to the pandemic.
    - Allow interest rates to decline earlier and reduce potential financial stability risks emerging in advanced economies.
- Design considerations:
  - Preserve key social programs and continue spending on housing, education, and public infrastructure.
  - Reduce inefficiencies in public spending (e.g., public procurement transparency and lower costs).
  - Redesign taxes to raise revenue and make tax systems more progressive; "The wealthy and the more fortunate should pay more of their fair share."
  - Well-designed policies can "restore macroeconomic stability, can tackle inflation, and can bring down debt in a socially equitable way."

### Financial sector and external risks
- Banking stresses in advanced economies:
  - "So far, we see these problems have had little impact on Latin America and the Caribbean."
  - Reasons: limited direct linkages to troubled institutions in the U.S. and Europe; payoff from past investments in supervision, regulation, and high banking standards in the region.

### Country-specific engagements and observations (Q&A highlights)
- Ecuador:
  - Discussions with authorities on IMF financing are ongoing, but "we haven’t actually received any request, formal request, from the government on financing."
  - On political uncertainty: uncertainty is empirically associated with lower consumption and investment; "the sooner the uncertainties are resolved, the better."
- Brazil:
  - IMF supportive of efforts to design a fiscal framework; impressed with proposed medium-term primary balance improvement.
  - Article IV Consultation in Brazil scheduled "next month" for more detailed discussion.
- Argentina:
  - IMF completed a review in March and disbursed; drought has made the situation more difficult.
  - IMF will engage with authorities for next review and to help recalibrate policies; specifics are premature.
- Honduras:
  - Longstanding IMF engagement with capacity development support; continuing discussions on balancing protection of the vulnerable with stronger public finances.
  - Program discussions ongoing; no new developments announced.
- Panama:
  - Rapid recovery post-pandemic; reached pre-pandemic GDP levels though some sectors lag in employment.
  - Expected to be among the fastest growing economies in the region in 2023.
  - Structural shift from investment-driven growth (canal, mining, public infrastructure) toward services: logistics, finance, legal services, and trade-related services.
- Suriname:
  - Program in place but reviews stalled around mid-2022 due to personnel changes and policy issues.
  - Authorities reached agreement with Paris Club creditors and are close with India; progress on restructuring Chinese official debt would help the program.
- Chile:
  - Only country in the region projected to contract in 2023: contracting 1 percent.
  - Context: Chile grew 14 percent over the last two years and remains well above pre-pandemic trend output.
  - IMF considers Chile to have strong fiscal and monetary institutions; IMF "do[es] think a tax reform is needed" and encourages dialogue with Congress to reach consensus.
- El Salvador:
  - IMF engaging with authorities; Article IV discussions recently finished. No formal program request received; preliminary discussions on a possible program are ongoing.
- Caribbean tourism-dependent economies and Citizenship by Investment (CBI) programs:
  - CBI programs have been "a very important feature of the region" and generated important revenues.
  - IMF advice on CBI revenue management:
    - Revenue is very volatile; recommended saving CBI revenue and spending from the income stream rather than lumpy, stop-go spending.
    - Maintain and improve the integrity of CBI schemes; ECCU moving to improve integrity in conjunction with larger economies.
  - Tourism outlook:
    - U.S. economy expected to slow but still grow; shift from goods to services consumption benefits tourism-dependent Caribbean economies.
    - IMF baseline does not assume U.S. recession, but counsels contingency planning for potential U.S. slowdown or higher U.S. interest rates.

### Cross-cutting policy messages
- Macroeconomic policy coordination:
  - With most economies operating at or above potential, macro policies should aim to realign demand with potential output to ease price pressures.
  - Monetary tightening has done much of the heavy lifting; fiscal adjustment can complement monetary policy to accelerate disinflation and debt consolidation.
- Governance and reform priorities:
  - Improve public spending efficiency and procurement transparency.
  - Undertake progressive tax reforms to raise revenue and strengthen public finance credibility.
  - Strengthen financial sector supervision to insulate the region from external banking stresses.

*Source: IMF Communications Department, April 13, 2023.*

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## References

- [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)
- [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)
- [Honduras and the IMF](http://www.imf.org/external/country/HND/index.htm)
- [Panama and the IMF](http://www.imf.org/external/country/PAN/index.htm)
- [Suriname and the IMF](http://www.imf.org/external/country/SUR/index.htm)
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_Source: https://www.imf.org/en/news/articles/2023/04/14/tr41423-april-2023-whd-press-briefing_