## Conclusions of the XVIII Regional Conference on Central America, Panama, and the Dominican Republic

_IMF News, July 30, 2024_

## Source details

**Canonical URL:** [Conclusions of the XVIII Regional Conference on Central America, Panama, and the Dominican Republic](https://www.imf.org/en/news/articles/2024/07/30/pr24296-capdr-conclusions-xviii-regional-conference)

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## Bibliographic details
- Published: July 30, 2024

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### Conference context and participants
- Meeting location and dates: San Jose, Costa Rica, on July 29-30.
- Inaugurated by: The First Vice-President of the Republic of Costa Rica, Stephan Brunner, and the IMF’s Deputy Managing Director, Kenji Okamura.
- Participants: Central bank governors, finance ministers, and bank superintendents of Central America, Panama, and the Dominican Republic (CAPDR), and IMF officials.
- Statement issued by: Rodrigo Valdés (Director, IMF’s Western Hemisphere Department) and Róger Madrigal López (President of the Central Bank of Costa Rica and President of the Central American Monetary Council).

### Global and regional economic outlook
- Global growth projections preserved from statements:
  - 3.2 percent in 2024
  - 3.3 percent in 2025
- Observations:
  - Global economy described as resilient with growth holding steady, but with important divergence across countries and regions.
  - Inflation is "gradually returning to target, albeit with slowing momentum."
  - Upside risks to inflation could raise prospects of "higher-for-even-longer" interest rates, increasing external, fiscal, and financial risks in the region.
  - Medium-term growth prospects in Latin America judged "lackluster," reflecting continued weak productivity growth.

### CAPDR performance and key regional statistics
- Comparative outcomes and projections:
  - Average real GDP levels in 2024 for CAPDR are projected to be 17 percent higher than pre-pandemic, compared to 9 percent in Latin America and the Caribbean as a whole.
  - Regional growth projected at 3.9 percent in 2024—about double that of the Latin American and Caribbean region.
- Drivers of positive outcomes (as credited by participants):
  - Sound policies stabilizing public debt and bringing inflation under control.
  - Strengthened social support.
- Risks and constraints noted:
  - Tighter global financial conditions pose challenges for regional debt dynamics and servicing.
  - Adverse implications for infrastructure and social investment.
- Policy emphases:
  - Need for policies to boost productivity, including accelerating public investment.
  - Benefiting from new patterns in the global trade system.
  - Addressing structural reform gaps.

### Income convergence and long-run growth differences
- Observations on income convergence:
  - Costa Rica, the Dominican Republic, and Panama have converged at rates similar to those in East Asia and Eastern Europe.
  - El Salvador, Guatemala, Honduras, and Nicaragua have experienced limited convergence despite solid growth.
- Factors associated with differences in convergence:
  - Nature of BOP inflows, particularly foreign direct investment versus remittances.
  - Factor endowments, domestic market size, and political stability.
- Policy recommendations to foster convergence and productivity:
  - Attract more foreign direct investment via reforms to boost productivity and labor force participation.
  - Proactively expand overseas markets and diversify exports.
  - Strengthen governance and the business climate.
  - Promote more productive use of remittances to support domestic investment.
- Costa Rica cited as an illustrative experience for policy lessons.

### Monetary and foreign exchange policy
- Focus of discussion:
  - Effectiveness of central bank monetary and foreign exchange policies in the context of large dollar inflows and heightened macroeconomic uncertainty.
  - Experience across the region, including the decisive response by the Central Bank of Costa Rica to recent price shocks.
- Policy conclusions and trade-offs:
  - Policies to strengthen the role of monetary policy should include:
    - Strengthening of the financial sector.
    - Development of foreign exchange and domestic debt markets.
    - Financial inclusion.
    - Interaction with fiscal policy.
    - Proactive communication.
  - Foreign exchange interventions can support short-term exchange rate stability but are costly and may impede gradual policy adjustments and market deepening needed to absorb higher financial inflows for long-run development.

### Public debt trends and sovereign financing costs
- Comparative assessment with investment-grade emerging markets (EM-IG):
  - Rising public debt in CAPDR and increases in sovereign financing costs since the global financial crisis have led to greater increases in interest expenses than in EM-IG.
  - Public debt and deficits in CAPDR are above those of EM-IG.
  - Revenue collection and governance quality in CAPDR are below those of EM-IG.
  - Reserves are also below EM-IG levels, with a note that accumulating more reserves when they are assessed to be adequate could be costly.
- Policy priorities to improve creditworthiness and market access:
  - Sound and sustainable fiscal policy frameworks.
  - Enhanced revenue mobilization.
  - Progress to improve governance.
  - Adequate communication of policy intentions.

### Climate change, adaptation, and green energy transition
- Discussion format: Only open session of the conference, including civil society and journalists, discussed a new IMF book on climate change challenges and opportunities in Latin America and the Caribbean.
- Shared views and policy options:
  - A broad range of mitigation tools is needed.
  - Comprehensive approaches to adaptation aimed at building structural and financial resilience are required.
  - Upfront financing from both official and private sector sources is necessary.
  - Supportive structural reforms should accompany financing to reach climate goals.

### Final remarks and institutional relations
- Participants expressed appreciation:
  - Thanked the IMF and the Central Bank of Costa Rica for support in organizing the event.
  - Stressed the importance of maintaining a frank and fluid policy dialogue between the region, the IMF, and other key stakeholders.
  - Expressed deep appreciation to Costa Rican authorities for hospitality.

*IMF press statement, July 30, 2024.*

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## References

- [Costa Rica and the IMF](http://www.imf.org/external/country/CRI/index.htm)
- [Dominican Republic and the IMF](http://www.imf.org/external/country/DOM/index.htm)
- [Panama and the IMF](http://www.imf.org/external/country/PAN/index.htm)
- [Press Releases](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2024/07/30/pr24296-capdr-conclusions-xviii-regional-conference_