## Transcript of Western Hemisphere Economic Outlook October 2024 Press Briefing

_IMF News, October 25, 2024_

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## Bibliographic details
- Published: October 25, 2024

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### Major messages and regional outlook
- Two key messages from the report release:
  - Need to rebalance macroeconomic policies in the region.
  - Urgency to press on with structural reforms to boost potential output growth.
- Growth projections and baseline figures:
  - Excluding Argentina and Venezuela, growth in Latin America and the Caribbean is expected to moderate from 2.6 in 2023 to 2.2 in 2025, passing through 2.6 in 2024.
  - Risks to near-term growth are tilted to the downside, partly reflecting global risks including persistent geopolitical tensions.
- Inflation and monetary policy:
  - Inflation has fallen markedly since the peak of mid-2022 and is near target in most countries, but "not a target almost everywhere."
  - Expectation of continued easing of monetary policy, but "gradually" because of sticky services, imperfectly re-anchored inflation expectations, upside inflation risks from commodity price volatility, geopolitical risks, and fiscal slippages.
- Output gap and inflation gap:
  - With both gaps mostly closed, policymakers should focus on rebuilding policy space and boosting potential growth by rebalancing policy mix and advancing structural reforms.

### Policy mix, fiscal consolidation, and monetary policy interaction
- Current regional policy stance:
  - Generally tilted toward tight monetary policy while fiscal policy remains loose in many countries.
  - Earlier monetary tightening was essential to bring down inflation; however, policy rates remain elevated in many countries while inflation is near target.
- Fiscal challenges and recommendations:
  - Public debt levels are high and will continue rising without fiscal consolidation.
  - Most countries have ambitious fiscal consolidation plans, but implementation has been delayed; timely implementation is crucial.
  - Key fiscal policy actions recommended:
    - Proceed with fiscal consolidation without further delays.
    - Protect priority public spending, investment, and social spending during consolidation.
    - Strengthen current fiscal rules so they can deliver consolidation objectives.
    - Delivering fiscal consolidation is critical to support normalization of monetary policy and credibility of macro frameworks.
- Policy coordination:
  - Rebalancing implies fiscal policy moving in the right direction would allow central banks to proceed with monetary easing while remaining vigilant against reemerging price pressures.
  - The interaction between fiscal and monetary policy described metaphorically as a "tango" requiring careful coordination.

### Structural reforms and medium-term growth constraints
- Causes of subdued medium-term growth:
  - Longstanding unresolved challenges including low investment and especially low productivity growth.
  - Shifting demographics: labor force is growing less than before, weakening a key engine of growth.
  - Ongoing reform agendas are thin in many countries, risking a vicious cycle of low growth, social discontent, and populist policies.
- Priority reform areas (cross-cutting and country-specific):
  - Strengthening governance: reinforce rule of law, improve government effectiveness, tackle crime more efficiently.
  - Improve business environment and public investment to increase overall investment.
  - Reduce informality and make labor markets more conducive to productivity gains; increase women’s labor force participation to offset demographic headwinds.
  - Position the region to harness benefits of the global green transition and technological advances.
- Specific observation on mining investment:
  - Despite opportunities for green minerals, mining investment in the region has not picked up; IMF Managing Director’s quote: "we can do better."

### Country and regional vulnerabilities highlighted in Q&A
- Security and investment:
  - Security (crime, violence) has macroeconomic impacts—matters for growth, investment, and well-being.
  - IMF estimate: if the region halved the difference between its homicide rate and the world average, growth could increase by about half a percentage point for a good 10 years.
- Caribbean vulnerabilities and climate-related losses:
  - Countries in the Caribbean lose 2.5 percent of GDP in capital per year on average; over 10 years this can amount to a 25 percent loss in capital.
  - Policy recommendations for the Caribbean:
    - Integrate mitigation and adaptation strategies into public investment plans.
    - Foster private finance participation to increase investment for climate resilience.
    - Reduce fuel consumption through electrification and invest in renewable energies to enhance resilience and competitiveness.
    - Use insurance, contingency bonds, and resilient investment practices; example: Jamaica used contingencies effectively after a hurricane.
- Ecuador:
  - Growth forecast for Ecuador increased from 0.1 to 0.3 percent for 2024 (report includes strength in first part of the year).
  - Ecuador faces a severe electricity crisis due to the worst drought in many decades; crisis is unfolding and expected to impact economic conditions and fiscal needs.
  - IMF stance on Ecuador program:
    - Authorities have made strong progress on the stabilization program.
    - First Review of the program is expected to be discussed at the Board by the end of the year.
    - Upon successful completion of the review, the second disbursement of $500 million would be available.
- Argentina:
  - IMF does not disclose private conversations between authorities and management; engagement has been active and constructive.
  - Management meetings highlighted important progress: reduced inflation, a strong fiscal anchor, nine months of primary surpluses, improvements in central bank balance sheet and international reserves.
  - Challenges remain: need to balance domestic and external considerations; gradual and carefully calibrated unwinding of exchange restrictions and controls discussed.
  - Teams continue to engage within the current EFF while authorities explore options for a new program; more information on engagement strategy expected in coming weeks.
- Honduras:
  - Staff-Level Agreement for combined First and Second Reviews recently reached; bringing the program to the Board will support macroeconomic stability and facilitate disbursement of financing from other partners (e.g., IDB, World Bank).
  - Ley de Justicia Tributaria (tax justice law) under congressional consideration:
    - Honduras has about 15 corporate income tax special regimes; proposal aims to consolidate to three regimes.
    - Tax exemptions amount to around 7 percent of GDP.
    - IMF estimates the law could yield about 1 percent of GDP in revenues in the medium run.
- Chile:
  - IMF notes efforts to make investment processes more predictable and shorten permitting procedures; initiatives to facilitate women’s labor force participation are also highlighted.
  - No detailed fiscal judgment in the transcript beyond noting ongoing reforms and structural measures to raise potential growth.
  - Reference to external forecasts in questions: Central Bank of Chile long-term GDP growth expectation mentioned as 1.8 (questioner reference).
- Brazil:
  - Fiscal challenge: need to implement consolidation to stabilize debt; many expenditures are rigid and politically difficult to adjust.
  - IMF recommends combining spending measures with revenue mobilization and structural reforms (wages, pensions, tax expenditures).
  - Consolidation can reduce risk premia and open the possibility of lower interest rates, supporting growth.

### Additional points from the briefing
- Institutional cooperation and alternatives:
  - The region has multiple development finance and reserve arrangements (IADB, CAF, FLAR); IMF emphasizes coordination across institutions rather than competing monopolies.
- Data and mission timelines:
  - Regional Economic Outlook launch event planned in Paraguay on November 4.
  - The IMF is conducting Article IV and program reviews (e.g., Mexico Article IV ongoing; Ecuador EFF First Review mission scheduled; Argentina engagement ongoing within EFF).
- Notable numerical and factual references preserved from the briefing:
  - Growth path: 2.6 in 2023; 2.6 in 2024; 2.2 in 2025 (excluding Argentina and Venezuela).
  - Caribbean capital loss metric: 2.5 percent of GDP in capital per year (on average); 25 percent loss over 10 years as illustrative.
  - Ecuador growth forecast revision: from 0.1 to 0.3 percent for 2024.
  - Ecuador EFF second disbursement: $500 million.
  - IMF estimate on growth gain from halving homicide gap: about half a percentage point for a good 10 years.
  - Honduras tax exemptions: around 7 percent of GDP; potential revenue yield from reform: about 1 percent of GDP.
  - Number of corporate income tax special regimes in Honduras: about 15; proposed consolidation target: three regimes.
  - Argentina: nine months of primary surpluses (as cited during management discussion).
  - Energy disruptions mentioned: Ecuador power outages of up to 14 hours (question context).
  - Reference to global/national estimates in questions: potential GDP hit of 1.5 percent to Germany from trade war (questioner citation); potential 10 percent euro depreciation (questioner citation); Central Bank of Chile long-term growth referenced as 1.8 (questioner citation).
  - Broad historical and institutional references: 80th anniversary of Bretton Woods institutions (questioner context); $3 billion tax revenue shortfall reference for Colombia (questioner context); historical Colombian growth of 4 percent versus current below 2 percent (questioner context).

*Source: Transcript of Western Hemisphere Economic Outlook October 2024 Press Briefing (October 25, 2024), IMF Communications Department*

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## References

- [PRESS CENTER](http://presscenter.imf.org/)
- [Regional Economic Outlook for the Western Hemisphere](https://www.imf.org/en/publications/reo/wh/issues/2024/10/25/regional-economic-outlook-western-hemisphere-october-2024)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2024/10/25/tr-102524-press-briefing-western-hemisphere-department_