IMF chief: Latin America still has plenty of room for structural reforms

By Patricia de Arce

Washington, Oct 14 (EFE).- The managing director of the International Monetary Fund says Latin America still has plenty of space for carrying out growth-promoting structural reforms.

In an interview with Efe during the IMF-World Bank Annual Meetings in Washington, Kristalina Georgieva also noted that she is seeing a bigger push in that region for policies that foster more social cohesion and equality.

“We’re seeing more voices in Latin America speak up for the importance of cohesion in society, that equality is not just an ethical concept. It is an economic concept. And that move towards more equitable, more inclusive societies, I believe is going to help Latin America to do better in the future,” the IMF chief said Thursday.

In its World Economic Outlook report, released Tuesday, the IMF projected 3.5 percent growth this year for the Latin American and Caribbean region, up five-tenths of a percentage point from its July forecast.

But it lowered its 2023 growth outlook for that region to 1.7 percent, down three-tenths of a percentage point from its previous projection.

An increase in borrowing costs due to a rise in interest rates and high public debt are two of the main economic vulnerabilities facing the countries of Latin America and the Caribbean, according to the Fund’s regional report, which also noted that financing needs remain elevated.

Speaking with Efe at a time when numerous structural reforms are being considered across the region, the IMF managing director did not assess the specific policies of any Latin American country.

She did cite Brazil, however, as an example of a country that read the global economic signs and moved quickly to tighten its monetary policy.

“What we have seen in Latin America is some countries acting very early, recognizing that they need to address inflation as the biggest risk for stability, the economy, like Brazil for example,” Georgieva said. “And in these countries the impact is that their currencies are not depreciating against the dollar. Actually the Brazilian real is appreciating against the dollar.”

“But in many countries inflation is indeed quite high. Fiscal buffers are exhausted” because of the spending measures governments adopted in response to the Covid-19 pandemic, she added.

“What we recommend is for policy-makers to take a very careful look at what they can afford in terms of fiscal support, not very different from the story in Europe,” the IMF managing director said.

According to the Bulgarian economist, there is “so much space still” for structural reforms that will provide better opportunities for growth.

“So in tough times, do what you were reluctant to do in good times to get a new impetus for growth,” Georgieva said.

In that regard, she said a more emphatic shift toward renewable energies and a more “dynamic energy mix” will not only address current problems but also build the foundation for a better future.

“One good thing about Latin America, like a silver lining, is there are so many opportunities not yet utilized, like regional cooperation, like taking advantage of this new direction of a green, climate-resilient economy as a driver for growth. And now is a moment to do more of it.” EFE

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