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IMF/ ECONOMIC OUTLOOK LATIN AMERICA
STORY: IMF/ ECONOMIC OUTLOOK LATIN AMERICA
TRT:2.52
SOURCE: IMF
RESTRICTIONS: NONE
LANGUAGE: ENGLISH /SPANISH /NATS
DATELINE: 24 APRIL, 2014, WASHINGTON DC / FILE
RECENT – LIMA, PERU
1. Various shots, traffic
24 APRIL, 2014, WASHINGTON DC
2. SOUNDBITE: (Spanish) Alejandro Werner, Director, Western Hemisphere Department, IMF:
“For 2014, unfortunately, the push, let’s say, from the increasing growth from developed economies is helping some of the Latin American economies, but most of them are actually suffering a bit from the decline in commodity prices given that are commodity exporting economies. So overall we are expecting a rate of growth for the region as a whole of 2.5 percent.”
RECENT - SAO PAOLO, BRAZIL
3. Various shots, busy streets
24 APRIL, 2014, WASHINGTON DC
4. SOUNDBITE: (English) Alejandro Werner, Director, Western Hemisphere Department, IMF:
“The Brazilian economy went back to a relatively low rate of growth and basically it’s explained by low investment rates, low productivity growth, and a low savings in the Brazilian economy. Some uncertainty regarding policies or going forward, it will be very important to move on several fronts, like strengthening education, strengthening infrastructure that the government is already doing; improving the business environment so that investment can really pick up.”
RECENT – MEXICO CITY, MEXICO
5. Close up, Mexican flag
6. Med shot, pedestrians
24 APRIL, 2014, WASHINGTON DC
7. SOUNDBITE: (Spanish) Alejandro Werner, Director, Western Hemisphere Department, IMF:
“Two things. One, Mexico is well positioned to take advantage of the recovery in the U.S. economy. Second, Mexico is much better placed in terms of relative unit labor cost vis-à-vis China, in terms of pushing its manufacturing industry forward. And third, the structural reforms that have been implemented in energy, telecom, fiscal, and education will help the country to grow much faster in the future.”
RECENT – MANAGUA, NICARAGUA
8. Various shots, traffic
24 APRIL, 2014, WASHINGTON DC
9. SOUNDBITE: (English) Alejandro Werner, Director, Western Hemisphere Department, IMF:
“What we have been seeing in the last 12 months is the important balance of payment pressures, declining resources in Venezuela, increasing inflation and scarcity, and we’re expecting negative growth in 2014. Venezuela has important, let’s say, financial and trade linkages with some economies in Central America and the Caribbean. And to the extent that the economic problems in Venezuela will affect these financial and trade agreements, some economies in the region, especially Central America and the Caribbean, can suffer from the pull-back of these commitments.”
RECENT – MANAGUA, NICARAGUA
10. Various shots, construction
According to the IMF’s latest forecast, economic activity in Latin America and the Caribbean is expected to remain low in 2014.
The recovery in the United States and other advanced economies is expected to bolster export growth, but lower world commodity prices and rising global funding costs are likely to weigh on activity across the region.
“For 2014, unfortunately, the push, let’s say, from the increasing growth from developed economies is helping some of the Latin American economies, but most of them are actually suffering a bit from the decline in commodity prices given that are commodity exporting economies. So overall we are expecting a rate of growth for the region as a whole of 2.5 percent,” said Alejandro Werner, Director of the IMF’s Western Hemisphere Department.
The IMF’s “Regional Economic Outlook for the Western Hemisphere”, released on April 24 in Lima, Peru, projects regional growth of 2½ percent in 2014, down from 2¾ percent in 2013. Weak investment and subdued demand for the region’s exports held back activity in 2013, as did increasingly binding supply bottlenecks in a number of economies. For 2015, the IMF projects a modest pickup, to 3 percent.
According to the report, Latin America still faces a number of downside risks. The key risk is a sharper decline in commodity prices caused by weaker demand from some of the major commodity-importing economies, especially China. Although the effects from a gradual and orderly normalization of U.S. monetary policy should be contained for most of the region, increased capital flow volatility also remains a risk.
Growth in the financially integrated economies—Brazil, Chile, Colombia, Mexico, Peru, and Uruguay—in 2014 is expected to remain the same as in 2013, at 3½ percent. However, the average growth number masks considerable differences in growth between different countries.
In Brazil, activity is expected to fall below 2 percent in 2014, as weak business confidence continues to weigh on private investment.
“The Brazilian economy went back to a relatively low rate of growth and basically it’s explained by low investment rates, low productivity growth, and a low savings in the Brazilian economy. Some uncertainty regarding policies or going forward, it will be very important to move on several fronts, like strengthening education, strengthening infrastructure that the government is already doing; improving the business environment so that investment can really pick up,” Werner said.
Mexico’s economy is expected to rebound to 3 percent this year owing to a stronger U.S. recovery and normalization of domestic factors.
“Two things. One, Mexico is well positioned to take advantage of the recovery in the U.S. economy. Second, Mexico is much better placed in terms of relative unit labor cost vis-à-vis China, in terms of pushing its manufacturing industry forward. And third, the structural reforms that have been implemented in energy, telecom, fiscal, and education will help the country to grow much faster in the future,” Werner said.
The IMF said the key policy priorities for the financially integrated countries include a careful calibration of macroeconomic policies, a clear focus on reducing financial vulnerabilities, and stepped-up structural reforms to remove obstacles to growth.
Growth in the other commodity exporters—Argentina, Bolivia, Ecuador, Paraguay, and Venezuela—is projected to fall sharply in 2014, to about 2¾ percent from nearly 6 percent in 2013. The IMF said that fundamental policy adjustments are needed in Venezuela to avert the risk of disorderly dynamics.
Further policy adjustments are also needed to restore macroeconomic stability in Argentina, especially in the context of less favorable prospects for global commodity prices. The other economies in this group will also need to control levels of public spending, which have increased sharply over the past decade owing to strong commodity revenue.
Werner said the IMF is also monitoring the situation in Venezuela.
“What we have been seeing in the last 12 months is the important balance of payment pressures, declining resources in Venezuela, increasing inflation and scarcity, and we’re expecting negative growth in 2014. Venezuela has important, let’s say, financial and trade linkages with some economies in Central America and the Caribbean. And to the extent that the economic problems in Venezuela will affect these financial and trade agreements, some economies in the region, especially Central America and the Caribbean, can suffer from the pull-back of these commitments,” Werner said.
Economic activity in Central America is projected at about 3½ percent in 2014, similar to last year’s level. Looking ahead, the IMF pointed out that a consolidation of public finances is necessary to reduce fiscal and external imbalances, and to ensure debt sustainability. Consolidation efforts would have to include both expenditure restraint and higher tax revenues.
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