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Latin-America confronts market turmoil and does well…so far Claudio M. Loser Inter-American Dialogue/Centennial LA XXVI Meeting of Latin American Network of Central Banks and Finance Ministries IADB-October 16-17, 2007

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latin america confronts market turmoil and does well so far

Latin-America confronts market turmoil and does well…so far

Claudio M. Loser

Inter-American Dialogue/Centennial LA

XXVI Meeting of Latin American Network

of Central Banks and Finance Ministries

IADB-October 16-17, 2007

economic growth in la has recovered in recent years however it has lagged behind the world
Economic Growth in LA has recovered in recent years. However, it has lagged behind the World
slide10
With limited foreign reserves and official borrowing there was limited space for countercyclical policies
slide11

The growth in International reserves and the decline

in short-term debt is helping a lot in improving

the prospect of the region

2007

International reserves

Short Term debt

Ratio of s t debt to Reserves

external accounts improved because of domestic policies namely fiscal policy
External Accounts improved because of Domestic Policies...Namely Fiscal Policy
slide16
...and Exchange Rate Policy. However, the current account has now reversed reflecting movements in policy variables
trade with china has grown significantly
Trade with China has grown significantly

Source: IMF Direction of Trade Statistics

financial markets have tightened
Financial Markets have tightened
  • Spreads had declined to historic lows, but jumped recently with existing turbulence
slide21
Spreads remain “widespread”, and with some deterioration at every level, particularly on the riskier side
in the end
In the End
  • The region is much stronger
  • The debt burden is lower and reserves are higher
  • The fiscal position is solid
  • But, high terms of trade cannot last forever
  • Public expenditure is increasing fast
  • Financial conditions have tightened somewhat
  • A small financial system and increased flows abroad are making the region vulnerable, but manageablle
  • The current liquidity crisis has been a soft warning..
  • …but the region seems too complacent