Political Risk Latin America Blog @PolRiskLatam

IMF looks ahead to Latin America’s challenges

Posted in News and Articles, Political Risk by politicalrisklatam on June 13, 2011

by Anthony Harrington for QFinance, June 10th, 2011.

In April the International Monetary Fund (IMF) published a “Discussion Note” which looked at the challenges a new era of abundance is already imposing on Latin America. Of course, there has been something of a mood shift in global markets between April and June, with April’s optimism in almost headlong retreat in the face of a spate of bad news from the US and European markets, and continued inflation in emerging markets. The US indexes have been falling for six weeks on the trot, giving up a large chunk of recent gains, all of which casts a shadow over the assumption that the emerging, resource-rich economies of Latin America are going to continue to enjoy booming market conditions.

Nevertheless, the IMF paper was smart enough to look ahead to what might happen, or what difficulties might present themselves to Latin American markets in the face of sudden market shocks. This, indeed, was part of what the paper was all about, so it is still very relevant.

The paper is titled: “Managing Abundance to Avoid a Bust in Latin America”. It’s starting point is neatly summarized in the paper: “Exceptional global circumstances have produced a double bonanza of easy foreign financing and high terms of trade for Latin America (LA), particularly for commodity exporters—favorable conditions that will not last forever. Managing this abundance will be critical to avoiding a boom-bust cycle.” (continue reading… )


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