Latin American Economy on Road to Speedy Recovery

Sources: eGovmonitor.com; Fast-track Recovery from Crisis Likely for Latin America; China View; IMF: Latin America to Recover from Crisis Ahead of Rich Countries

The International Monetary Fund (IMF) stated on Wednesday that Latin America will recover more rapidly than the rich countries even though the region has not escaped the current global financial crisis unscathed. Certain economic policies Latin American countries had previously adopted better equipped them to deal with the crisis. These countries strengthened their fiscal circumstances and solidified their economic systems. In turn, the measures improved the integrity of the political base and resulted in a reduction of projected inflation rates.

As compared to prior financial crises, and other emerging economic regions, Latin America has shown itself less vulnerable to the negative consequences of the current global crisis. While the region has prevented a systemic meltdown, it cannot prevent economic deceleration.

Stimulus packages in Brazil, Mexico, Peru, Chile, and Chile, as well as other countries in the region, will lessen the harmful social and economic effects of the economic decline. Countries without the ability to put incentive plans into practice will receive significant economic support from multilateral organizations. National assets should also attract foreign investors as exchange rate flexibility facilitates dynamic domestic economies.

The IMF projected contraction rate of 3.8 percent for 2009 in developed countries is worse than the 1.5 percent for Latin America. Further, in 2010, the IMF has projected a 1.5 percent growth rate for the Latin American economy.

Discussion Questions:
1) How and to what extent will the recovery of the Latin American economy affect other less resilient emerging economies?
2) As the economic development of Latin America renews, how might the region change its current economic policies?