IMF Managing Director Outlines Policies to Consolidate Regional Economic Growth

Prepared by Jason Marczak
May 7, 2008

Sound fiscal and monetary policy frameworks have underpinned Latin America’s most sustained economic expansion since the 1970s, according to IMF Managing Director Dominique Strauss-Kahn. Some of the region’s most critical economic achievements include: change in the structure of debt with Brazil eliminating its exposure to foreign currency debt; single digit inflation despite policy transitions; and greater integration into the global economy. In the last decade, Latin America’s share of world trade has jumped 50 percent.

Download an mp3 of Strauss-Kahn's speech.

The region’s continued economic advancement requires addressing three important concerns. First, with recent export growth reflecting a surge in commodity exports, greater focus should be placed on value-added exports. Second, the region’s lagging share of manufacturing output should be reversed from the steady decline seen since the 1980s. Finally, besides Chile, Costa Rica, and Uruguay—where poverty is below 20 percent of the population—poverty continues to plague much of the region.

Economic growth policies should focus on increasing private and public investment and boosting productivity. An increase in value-added industries is paramount to propelling Latin American growth beyond rates (one-third to one-half) that lag far behind other emerging markets.

At the same time, about one-half of regional growth is linked to global forces. Many economists have cited potential decoupling from the 1.5 percent to 2 percent decline in Asian growth (from 11 percent to 9 or 9.5 percent), but the IMF managing director does not see decoupling as a possibility. At the same time, China’s continued, tightly managed exchange rate has shifted global dollar adjustment to floating currencies. Latin American growth will be contingent upon a rebalancing of China’s exchange rate.

A new and developing influence on regional economic growth is the escalation of global commodity prices. While many Latin American countries are food exporters, domestic inflation is a top concern. Governments considering tax system or customs rate changes should note that neither policy is a long-term solution for addressing rising food prices. In fact, both may jeopardize years of sound policy progress. One short-term solution is the granting of temporary subsidies to alleviate domestic shortages.

Before taking office at the IMF, Strauss-Kahn served as a member of the French National Assembly and an economic professor at the Institut d'Etudes Politiques de Paris. He also served as a personal advisor to the OECD's secretary general. Earlier, he oversaw the launch of the Euro as France's minister of economy, finance, and industry. He participated in the Uruguay Round of trade negotiations as the French minister of industry and international trade. Strauss-Kahn also worked in the private sector as a corporate lawyer.

For nearly four decades, the annual Washington Conference on the Americas has served as the top forum for government, industry, and policy leaders to engage in substantive analysis on timely themes affecting the Western Hemisphere.

View summaries of and listen to audio of remarks by conference speakers:

• President George W. Bush
• President of Panama Martín Torrijos
• U.S. Secretary of State Condoleezza Rice
  
• Peru's Minister of Finance Luis Carranza Ugarte
• U.S. Commerce Secretary Carlos Gutierrez
• U.S. Representative Gregory Meeks
• Canada's Minister of Industry Jim Prentice
• Colombian Minister of Defense Juan Manuel Santos
• U.S. Trade Representative Susan Schwab
• U.S. Assistant Secretary Thomas Shannon
  
• U.S. Education Secretary Margaret Spellings
• IMF Managing Director Dominique Strauss-Kahn

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