Thursday, February 6, 2020

LatAm in Focus: How Can Latin American Economies Grow Again?

IMF’s Alejandro Werner talks with Bloomberg’s John Authers about the region’s economic outlook for 2020.

For Latin American economies, 2020 isn’t off to the best start. While many see the 2010s as a <a href="https://www.americasquarterly.org/content/latin-americas-decade-long-hangover">lost economic decade</a> in the region, the new decade begins with <a href="https://www.as-coa.org/articles/chart-latin-americas-economic-and-business-outlook-2019">uncertainty</a> in Brazil and Mexico, <a href="https://www.as-coa.org/articles/season-discontent-are-latin-american-democracies-risk">protests</a> in much of the region, and the global economy shaken by threats of war and a potential <a href="https://www.wsj.com/articles/coronavirus-closes-china-to-the-world-straining-global-economy-11580689793">pandemic</a>.  <a href="https://www.as-coa.org/events/imfs-alejandro-werner-latin-americas-2020-economic-outlook">In an AS/COA event</a> in New York, Bloomberg’s Senior Editor for Markets <a href="https://www.bloomberg.com/opinion/authors/AT2bBytfUHQ/john-authers">John Authers</a> interviewed the IMF’s Western Hemisphere Department Director <a href="https://www.imf.org/en/About/senior-officials/Bios/alejandro-werner">Alejandro Werner</a> in a discussion that covered external obstacles to the region’s economic recovery, but also the core reasons why and how things get complicated when it comes to Latin American economies. Authers, recalling his time as a correspondent in Mexico, asked Werner: “Is it possible for the IMF or finance ministers or central banks in the region to be more than porteros?” Werner, a former Mexican finance sub-secretary, said that even with the decade’s slowdown, it has been easier during that time to build regional consensus on macroeconomic policies. On the other hand, it has been hard for economists to understand what makes an economy “a good striker.” The IMF expects Latin America’s growth in 2020 to be 0.1 percent, because of “secular and cyclical issues,” he explained.  The duo talked about Brazil’s high hopes for structural reforms and the measures’ lack of effectiveness on growth numbers, how the USMCA helped clear up uncertainties “about the rules of the game” in North America, and February’s IMF mission to Argentina to discuss the country’s debt restructuring.

“Even in the best of times we don’t grow that much.” —Alejandro Werner

On Chile, Werner said the country’s growth is likely to slow but that “the true question” is what comes out of Chileans’ constitutional process, taking place in 2020. Will Chile be able to regain its economic strength and have more inclusive growth? “If that is the outcome, it will be a great investment,” Werner said. But he cautioned that one big risk is to engage in the process and lose the stability that the financial system gave the country. Said Werner: “A lot of countries in Latin American kind of aspired to converge to Chile. Now, what Chile needs to avoid is to converge into Latin America.”

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LatAm in Focus: How Can Latin American Economies Grow Again?

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