IMF Managing Director Dominique Strauss-Khan praised the management and achievements of the Uruguayan economy and said it was a pleasure to visit a country that does not have major problems resulting from the 2008 global financial crisis, which is a “recurrent issue” of his busy agenda.
However he also cautioned about the need to prepare for the day after the good times come to an end and pointed out that some Latin American economies are growing too fast, risking overheating and its consequences.
“I must congratulate the different Uruguayan officials for the way they have coped with the crisis”, said the head of the IMF during his brief Wednesday visit to Uruguay where he met members or Parliament, the president of the General Assembly Danilo Astori, Economy minister Fernando Lorenzo, Central Bank chairman Mario Bergara, President Jose Mujica and even had time for a debate with university students.
“The world economy is recovering, there are some weak patches still, such as Europe and to a certain extent the US, but we must be aware of events in North Africa, where inequality seems to have triggered the situation”, said Strauss-Khan who recommended Uruguay must find the adequate tools for sustained, long term inclusive development.
“The great threat is the existence of great inequalities; things are working fine in Uruguay, maybe too good, but tailwinds can easily become headwinds, and countries must prepare for the future. President Mujica and officials I’ve talked too are well aware of this and working on it”, pointed out the IMF head that is in a Latinamerican round of visits that also includes Panama and Brazil.
Strauss-Khan said that in the last decade Uruguay has achieved formidable economic progress which has brought an increase in the living standards of the population.
“Ensuring macroeconomic stability is an essential foundation to keep advancing other social improvements because economic cycles in their downturns hit mainly the most vulnerable groups of society” cautioned the IMF chief adding that “managing the current boom and the opportunity to consolidate Uruguay’s resistance to external shocks” must be a priority of government policies.
“It is also the right moment to keep advancing on reforms that will support sustained long term growth to be shared with all sectors of the society, and we welcome the current Uruguayan government’s focus on reducing the gaps in infrastructure and education”.
But Strauss-Khan also cautioned about growing too fast and the overheating of economies, a risk he said several regional countries could be facing.
In support of his argument he referred to the economic situation in Greece and Ireland where with the implementation of the Euro, the average real salary increase has been 35%, but in Ireland it shot up to 100%, complicating all possible competitiveness.
The only exception was Germany, where salaries increases averaged 17% and currently “German competitiveness is extremely high and evidence of this is the level of exports in these last twelve years”.
“Yes we must help people to live better, but this must be done at a sustained rhythm and not too fast; things don’t last for ever and growth must benefit all sectors, not only a few, and this could happen or be happening in Latin America”, warned the IMF chief.
“A situation as the current can last two, three years but after that if you did not take advantage of the good times, and prepare for lean times, you might find yourself at the edge of a cliff, and you might even fall over”… emphasized Strauss-Khan.
“Latin American countries that are growing too fast must find the right rhythm: if you devour everything on the first day, there won’t be any left for the second day”…
The visit of the IMF Managing Director to Uruguay was his first and most probably his last in such a post, since it has been strongly suggested, --and he has not denied it-- he will be resigning before next July 14th, when French presidential hopefuls must register for the 2012 election.
Opinion polls show former Socialist Economy minister Strauss Khan has the highest support ratings in France.