MercoPress. South Atlantic News Agency

IMF proposals for Latinamerica's cyclical crises.

Latinamerica's problem is not achieving economic growth which it has, but rather the challenge of making it sustainable, said Raghuram Rajan, Director of IMF's Research Department during the official release of the “World Economic Outlook”.

Mr. Rajan who is the main contributor to the report forecasts a solid economic recovery in Latinamerica this year with 4,6% and 3,6% in 2005.

However it seems difficult to sustain the level of recovery in a continent characterized by strong expansions, preceded and followed by recessive cycles and great contractions. Mr. Rajan points out to Brazil as a good example for other countries to follow.

Brazil is forecasted to expand above 4% in 2004 more or less the average of the region, but less than Africa, or countries such as India and China, nevertheless Mr. Rajan described the rate growth "healthy".

"We're optimistic with the reforms being implemented by Brazilian authorities, because it's important they ensure long term sustainable growth", said Mr. Rajan adding that structural reforms are essential to achieve the goal, "unfortunately in countries such as Mexico and Argentina they have slowed down considerably".

When asked about the negative consequences for the poor of the IMF sponsored reforms Mr. Rajan argued that if governments implement reforms that include services infrastructure expansion for the poor, "the objectives are not contradictory but complementary".

"It's a mistake to believe that reforms necessarily are harmful for the poor. I believe crises are far more harmful, --6% growth followed by 10% contraction--; obviously some reforms are more difficult to implement than others but you must also work in reforms that will help the poor such as social security".

Regarding Argentina, a member of Mr. Rajan's team, economist David Robinson cautioned that expansion so far is the consequence of the rebound effect following the brutal contractions of 2001 and 2002, "but this has began to slow down".

"To keep growing Argentina must restructure its debt reaching an agreement with private creditors and bond holders, this is crucial and critical".

Argentina's economy is forecasted to expand 7% in 2004 and 4% in 2005.

Besides restructuring the almost 100 billion US dollars debt, IMF suggests Argentina must insist with fiscal reform, finalize bank compensations for losses during the asymmetrical "pesification" process, reform government owned banks and establish a new legal framework for public utilities companies.