MercoPress. South Atlantic News Agency

Latinamerican growth prospects soar

Latinamerica and the Caribbean will be expanding 4,7% in 2004, a full percentage point more that last April's forecast according to the World Bank.

With economic growth reaching 4,7% this year and 3,7% forecasted in 2005, the region will be seeing the end to at least three years of stagnation according to the WB "World Economic Prospects" released this Tuesday in Washington.

"Good times are back in the region", remarked Guillermo Perry, WB economist for the region. The report indicates that the solid strength registered in most countries of the region in 2004 and the strong acceleration in several of the world's main economies has resulted in the highest GDP expansion since 1997.

"Higher prices for commodities, an increase in the inflow of capital and a greater expansion in United States, Europe and Japan, as well a better fundamentals in the region's economies have contributed to the encouraging performance", said Mr. Perry.

The region's two main economies, Brazil and Mexico will experience strong growth during 2004 with 3,9% and 4%. Mexico in particular with sustained foreign investment and a boom in exports has managed to retain market shares in spite of stiff competition from China.

Other countries of the region with soaring economies are Venezuela, 13,6%; Uruguay, 11,5%; Argentina 6,7%; Peru, 3,7% and Colombia 3,5%.

However several Caribbean countries have experienced frustration because of the destructive impact of recent hurricanes which will take several years to recover. Forecasts for the coming two years, 2005 and 2006 remain robust, but according to the report will be in the range of 3,7%, below the 4,7% of this year.

The moderate growth contraction is attributed to a slower expansion of world trade; moderate prices for oil and other commodities and the rise in interest rates.

But the WB, following on the IMF steps, highly recommends Latinamerican countries to take advantage of the current growth trends and good economics to implement needed fiscal reforms.

Among the reforms are: reduction of government spending by introducing fiscal reforms and increasing the tax burden on certain sectors.

"This will help to have a more solid fiscal foundation helping to confront the coming years with lesser activity, according to the WB report.

"Latinamerica and the Caribbean must take advantage of the situation leaving behind the traditional pro cyclical fiscal policies which keep increasing government expenditure during booming times, but are followed by dramatic and painful fiscal adjustments, worsening contraction conditions and recessions", highlighted Mr. Perry.