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IMF warns about fiscal deficits and price controls systems

Tuesday, June 19th 2007 - 21:00 UTC
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The International Monetary Fund Managing Director Rodrigo Rato warned about the risks for Latinamerica of “populist” economic measures which worsen fiscal deficits, or price controls and manipulation of exchange rates.

Addressing on Monday the International Economic Forum of the Americas in Montreal, Canada, said that in spite of a descent in the rates of poverty in the region, "Latinamerica continues to be highly unequal as far as income distribution is concerned compared to other regions of the world". And the region is "most unequal in several areas that are crucial to promote growth" adding that this tendency leads to the "wrong policies" such as fiscal deficits which frequently end in high inflation and high interest rates and therefore "harm most the very people populists are trying to help". Similarly price controls frequently end harming the rural population which produces mainly food for cities and urban centers, warned Rato. He also cautioned about the manipulation of the exchange rate. "Members must avoid the manipulation of exchange rates in the world monetary system with the purpose of achieving unfair advantages over other members". But fortunately many Latinamerican governments have realized this and "we are seeing a new generation of leaders interested in social changes but also very alert to the importance of macroeconomic equilibrium", underlined IMF's Managing Director. Rato praised social assistance programs such as "Oportunidades" in Mexico; "Bolsa familia" in Brazil and "Chile Solidario" in Chile. "These programs have been particularly beneficial for the underprivileged", he said.

Categories: Economy, International.

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