MercoPress. South Atlantic News Agency

IMF anticipates Latinamerica will recover before developed countries

Although Latinamerica is well prepared to confront the international economic crisis, the economies of the region will suffer on average a contraction of 1.5% this year, said the International Monetary Fund main advisor for the hemisphere Miguela Sabastano.

“Latinamerica is not immune to the crisis, but its performance has been far better than would have been in a similar situation ten years ago”, said Sabastano on presenting an IMF report on economic prospects for Latinamerica and the Caribbean.

Among the strength factors outlined by Sabastano are the solidity of the region’s financial systems; good fiscal fundamentals and the reduction of debt as percentage of GDP in the majority of countries, which has given space to address the global crisis.

The main effects of the global crisis on the region this year according to the IMF will be “a strong fall in foreign trade”, estimated between 20 and 30%, less domestic demand, less credit for the private sector, plus a larger current account deficit.

Inflation is also expected to drop because of a weaker demand and the international fall of fuel and food prices.

Overall all Latinamerican economies will suffer a contraction of 1.5% on average, with Mexico the country forecasted to suffer most, a fall of 3.5%, (before the A/H1N1 influenza outbreak) while Central America is expected to expand 1%.

Latinamerican countries have been applying “ant cyclical fiscal policies” to address the crisis, by increasing government spending, which the IMF very much recommends “until we have sound evidence of an inflection point and recovery”, said Sabastano.

Among the countries which have followed this policy based on accumulation of strong budget surpluses during the boom years are Chile, Colombia, Peru, Brazil, Mexico and Costa Rica which have “latitude” to expand their outlays.

Sabastano said the IMF expects Latinamerica to begin recovering on the growth track in 2010, even possibly before the more developed countries.