MercoPress. South Atlantic News Agency

Latin America situation ‘solid’ but not ‘immune’; watch the fiscal front, says IMF

Eyzaguirre’s weather forecast: the rain of inflow capitals is stopping, but won’t dry up

The head of the IMF for the Western Hemisphere Department Nicolás Eyzaguirre discards an outflow of capitals from Latin America as a consequence of the current global situation and pointed out that the region’s position is solid.

“We are not seeing an episode of outflow of capitals” said the Chilean born Eyzaguiree during the round of press conferences on the region in the framework of the annual IMF and World Bank assemblies in Washington DC.

“Previously we had a problem with the rainfall of capital inflowing to the region, now we are seeing that the rain is stopping. But I don’t think we have a drought ahead of us, but precipitations will diminish”, added Eyzaguirre.

The IMF official said that the IMF-WB report on Global Economic Prospects considers that the “tail winds with easy outside financial conditions and high prices for commodities will continue, although at a less energetic pace”.

Therefore he underlined it is most important that Latin American officials, “do not relax fiscal consolidation policies”.

“Most countries are enjoying a solid situation vis-à-vis the challenge of the world’s economy slowdown, but mind you solid does not mean immune”, added Eyzaguirre.

However he was ironic about the old saying that when advanced economies catch a cold, emerging economies catch pneumonia.

“It very well could be that the current situation is exactly the opposite” he said pointing out that sustained growth of developing economies is what is helping to support the global economy in spite of distorting turbulences in the advanced countries.

In reference to some countries Eyzaguirre said that the downward review of Mexico’s growth to 3.8% and 3.6% for the two coming years, compared to the previous IMF review, was neither disturbing nor is its influence.

“México’s position is very solid because of very responsible macro-economic policies. The country has weathered quite will the weakness of the advanced economies, particularly from the US, which is its main market and trading partner”, said the IMF official.

Eyzaguirre finally recommended the region to prepare “for a scenario of global economic slowdown” and avoid policies that could exacerbate vulnerabilities and equally significant “preserve sufficient political space to undertake initiatives”.