MercoPress. South Atlantic News Agency

Argentina and Brazil blast IMF for its excess of pessimism regarding emerging economies

Lorenzino and Tombini confident Latam has the sufficient training and experience to overcome forecasted instabilities

Argentina and Brazil strongly questioned the IMF generalized “excess of pessimism” because of a slowing down in emerging economies but also underlined that these countries have the sufficient ‘training’ and recent experience to confront the new challenges.

“We believe the majority of emerging economies are better prepared than in the past and their resilience has improved mainly because of different measures: the state of public finances, the administration and flexibility with the different exchange rate systems, more and better shock absorbers and also the level of international reserves”, said Argentine Economy and Finance minister Hernan Lorenzino addressing the IMF International Monetary and Financial Committee.

“More specifically Latinamerican main economies have strong macroeconomic fundamentals and thus it is an excessive generalization to disregard the strength of emerging markets without making a distinction of regions and of those with positions that are stronger and with better shock absorbers”, added Lorenzino.

The Argentine minister said he was convinced the emerging economies will continue to grow at “standing, sustained and strong speed, and will persist as the main dynamo of the world economy”.

Argentina’s Lorenzino in the IMF monetary and financial committee also represents Bolivia, Chile, Paraguay, Peru and Uruguay.

Likewise Brazil’ Central bank president Alexander Tombini said that “not so long ago there was an excess of euphoria and now maybe an excess of pessimism”.

“This new pessimism does not take into account our training, our long experience with ‘sudden paralysis’ and our far better economy fundamentals”

Part of this pessimism can be attributed to the ‘volatility’ experts link with the expected withdrawal of the US Federal Reserve stimuli program of which all these years the emerging economies have benefited when they received massive inflows of capital, which are now preparing to leave back to their countries of origin and have had a slowing down effect on these economies.

To this must be added the political controversy in the US, whose lawmakers can’t agree on the budget approval or on the limit increase for the national debt.

Precisely the slowing down of emerging economies growth has been the main concern of this year’s IMF-World Bank annual assemblies which concluded on Saturday.

According to the latest IMF World Economic Outlook, the emerging economies are forecasted to grow 4.5% and 5.1%, this year and in 2014. Last July estimates were at 5% and 5.4% and last April, 5.3% and 5.7%.

“Attention is now centred in the emerging countries’ economies”, said Olivier Blanchard, IMF chief economist.

Tombini admitted that developing countries would have to address financial instability during and after the Fed withdraws the stimuli from the US economy, such as its massive purchase of sovereign bonds, and at the same time face external misbalances, slower growth debt and weaker tail winds”.

However this does not mean that these countries are heading for another crisis as happened at other periods of time in regions such as Latam, “but we believe those challenges are not sufficient to launch a general pessimist vision of all emerging countries”, added Tombini.

Brazil for example has “strong shock absorbers that can mitigate the risks” added the central banker, and in effect the slowing down of the Chinese economy could have a positive side since that giant economy could be heading to a more sustainable growth model, which “would be a great contribution to the world economy, which could be even more robust if it contributed to help stabilize commodities prices at a lower level”.

“Emerging economies in general, and Brazil specifically are better prepared than is generally said to sail successfully through that transition and achieve a growth pattern that is stronger and sustainable in the future”, concluded Tombini.