Problems ahead for many Latin-American Countries and Caribbean Economies. As the global growth shifts from the emerging to the more advanced economies, the former countries have to deal with lower commodity prices and a tighter global financial environment.
"Lower commodity prices have already started to affect the region’s commodity exporters. Even though prices remain high by historical standards, countries can no longer count on the tailwind from ever-improving terms of trade, which had propelled economic activity over the past decade.
Meanwhile, longer-term U.S. interest rates have started to rise, with knock-on effects for emerging markets. Across all of the financially integrated economies of Latin America, bond yields have increased, equity prices have fallen, and currencies have depreciated since May, when the U.S. Fed first mentioned the possibility of tapering its bond purchases later this year" says Alejandro Werner.
Because of that scenario is that the IMF projects a 2.75% growth for the region on this year. For 2014 the Fund projects a growth to about 3%.
"With less supportive external conditions in the offing, the strength of domestic economic policies will be crucial for how individual countries can cope. Fortunately, many of the larger economies in the region are in a good position to weather more challenging times, as policy frameworks and economic fundamentals have been strengthened over the past decade. Banking systems are generally healthy and well-funded; external debt is moderate; official foreign exchange reserves are sizable; and flexible exchange rates are acting as a useful buffer for shocks, while allowing countries to adjust monetary policy within their inflation targeting frameworks" says Mr A Werner
Source: IMF
