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April 22, 2006 12:03 am

Latin America performs better than expected

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Latin American economies continue to perform better than expected, the International Monetary Fund said on Friday, remarking on the region’s recent success in increasing employment growth and reducing poverty.

Anoop Singh, director of the fund’s Western Hemisphere Department, said Latin America’s improved performance was not solely caused by a healthy world economy, but economies were benefiting from “improved macro and structural policies”.

Inflation was under control, with headline rates close to 6 per cent and budgetary positions “continue to show overall strength”.

He picked out the financial sectors of Mexico and Brazil as “much stronger” than they were five to 10 years ago. Mr Singh reiterated the IMF’s forecast that economic growth should remain above 4 per cent in 2006, even with a string of elections in Latin American countries. He added that over the past five or six years, economic performance in countries holding elections or with new governments had not suffered.

But the IMF warned that risks to the global economy remained and these had the potential to harm the Latin American economy since it was not yet ready to sustain its strong performance without the benefits of high commodity prices, low global interest rates and surging demand for its commodity exports. Rodrigo Rato, the IMF managing director, also suggested ahead of the fund’s weekend meetings that the region’s remaining public debt problems would leave it more exposed to a global downturn.

“Latin America still is not in a position to use fiscal policy in a counter-cyclical way,” he said. “Continuation in reduction of debt is key.”

Related stories:
IMF set to boost emerging economies’ role
Oil tops $75 as G7 calls for output increase
Latin America: News and analysis

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