Front Page	E-mail PagePrint Version

New International Monetary Fund study lists economic priorities for region

WASHINGTON, DC - 02/16/05 - Latin America's economies need to be made more ''crisis resistant'' if the region is to sustain the economic growth it has achieved since 2002, says a new regional economic report published by the International Monetary Fund (IMF).

The report's findings come as negotiators from the US, Colombia, Peru, and Ecuador recently completed the seventh round of US-Andean Free Trade Agreement (USAFTA) talks in Cartagena, Colombia.

In the new report, the IMF said priorities for the region on the economic front include strengthening fiscal management, lowering public debt, sustaining low inflation and pursuing trade liberalization.
 
The IMF added that maintaining the strong growth the region enjoyed in 2004 involves giving "renewed emphasis to broader structural reforms."

Improvements in the business environment and labor market reforms "are also needed to raise investment and structural flexibility," said the IMF in its new "Stabilization and Reform in Latin America: A Macroeconomic Perspective on the Experience since the Early 1990s" report.

The IMF said that, in the late 1990s, persistent macroeconomic vulnerabilities, slowing growth, and limited popular support for corrective measures undermined investor confidence. That lack of confidence precipitated economic crises in a wide range of countries in Latin America.

Only Chile and Mexico, which had gone furthest in addressing "underlying vulnerabilities" in their economies, "were able to successfully resist the difficult economic conditions," said the IMF.

The IMF said pursuit of free-trade policies by Chile and Mexico helped both countries' economies.

Chile, the IMF said, was helped "immeasurably by opening its economy aggressively," while Mexico "benefited" by its membership with the US and Canada in the North American Free Trade Agreement.

But, it said, the entire region is now recovering from the economic downturn. 

The reason for that, according to the report, is "strengthening political resolve in many countries to address the immediate macroeconomic vulnerabilities - combined with an ongoing global economic recovery, strong commodity prices, and favorable emerging market conditions."

The report reflected the views expressed recently by IMF Managing Director Rodrigo de Rato, who said Latin America's current economic expansion offers regional leaders the opportunity to deepen reforms and build on recent gains.

Rato told an audience at the Canning House in London that global economic growth should remain robust in 2005.  He pointed out that while growth in industrialized countries has slowed noticeably in recent months, Latin American growth has remained strong.
 
The Canning House is the home of the Hispanic and Luso (Portuguese) Brazilian Council, a nonprofit organization founded in 1943 to promote understanding between Portugal, Spain, the United Kingdom and Latin American countries.

In the forward to its new report, the IMF says Latin America's "short-term" economic prospects "look more promising than they have for some time."  As the global economy strengthens, "a pickup in activity is well underway in most countries in the region, after two years of weakness."

But, the IMF cautioned, "reforms need to be carefully targeted, to deliver macroeconomic stability that will increase resilience to outside shocks and so make it possible to sustain higher growth rates and thus reduce poverty."

Identifying where reforms fell short, or where they were not followed through, the IMF asserts, should help policymakers to avoid the shortcomings of the 1990s and set Latin America on a "path of sustainable, more rapid growth."

The IMF's "Stabilization and Reform in Latin America: A Macroeconomic Perspective on the Experience since the Early 1990s" report is available on-line at http://www.imf.org/external/pubs/ft/op/238/index.htm

Washington sees the proposed US-Andean trade pact as a driving force of that growth with the Bush Administration committed to efforts to create a Western Hemispheric free trade zone competitive with similar trade blocs being created in Southeast Asia and elsewhere.

Over the past two years, the US has inked free trade pacts with Chile and has completed negotiations on the Dominican Republic-Central American Free Trade Agreement (DR-CAFTA). In addition to the countries impacted by the Free Trade Agreement of the Americas (FTAA) and the Andean nations of Colombia, Ecuador, Peru, and Bolivia, free trade talks are also currently underway with the government of Panama.

Mexico has enjoyed free trade status with the US and Canada since 1994 when the North American Free Trade Agreement went into effect.

According to Assistant US Trade Representative (USTR) for the Americas Regina Vargo, the primary topics covered in the latest round of USAFTA talks covered market access, government procurement, and dispute settlement, while the texts of the trade agreement covering telecommunications and electronic commerce are "almost complete."

The USTR official said that the recent talks included broad discussions on agriculture, but indicated that more work is needed since negotiations are "still very early in the curve" in this area. 

The US, she said, will have a series of two-day bilateral meetings next month with the Andean participants to discuss agricultural issues "within the context of the free trade agreement."

Besides the agricultural meetings, the next full round of US-Andean FTA talks is scheduled to begin March 14 in Washington.
 
Those talks will focus on intellectual property rights, investment, rules of origin, and a "deeper discussion of the structure of the agreement," Vargo said.

Apart from the current round of negotiations, discussions on textiles are scheduled March 16-18 in Miami at the same time as the Material World trade show - one of the world's largest textile expositions. 

In April, trade officials are scheduled to meet for another round of talks in Lima, Peru. 

Vargo said that Andean officials hope to reach an agreement with the US early this summer to allow time for the ratification of the agreement before the Andean Trade Preference Act (ATPA) expires in December 2006.

Bolivia continues to participate in the trade talks as an observer.

Before that country is folded into the talks, Vargo said, "there are issues, including a hydrocarbons law, that Bolivia must address in order to demonstrate a respect for the sanctity of contracts."

Go back, or read the latest Front Page stories:

''Moving the Goods'' Named a Statewide Priority

03/17/05 – Gov. Schwarzenegger has created a Cabinet Working Group to work ''collaboratively'' with the state’s logistics providers, local and regional governments, business, labor and environmental groups, and other interested parties ''to achieve shared goals;'' five Senate bills sponsored by State Sen. Alan Lowenthal (D-Long Beach) aimed at easing the congestion on the over-burdened surface highway corridors serving the ports of Los Angeles, Long Beach, and Oakland are now wending their way through the legislative process in Sacramento.