LATIN AMERICA AND THE FINANCIAL CRISIS
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LATIN AMERICA AND THE FINANCIAL CRISIS Mario I. Blejer 1
description
LATIN AMERICA AND THE FINANCIAL CRISIS. Mario I. Blejer. Latin America: GDP Growth. Source: ECLA. Amlat: Crecimiento del PIB (%). Fuente: Institute of International Finance. Latin America: Larger Fall but Stronger Recovery. Source: Institute of International Finance. - PowerPoint PPT Presentation
Transcript of LATIN AMERICA AND THE FINANCIAL CRISIS
LATIN AMERICA AND THE FINANCIAL CRISIS
Mario I. Blejer
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MIB
Latin America: GDP Growth
-3
-2
-1
0
1
2
3
4
5
6
7
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
percen
t
Source: ECLA
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Amlat: Crecimiento del PIB (%)
Fuente: Institute of International Finance 3
Latin America: Larger Fall but Stronger Recovery
Source: Institute of International Finance 4
Long Term GDP Growth Prospects(% - 10 year rolling average)
Source: WEO - IMF5
Are there some areas in which particular lessons could be learned?• Pragmatism about Exchange Rate Policies
• Capital Controls and Reserve Accumulation
• Financial Stability and Banking Regulation
• Fiscal Management (Debt and Deficits)
• Social Policies to Reduce Political Conflict
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Exchange Rate Policies
• Following the hyperinflations of the 80s the hard pegs were adopted as centerpieces of stabilization
• After the collapse of the regimes floating rates were implemented in the context of inflation targeting
• However, there is active intervention in the FX market – In practice there is a Managed Floating Regime rather than a free floating.
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Exchange Rate Policies - Lessons
1. Futility of relying on Exchange Rates as the main stabilization instrument.
2. Importance of Flexibility. Including the flexibility to intervene and to impose restrictions. None of the extreme regimes preserves competitiveness.
3. Importance of a good level of International Reserves
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MIB
Latin America: Exports (in U$S Millions)
-
100.000
200.000
300.000
400.000
500.000
600.000
700.000
800.000
900.000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009Source; CEPAL
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Latin America: Regional Terms of Trade(yearly change - %)
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MIB
Latin America: Evolution of the terms of trade
Source: ECLA (Cepal)
TotalSouth America
Central AmericaMexico
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Strong External Accounts
Source: Institute of International Finance
CURRENT ACCOUNT DEFICIT - AMLAT
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MIB
Net Foreing Investment Direct in Latin America -2009
26%
23%
11%9% 8%
4%
44%
14%
9%
5% 5%7%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Brasil México Chile Colombia Argentina Perú
2008 2009
Source: ECLA (Cepal)
Total: U$S 65.269 M (30% less than 2008)
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Financial Stability• The Region Experienced Serious Banking
Crises in the Past and Learned the Lessons
• Stricter Banking Supervision and Less Use of Sophisticated Complex Instruments
• Stricter Standards for Capital, Leverage, and Liquidity Requirements
• Relatively Low Exposure to the Public Sector
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EM: % Change in Bank Lending
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Bank Lending: Advanced vs. EM(% change over year ago)
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Fiscal Prudence
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Public Debt
Source: IIF19
PUBLIC DEBT (% of GDP)
Source: IIF
113%
44%
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Financing Needs, 2010(% of GDP)
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MIB
Latina America: Public Debt (in GDP %)
0
10
20
30
40
50
60
70
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: ECLA (Cepal)
32%
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MIB
Latin America: Fiscal Deficit (in GDP %)
-5
-4,5
-4
-3,5
-3
-2,5
-2
-1,5
-1
-0,5
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: ECLA (Cepal) 23
Brazil: Significant Progress in Poverty Reduction
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Social Programs
• Inequality continues to be a problem but social programs have reduced poverty and largely increased the middle class.
• Social programs did not cause fiscal imbalances
• Important reduction of Political Conflict and facilitated introduction of structural reforms 25
THANK YOUTHANK YOU!!
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Source:IIF 27
