IMF head warns of bumpy road for Latin America

AP News
Posted: Dec 05, 2014 3:07 PM
IMF head warns of bumpy road for Latin America

SANTIAGO, Chile (AP) — Latin America faces a rocky road ahead despite social and economic achievements in recent years, the head of the International Monetary Fund said Friday.

IMF director Christine Lagarde said that for two decades, most Latin American nations have achieved low inflation, fiscal discipline, and financial stability.

"These economies thrived because of their sound, rule-based policy frameworks, rising commodity prices, and favorable global financial conditions," Lagarde said at a regional summit in Santiago.

Despite impressive achievements, "the road ahead looks increasingly bumpy" for the region's economies, she said.

Lagarde said Latin America's outlook will now be influenced by shifting economic and financial conditions worldwide. She said that while the U.S. appears on the path to recovery, prospects for the eurozone countries are uncertain and the outlook for China has cooled.

Putting extra pressure on Latin American economies, commodity prices that lifted the region for more than a decade are now falling and the era of easy financing will soon end, said Lagarde.

She said that regional economic growth is expected to remain at 1.3 percent this year and 2.2 percent in 2015.

Latin America must now invest more in structural reforms in education and infrastructure to lift productivity and create economic diversification, the IMF chief said.

Lagarde said Latin America's middle class had grown by about 50 percent since 2003, partly because of a reduction in labor income inequality, including through rising minimum wages.

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Improved healthcare and education have also helped reduce inequality in Argentina, Bolivia, Brazil, Mexico and Uruguay by 10 to 20 percent between 2000 and 2007, she said. But social indicators remain weaker, and inequality much higher, than in comparable regions, Lagarde added.

"Why is this relevant right now? Because the rising expectations of Latin America's middle class are bumping up against shortcomings in the provision of public services," she said, pointing as an example the protests sparked in Brazil last year by rising public transportation costs.


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