As usual in this series, Chapter 1 reviews the configuration of global risks and assesses the outstanding short term opportunities and challenges facing the LAC region. A special focus is placed this time around on the difference between exposure and vulnerability to exogenous shocks, with the latter assessed by adjusting exposure for a country’s shock absorption policy capacity. Given the global context and associated concerns with capital flow volatility, in Chapter 2 we take a look at the comparatively more stable components of international flows: FDI and Remittances. The cyclicality and volatility, as well as the joint determinants of FDI and Remittances are reviewed.
As usual in this series, Chapter 1 reviews the configuration of global risks and assesses the outstanding short term opportunities and challenges facing the LAC region. We document the significant slowdown in economic activity across the region, and explore the possibility of this being the ‘new normal’. In Chapter 2 we assess if the major social gains achieved during the ‘Golden Decade’, in particular the decline in inequality, will hold in this less supportive environment, and discuss alternative policy responses to preserve and further the equity gains in the region.
The April 2015 LAC Semiannual Report covers the short-term prospects and provides an analysis of the external factors affecting the region's economic performance. The first chapter expands on LAC's economic outlook paying special attention to the global context and its effect on LAC’s economic performance. In this first Chapter we argue that the region experienced an external shock that has shaped growth in recent years, and that this shock is likely here to stay. Chapter 2 discusses the policy space available for LAC countries as they try to accommodate to the current global context. In particular, the first part of the second Chapter discusses the rather limited monetary fiscal and monetary space currently present in the region. The second part of the Chapter argues part of this limited policy space is associated to LAC’s relatively low savings rate. Moreover, the Chapter shows that in addition to the potential positive effects that higher savings could have on policy space, it could also have a beneficial effect on long-term growth.
This semiannual report †“ produced by the Office of the Chief Economist for Latin America and the Caribbean (LAC) of the World Bank †“ analyzes the economic and financial performance of LAC in light of the commodity price cycle. Chapter 1 covers short-term prospects, identifies the external factors affecting the economic slowdown, and focuses on the policy challenges faced by the region (South America in particular) in terms of the monetary, fiscal, external and social adjustments required to accommodate the new external environment. Chapter 2 reviews the region’s experience during the commodity cycle, links it with the external environment, and identifies low saving as a key determinant of both the macroeconomic performance during the cycle and the constrained policy space policy makers now face, in some countries more than others. The chapter concludes with a discussion of the policy choices the region now faces, both for the immediate future and for the longer run.
This semiannual report examines the short and medium-term challenges for Latin America and the Caribbean (LAC) as the external factors that were instrumental in the region s recent performance recede. In particular, we address the role of the exchange rate as a counter-cyclical policy tool to buffer adverse external shocks.
Chapter 1 of the report covers the short-term prospects and provides an analysis of the external factors affecting the region's economic slowdown. The focus is on the adjustment challenges faced by those Latin American countries experiencing a major adverse terms of trade shock, which comes after an unprecedented (in magnitude and duration) period of terms of trade bonanza. Chapter 2 discusses the key topic of this semiannual report, that is, the implications of the slowdown for labor markets on jobs and wages. We describe the broad labor market trends observed during the boom and contrast them with the patterns observed during the slowdown. We also describe the implications of the slowdown for inequality. A corollary of the observed labor market patterns during the slowdown is that some of the gains towards greater income equality achieved in the past decade or so may be reversed, at least in part, and that we may see a divergence between labor income inequality and household income inequality, whereby the latter may rise more than the former.--Résumé de l'éditeur.
In 2012, the Latin America and the Caribbean (LAC) region continued its successful drive to reduce poverty and build the middle class. Poverty reduction was accompanied by strong income growth of the bottom 40 percent of the population, the World Bank’s indicator of shared prosperity. However, the recent economic slowdown and stagnation in inequality decline suggest that future social gains may be more difficult to achieve. Given the modest prospects ahead, the region’s poverty reduction strategy needs to focus on restoring growth and preserving macroeconomic stability, while reinforcing the ability of less advantaged groups to participate in and contribute to growth. This report assesses two relevant policy areas: equity of fiscal policy and equal access to basic goods and services for children that open the opportunity for them to lead lives of their choosing. Drawing on results from the Commitment to Equity project, the report shows that fiscal policy remains an underused instrument in terms of level and incidence of taxation and spending. The Human Opportunity Index underscores that opportunities are expanding for children in the region, but large gaps remain in access and quality.
"After a growth slowdown that lasted six years (including a contraction of 1.3 percent last year), the Latin American and Caribbean (LAC) region is finally expected to resume positive growth in 2017, with market analysts forecasting real GDP growth of 1.2 percent for 2017 and 2.3 percent for 2018. The recovery, particularly in South America, will be led by a strong rebound in Argentina, which is expected to grow by 2.8 percent in 2017 and 3.0 percent in 2018, and Brazil, which is expected to resume positive growth as well, expanding by 0.7 percent in 2017 and 2.3 in 2018, after contracting for two consecutive years. The usual external drivers of growth (particularly commodity prices, and growth in China and U.S.) are expected to remain relatively neutral, which points to the need for the region to reinforce its own sources of growth (e.g., structural reforms, investment in infrastructure, and further international trade both within and outside the region). Unfortunately, the region finds itself in a weak fiscal situation with 28 out of 32 countries with an overall fiscal deficit, which implies that a gradual but sustained fiscal consolidation will be needed in the years ahead. The report's main focus (Chapter 2) is on the monetary policy dilemma faced by countries in LAC. When a typical commodity-exporter country in LAC is hit by, say, a negative terms of trade shock, real GDP falls, the currency depreciates, and inflation increases. The Central Bank faces the dilemma of (i) increasing policy rates to defend the currency/fight inflation, but at the cost of aggravating the recession or (ii) reducing the policy rate, thus stimulating output, but encouraging further depreciation and inflation. Traditionally, LAC countries have chosen the first option and have thus pursued procyclical monetary policy (i.e., increasing policy rates in bad times). Recently, however, many countries have been able to switch and become countercyclical (i.e., reducing policy rates in bad times), which enables them to prop up the economy in recessionary times (which is particularly important when lack of fiscal space precludes countercyclical fiscal policy)."
Latin America and the Caribbean suffered the largest death toll from Covid†?19 across developing regions and the sharpest decline in economic activity. With fewer school days and lower employment rates, with higher public debt and more firms under stress, the effects could be long†?lasting. The crisis also triggered large†?scale economic restructuring, with productivity higher in the expanding than in the contracting sectors. Accelerated digitization could instill dynamism in finance, trade and labor markets, but it may amplify inequality within and across the countries in the region. Technology could transform the energy sector as well. Latin America and the Caribbean has the cleanest and potentially cheapest electricity generation matrix of all developing regions. But its electricity is the most expensive, due mainly to inefficiencies. Distributed generation within countries and electricity trade across countries, could make energy greener and cheaper, provided that the pricing is right.
Throughout the 2000s Latin America transformed itself into the leading edge of anti-neoliberal resistance in the world. What is left of the Pink Tide today? What is their relationship to the explosive social movements that propelled them to power? As China's demand slackens for Latin American commodities, will governments continue to rely on natural resource extraction? In an accessible and penetrating volume, Jeffery Webber examines the most important questions facing the Latin American left today.
