REGIONAL REPORT
Latin America and the Caribbean
Antigua and Barbuda ; Argentina ; Aruba ; The Bahamas ; Barbados ; Belize ; Bolivia ; Brazil ; Chile ; Colombia ; Costa Rica ; Dominica ; Dominican Republic ; Ecuador ; El Salvador ; Grenada ; Guatemala ; Guyana ; Haiti ; Honduras ; Jamaica ; Mexico ; Nicaragua ; Panama ; Paraguay ; Peru ; St . Kitts and Nevis ; St . Lucia ; St . Vincent and the Grenadines ; Suriname ; Trinidad and Tobago ; Uruguay and Venezuela .
“ Despite solid macroeconomic management in the region , prospects for growth remain low not only because of global conditions but also because of long unaddressed structural issues . Regional growth remains constrained by low capital accumulation and low productivity growth over the longer term ,” it added .
Throughout the region , low competition makes consumers pay higher prices for lower-quality goods and services , reducing overall welfare , and contributes to higher inequality , as monopoly prices on essential goods and services consume relatively more of the budgets of poorer households .
Increasing the competition that LAC firms face has the potential to stimulate growth and improve consumer welfare , said the World Bank . Competition from low-cost consumer imports can help to raise the standard of living of families across the income spectrum . Competition also has the power to nudge domestic producers into adopting new products and technologies , improving productivity at the firm level .
“ The global integration of markets has contributed to more competitive environments , facilitating the diffusion and adoption of innovations that enhance efficiency . At the same time , competing in dynamic and challenging domestic markets is the best way for firms to prepare for exporting ,” added the World Bank .
Public debt levels
During the first half of 2022 , inflation reached multi-decade highs in many LAC countries . Smaller economies are typically less diversified and rely more on imports , making them more susceptible to inflationary pressures arising from higher import prices . Also , food and fuel — both of which have experienced large price increases since the beginning of the war in Ukraine — account for a larger share in the consumption basket in these economies
“ Public debt levels soared across the globe over the past decade . In seven large economies in Latin America ( Brazil ; Chile ; Colombia ; Mexico ; Paraguay ; Peru and Uruguay – known as the LA7 ) after the steady decline that accompanied the commodity price boom in the early 2000s , public debt surged around 2013 . While the pandemic had a less-thanexpected fiscal impact , debt levels remain elevated especially in light of the region ’ s prospects of low growth , high financing costs and growing spending demands to address social needs ,” commented the IMF
“ Moreover , prospects for debt dynamics in LA7 — which may compete for global financing with advanced economies ( AEs ) and other emerging markets ( EMs )— are clouded by a global environment of high uncertainty ,” it continued .
“ The drivers of public debt in LA7 have changed over time , and the progress made in lowering debt during the commodity price boom was reversed in the years preceding the pandemic . Going forward , public debt in the region is projected to stabilize around current levels over the medium term . However , this hinges on strengthening public finances , which requires ambitious fiscal consolidation efforts — both historically and relative to peers — as financing costs are expected to remain high and growth lacklustre — implying an unfavourable interest rate-growth differential . Fiscal frameworks are supportive of ongoing consolidation efforts but need to be further strengthened to enhance credibility , ensure fiscal discipline and help reduce financing cost ,” it concluded .
Images : Shutterstock . com .
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