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International Monetary Fund Chief Urges Reform in Latin America

Rato says region should focus on reducing economic vulnerabilities

Posted: May 31, 2005


Rodrigo de Rato
Latin America is currently experiencing the fastest pace of economic expansion in decades, but should continue to confront challenges that could undermine stable growth and efforts to address poverty, says International Monetary Fund (IMF) Managing Director Rodrigo de Rato.

In a May 30 statement issued following his participation in a seminar entitled "Building Prosperity in Latin America and the Caribbean: Macroeconomic and Reform Priorities," Rato said that the current high economic growth rates in the region are largely the result of sound economic policies and reforms. The seminar was hosted jointly by the Economic Commission for Latin America and the Caribbean (ECLAC) and the IMF.

Despite such progress, Rato explained, much of the region continues to confront challenges and vulnerabilities. He cited high levels of public debt as one of the factors that limits a nation's ability to carry out social and public spending. The IMF official pointed out that many of the region's economies are also too closed and inflexible to fully benefit from globalization.

Rato said that regional governments should continue to focus on reducing vulnerabilities through continued fiscal consolidation. Other possible reforms discussed at the seminar included improving trade openness, advancing labor reforms, strengthening the efficiency and soundness of financial systems, and governance reforms to improve the investment climate.

The IMF will continue to work with the region to these ends, Rato vowed.

"It goes without saying that the IMF remains committed to working in partnership with countries in the region to develop an agenda for growth and poverty reduction that takes into account their economic circumstances," he said.

Following is the text of Rato's statement:

(begin text)

INTERNATIONAL MONETARY FUND
700 19th Street, N.W.
Washington, D.C. 20431

FOR IMMEDIATE RELEASE
May 30, 2005

Statement by IMF Managing Director Rodrigo de Rato at the Conclusion of His Visit to Chile

Mr. Rodrigo de Rato, Managing Director of the International Monetary Fund (IMF), issued the following statement today in Santiago on his visit to Chile, where he participated in the Economic Commission for Latin America and the Caribbean (ECLAC)-IMF Round Table Seminar on Building Prosperity in Latin America and the Caribbean: Macroeconomic and Reform Priorities:

"It has been a great pleasure to come to Chile and participate in this important roundtable that we have organized with Jose Luis Machinea and our other friends and colleagues at ECLAC. This is my second visit to Chile in the year since taking on the Managing Director responsibilities at the IMF and, as before, this has been a very rewarding trip. Today's discussion by a distinguished and diverse group of policymakers, journalists, and civil society representatives has yielded new insights on policies that hold the most promise to invigorate growth, create employment, and attack poverty within the region.

"It is fitting that we are considering these issues at a time when the region is experiencing the fastest pace of economic expansion in decades. This impressive performance is, in large part, the result of implementing macroeconomic policies geared towards promoting stability and resiliency to shocks, alongside reforms to help countries better tap their economic potential.

"However, we should not lose sight of the fact that countries in this region continue to confront a range of short-term vulnerabilities and medium-term challenges that have, for so long, compromised stable growth and frustrated efforts to improve social equity in a durable way. Public debt remains too large in many countries, limiting government's ability to carry out priority social and public investment expenditures, and leaving them exposed to shifts in financial market sentiment. Shifts in global financial conditions and commodity prices remain a source of vulnerability for many countries. And, in many instances, economies in the region are still too closed and too inflexible to benefit fully from globalization.

"Today, we in the Fund have shared our thoughts and listened to views of others on policy priorities to maximize the region's growth potential. In the Fund's view, we continue to believe that macroeconomic policies should remain focused on reducing vulnerabilities through continued fiscal consolidation, as well as by entrenching the hard-won gains of low inflation. From a structural perspective, we have discussed a menu of reforms, including efforts to improve trade openness; advance flexibility in labor and product markets; strengthen the efficiency and soundness of financial systems; and wide-ranging governance reforms to improve the climate for private investment.

"It goes without saying that the IMF remains committed to working in partnership with countries in the region to develop an agenda for growth and poverty reduction that takes into account their economic circumstances. I am therefore please to inform you that the IMF is also considering how we ourselves can best fulfill this partnership. As you may know, this year we are examining our own strategic direction. Strengthening the Fund's surveillance, and thus our ability improve the economic circumstances of our members, is at the heart of this review.

"On this brief trip, I have also had the privilege of meeting with President Lagos, and to hear his views on economic and political challenges and priorities. I also had met Central Bank Governor Vittorio Corbo and his Board of Directors. We discussed Chile's prospects in the near-term, which remain very favorable on account of sustained high copper prices, relatively low interest rates, and a favorable external environment, reinforced by a sound and tested macroeconomic policy framework. We expect the economy to grow by about five and a half to six percent this year, with inflation contained. There was also broad agreement that Chile's highly transparent inflation-targeting regime continues to provide an important anchor for macroeconomic stability."

(end text)

 

 

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