Santiago, Chile, March 7, 2013 - The Institute of International Finance published today the new edition of its Latin America Regional Overview , at the conclusion of its 2013 annual meeting of Latin America Chief Executives, hosted in Santiago by Banco de Chile.
Tim Adams, Managing Director of the IIF, said: "I am delighted to be able to attend this important forum in Santiago, generously hosted by the Banco de Chile. I especially thank its Chairman, Pablo Granifo LavÃn. Our discussions focused on global economic and financial issues, with particular reference to their implications for Latin America's future. Top of the agenda were the various quantitative easing measures taken by countries struggling to emerge from the financial crisis; lessons that can be drawn from the European debt problems; the outlook for the global economy; and the challenges ahead for Latin America."
Pablo Granifo, Chairman of the Board of Banco de Chile, said: "The fact that this IIF meeting is taking place in Chile is a tangible sign of the soundness and solvency of our domestic banking industry, which has demonstrated its strength despite the difficulties occurring now in the global economy. This good performance is to a large extent a consequence of prudent risk management by the Chilean banking industry and, for that reason, we are attentive to those policies that can make an impact on this great asset we have as a country."
Keynote speakers at the meeting includedHis Excellency Felipe LarraÃn BascuñÃ¡n, Finance Minister of the Republic of Chile; theHonorable Rodrigo Vergara, Governor of the Central Bank of Chile; andHis Excellency Alfredo Moreno Charme, Minister of Foreign Affairs of the Republic of Chile.
Coinciding with the meeting, the IIF published the latest edition of itsLatin America Regional Overview, a detailed analysis of dominant economic themes for the region. Introducing the report,Phil Suttle, Deputy Managing Director and Chief Economist of the IIF, said: "The region as a whole continues to demonstrate robust macro fundamentals and well-balanced policies. It's evident that a number of countries in the region have learned from the mistakes of the 1980s and 1990s, especially Chile, Colombia, Mexico and Peru. The G7 economies would do well to study this performance."
Among the report's key findings are:
- Latin America's sound banking sector has played a critical role in supporting domestic demand growth. Overall regional lending conditions (credit standards, demand for loans, funding conditions) were the most favorable of all emerging market regions in 2012.
- Currency appreciation is putting stress on policy, as countries seek to protect their international competitiveness. Policy responses have differed by individual country and include varying degrees of reliance on exchange rate flexibility, intervention in spot and derivatives' exchange markets, the tightening of macro-prudential regulation, and the imposition of capital inflow controls.
- Currency appreciation is not just a challenge; it's also an opportunity. Seizing this opportunity calls for acceleration of productivity-enhancing reforms and increased fiscal restraint, to widen the scope for a sustained reduction of interest rates.
- Chile, Colombia, Mexico and Peru have sustained real GDP growth around trend while simultaneously keeping inflation in check, thanks to sound, well-balanced policies. Others, notably Brazil, have been unable to maintain previous domestic growth rates, a result of the increasing uncertainty of economic policy. Others, such as Argentina and Venezuela, have under-performed compared to their regional peers.
- While Latin America has achieved broad macroeconomic stability, most countries still measure up poorly in a number of structural areas, and this is weighing down on productivity. Three main challenges face Latin America overall: lifting long-term growth by accelerating productivity-enhancing reforms; upgrading policy frameworks, to smooth the effect of terms-of-trade fluctuations on local economies; and sustaining policy efforts aimed at reducing income inequality and poverty.