Latin Economy: When the Party's Over (Emerging Markets)
Liliana Rojas-Suarez was quoted in an Emerging Markets article on Latin America's Economy
From the Article
Despite Latin America’s astonishing recovery from the global downturn, policymakers face huge challenges if they are to turn recent momentum into lasting growth
For Latin America, the Great Recession is already little more than a memory.
The savage financial and economic crisis which drove large swathes of the rich world to the brink of bankruptcy was, for the western hemisphere, something of an aberration – its effects on growth relatively short-lived.
The region has, for the most part, bounced back with unprecedented vigor. Today, roaring output and surging commodity demand – together with a flow of cheap capital – has once again helped feed a belief that Latin America has entered a new era of macroeconomic stability, having shrugged off its historical vulnerabilities, including unwieldy public debt burdens, rampant inflation and a legacy of policy unpredictability.
The resilience of regional economies during the global crisis bore this out, as does greater policy stability and flexibility, stronger external balance sheets and low levels of government and external indebtedness. As IDB president Luis Alberto Moreno likes to put it: “This is Latin America’s decade.”
THIS TIME IS NO DIFFERENT
But, in many ways today’s macroeconomic picture is reminiscent of the status quo in the months before the 2008 crisis, when policy debates focused on how to rein in overheating Latin economies against the onslaught of high oil and commodity prices and unremitting capital inflows.
“The global crisis gave us a parenthesis, and now the same issues have come back,” says Liliana Rojas Suarez, senior fellow at the Center for Global Development. “People are once again discussing exactly what we were talking about pre-crisis.”
Today, the near-term challenges facing policymakers are significant – including managing rising consumer prices while grappling with the effects of capital inflows and upward pressure on local currencies. Rising consumer price inflation is being fuelled by a combination of rapid growth, higher food prices, and a resistance to currency appreciation.
