Press Release

Latin American Economists Call on Policymakers to Stay the Course on Fighting Inflation, Propose Reforms to Complement Central Banks' Actions

November 16, 2022


Jeremy Gaines, Center for Global Development: ; +1 (202) 416-4058

Diego Laje for CGD:; +1 (301) 637-7773

IMF and Other Multinational Organizations Urged to Explore Debt Buybacks for Emerging Markets

WASHINGTON, DC – The Latin American Committee on Macroeconomic and Financial Issues (CLAAF, by its Spanish acronym) today praised the central banks of Brazil, Mexico, Chile and Peru for taking swift and aggressive action to address growing inflation – and urged them to stay the course, as conquering inflation will be crucial to spur economic growth in the months ahead. In fact, these countries, along with Colombia, Uruguay, Paraguay, Costa Rica and the Dominican Republic, recognized the persistence of inflation well before the U.S. Federal Reserve, the experts said.

In its biannual policy analysis, the CLAAF called on Latin America’s leaders to build political consensus for reforms to reduce debt levels to ensure that national economies remain resilient without putting social safety net programs in jeopardy. The group, which is convened by the Center for Global Development and includes a number of former Latin American finance ministers and central bankers, warned that debt levels in the region had risen dangerously during the pandemic, which leaves many Latin American economies unusually exposed to financial system contagion.

As lenders assess the current volatility of global financial markets – driven by supply shocks and expansive monetary policy in high-income countries during the pandemic – the CLAAF warned that any sudden disruptions of capital flow to emerging markets could jeopardize progress. The Committee urged multilateral organizations to prioritize debt buybacks as a mechanism to reduce debt levels in emerging markets. The group recommended that the International Monetary Fund in particular consider setting aside a portion of its assistance to exclusively finance debt buybacks.

To read the Committee’s full analysis, visit: To view a recording of the media briefing, visit:

During a media briefing today, CLAAF members offered the following assessments:

“Although it’s too early to declare victory, many central banks in Latin America are credibly fighting inflation and demonstrating their independence. But risks remain elevated, and the region now needs effective fiscal management to complement central banks’ efforts,” said Liliana Rojas-Suarez, President, CLAAF and Director, Latin America Initiative, Center for Global Development; former Chief Economist for Latin America, Deutsche Bank.

“Unlike most countries’ central banks, BCB (Banco Central do Brasil) understood that the origin of inflation was a demand shock, not a supply problem. In their documents, they mention that the global production of chips, for example, had increased, as had the consumption of durable goods. This suggested that the inflation problem was not temporary and called for tight monetary policy. Accordingly, they have hiked earlier and more abruptly than the other central banks. As a result, Brazilian inflation - in particular, services prices and more inertial prices – have already started to recede,” said Laura Alfaro, former Minister of National Planning and Economic Policy, Costa Rica; Warren Albert Professor, Harvard Business School.

“We live in a period of extreme economic volatility. This calls for clear and credible policy announcements, which can only be achieved if the technical and political branches of government can show a unified front. Under these conditions, political games could be seriously counterproductive,” said Guillermo Calvo, former Chief Economist, Inter-American Development Bank; Professor, University of Columbia.

“As the COVID pandemic fades away, it is essential to tackle the record levels of public debt reached globally, but especially in emerging and developing economies. We believe that a systemic approach to this problem is necessary and the use of IMF resources in debt buybacks may strengthen the success of its lending programs and increase policy medium-term credibility,” said Pablo Guidotti, former Vice Minister of Economy, Argentina; Professor of the Government School, University of Torcuato di Tella.

“Uruguay´s fiscal policy has been textbook optimal. During the pandemic Uruguay created a Covid fund to finance exceptional outlays while reducing the structural budget deficit. Post pandemic, Uruguay aims for a social security reform that reduces implicit debt in unfunded pension liabilities, ensuring long run fiscal credibility. The recognition: at 1,5% Uruguay has the lowest EMBI spreads in Latin America,” said Ernesto Talvi, former Minister of Foreign Affairs, Uruguay; Senior Fellow, Real Instituto Elcano, Madrid, former Executive Director of CERES.

“History suggests that interest rate spikes in the United States can trigger financial instability and sudden stops in capital flows to emerging markets. Authorities in Latin America need to create liquidity buffers to ensure that does not happen again,” said Andres Velasco, former Minister of Finance, Chile; Dean of the School of Public Policy, London School of Economics, UK.