LATIN AMERICA UNDER THE CURRENT TURMOIL

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LATIN AMERICA UNDER THE CURRENT TURMOIL
JOSÉ ANTONIO OCAMPOCOLUMBIA UNIVERSITY
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BASIC DETERMINANTS OF THE RECENT BOOM

• High levels of remittances
• High commodity prices (a mixed blessing for some)
  
• Exceptional conditions of external financing
• ALL OF THESE CONDITIONS HAVE EXPERIENCED A
  SHARP RECENT DETERIORATION

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HIGH LEVELS OF REMITTANCES(Remittances as of
GDP)
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HIGH NON-OIL COMMODITY PRICESMORE MINERALS THAN
AGRICULTURE
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BUT THE BENEFITS WERE UNEVENLY DISTRIBUTED
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BUT THE COMMODITY BOOM IS OVER
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EXTERNAL FINANCIAL CONDITIONS FROM EXCEPTIONAL
FINANCING TO FLIGHT TO SAFETY
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FROM BOOMING FLOWS TO SCARCITY
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END OF THE STOCK MARKET BOOM
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MAIN RISKS

• Food inflation made monetary management
  difficult. The effects of monetary policies are
  still being felt.
• The deterioration of commodity prices may lead to
  a sharp deterioration in the current account
• There are inherited policy vulnerabilities,
  though not as strong as during previous crises
• Strong short-term effects on growth, in the
  context of weak long-term growth

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INFLATION ACCELERATION HAS NOT BEEN FULLY REVERSED
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THE REVERSAL OF THE COMMODITY BOOM WILL LEAD TO A
DETERIORATION IN THE CURRENT ACCOUNT
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WITH DIFFERENTIAL EFFECTSACROSS THE REGION
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THE IMPACT OF THE POLICY ENVIRONMENT OF RECENT
YEARS

• Public sector balances are generally healthy
• but public sector spending has increased
  rapidly in most countries
• Monetary an credit policy has not neutralized the
  boom
• The best legacy foreign exchange reserves as the
  result of massive interventions in foreign
  exchange markets.

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PUBLIC SECTOR BALANCES LOOK HEALTHY
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BUT PUBLIC SECTOR SPENDING HAS INCREASED
RAPIDLY IN MOST COUNTRIES
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MONETARY AND CREDIT POLICY HAS NOT NEUTRALIZED
THE BOOM
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MASSIVE INTERVENTIONS IN FOREIGN EXCHANGE MARKETS

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SHARP REDUCTION IN EXTERNAL DEBT RATIOS
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BUT MIXED EFFECTS ON EXCHANGE RATES
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A TYPOLOGY OF VULNERABILITIES
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GROWTH PERSPECTIVESSTRONG GROWTH RECESION IN
THE INDUSTRIAL ECONOMIES
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THAT IS TRANSMITED TO LATIN AMERICA
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IN THE CONTEXT OF SLOW GROWTH IN A LONGER TERM
PERSPECTIVE
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LATIN AMERICA UNDER THE CURRENT TURMOIL
JOSÉ ANTONIO OCAMPOCOLUMBIA UNIVERSITY