IPDAL releases the report Regional Economic Outlook for the Western Hemisphere, from the International Monetary Fund (IMF) , with the theme “Latin America and the Caribbean: Recovering from Recession”. The document, published in May 2017, points to the gradual exit of the Latin America and the Caribbean region from the economic recession in which it finds itself, also listing adversities to face.

The economies of Latin America and the Caribbean are still recovering from a regional recession and activity is expected to gradually return to its “normal” state this year and next. The forecast is worse than predicted in October 2016, with average growth at around 2.6% per year, as well as a decrease in inflation in many economies.

Political uncertainty at a global level has been increasing due to the position taken by the United States of America in relation to Mexico, creating distrust in the Mexican economy and businesses, as well as in Latin America. We then note a growth in economic nationalism in advanced economies and a potential tightening of financial conditions.

In this challenging international context, it is necessary to drive more sustainable and fair growth in the medium term. This measure will require strengthening structural reforms aimed at reducing infrastructure gaps, improving business environment, governance and education outcomes; as well as encouraging the participation of female workers.

The real depreciation led to a smaller boost in exports and a greater reduction in imports compared to last year, with demand shifting towards locally produced products. Together, the income effect and the expenditure shift effect eased the burden on domestic demand thus reducing the “sacrifice index” of external adjustment for flexible exchange rate regimes in Latin America.

In terms of global shares, global factors, namely the prices of commodities , are strongly associated with the cyclical movements of capital inflows in emerging markets, this applies mainly to Latin America. At the same time, country-specific structural factors, such as good governance and strong institutional and regulatory frameworks, play a key role in attracting inflows over long-term horizons.

With regard to vulnerabilities, capital flows in countries with deeper financial markets and large, stable domestic investor bases show less sensitivity to external shocks, while a greater presence of foreign investors and more open capital accounts increase this sensitivity.

Migration and remittance flows to Latin America and the Caribbean (LAC) – often with the United States as the host economy – have major economic and social ramifications for migrants’ countries of origin.

Emigration decreases growth in countries of origin by reducing labor supply and productivity, however remittances sent by workers serve as a mitigating factor, serving as a large stable source of external financing, especially in Central America. and the Caribbean, and helping to cushion the impact of economic shocks.

However, regions’ dependence on remittances may pose risks to macroeconomic stability for cyclical reasons and, more importantly, possible changes in migration-related policies. Specific reforms in countries of origin can help reduce emigration and its consequences. In particular, structural reforms, which would boost the pool of highly skilled workers to promote internal economic diversification, would reduce the “brain drain”.

Likewise, given the stabilizing and financial role played by remittances, policies aimed at reducing transaction costs should be supported. To ensure strong and inclusive growth for the future of Latin America and the Caribbean, the region needs to address gaps in infrastructure, improve education outcomes, strengthen the business environment and combat corruption. References: Regional Economic Outlook: Tale of Two Adjustments , IMF, May 2017,

http://www.imf.org/en/Publications/REO/WH/Issues/2017/05/10/wreo0517