High interest and debt, the challenges of Latin America according to the IMF


Washington, Oct. 13 (EFE).- Rising borrowing costs due to rising interest rates and high corporate indebtedness are two of the main economic vulnerabilities facing countries in Latin America and the Caribbean will face, according to a report released Thursday by the International Monetary Fund (IMF).

“El aumento de los costos de endeudamiento pondrá a prueba las finanzas públicas por los mayores pagos de intereses, ya que la deuda pública y las necesidades de financiamiento siendo siendo elevadas”, apuntó el Fondo en un estudio en el que aparecen detalladas las económicas perspectivas of the region.

View of some containers in the port of Cartagena, in a file photograph. EFE/Ricardo Maldonado Rozo

Last Tuesday, the IMF published its latest report on the outlook for the world economy in which it reverses the growth projections it made last July, and improves those for Latin America by half a point , up to 3.5% (3 tenths more than the world as a whole), even if it lowers by three tenths those of next year, to 1.7%.

Latin America will withstand the strong global impact of the war in Ukraine and the latest blows of the covid-19 pandemic this year thanks to favorable commodity prices, still good external financing conditions and the normalization of activities in sectors such as hospitality and catering, which at the time were the most affected by the pandemic.

But in 2023, the region will be dragged down by poor data from trading partners and falling commodity prices.

A woman carries a baby while selling fruit in the town of El Alto, in a file photograph. EFE/Martin Alipaz

Thus, commodity exporters (South American countries, Mexico and some Caribbean economies) are expected to see their growth rate halve next year, with lower commodity prices amplifying the impact of rising interest rates.

On the other hand, Central American economies will also slow as trade with the United States and inward remittances weaken, although they will benefit from lower commodity prices.

Caribbean economies dependent on tourism will continue to recover, although more slowly than expected in July, amid weaker tourism prospects.

Country growth

By country, the IMF pointed out that Mexico will experience growth of 2.1% this year (three tenths less than last July’s estimate) and 1.2% next year, a percentage that has not not changed.

As for Brazil, it will grow by 2.8% this year, or 1.1 points more than estimated in July, while in 2023 its growth will slow to 1% (a tenth less than previously forecast).

Furthermore, the report published today details that Chile will end 2022 with 2% growth while next year the Chilean economy will fall by 1%; Colombia will grow 7.6% in 2022 and 2.2% next year, while Peru will grow 2.7% in 2022 and 2.6% in 2023.

“The growth momentum continues, but scarcer and more expensive financing will slow down economies in the region, while inflation remains high. The political priorities are to restore price stability and maintain fiscal sustainability while protecting vulnerable groups,” says the report, signed by economists Santiago Acosta Ormaechea, Gustavo Adler, Ilan Goldfajn and Anna Ivanova.

The Venezuelan Banking Association building in Caracas, in a file photo. EFE/David Fernandez

high inflation

Despite slowing growth, Latin America will continue to face high inflation for some time. The organization headed by Bulgarian Kristalina Georgieva estimates that in Latin America and the Caribbean, prices will increase this year by an average of 14.1%.

In 2023, life will continue to become more expensive in the region of 11.4% and five years from now, in 2027, the main price indicator is expected to stand at 5.7%.

These estimates, the IMF says, include Argentina since 2017 but not Venezuela, two of the countries with the most volatile prices in the region.

By country, the report details inflation in the five largest economies. Thus, Brazil will close with a rise in the CPI of 6% this year and 4.7% next year; Mexico, 8.5% and 4.8%; Chile by 12.2% and 6.2%; Peru 6.8% and 3% and Colombia 8.5% and 4.8%.

Web edition: Natalia Sarmiento.


Please enter your comment!
Please enter your name here