Sustaining Latin America`s Transformation.

    This report was published at Finance and Development magazine in March,2011 and was written by Nicolás Eyzaguirre, IMF`s Western Hemisphere Department`s Director. This is a summary and the title is above.

    With the global crisis behind it, L.A. endowed with a wealth of commodities and now facing favorable external conditions, has great economic opportunities and the potential to become an increasingly important global player. Three countries in the region: Argentina, Brazil and Mexico, are members of the G20.
    Better policies played a critical role in the region`s recent relative success, supported by much broader social consensus about the importance of macroeconomic stability.
    Now more people are experiencing a higher standard of living, compared with previous periods of economic expansion. Income distribution, a long-standing weakness in the region, improved in 15 out 18 countries in the region. Increased government transfer to the poor, as well as a narrowing of the wage gap between skilled and low-sklled workers, help explain these improvements. The region`s success in bringing down inflation, which hurts poor people most, has also played a key role.
    The region has the potential to become more prominent on the global stage and raise its share of world output, which has been stable at about 8 to 9% in recent decades. The region`s output grew by about 6% in 2010(second only to Asia) and is projected at about 4 to 5% in the coming years, well above its 30-year average of less than 3%.
    Achieving or even bettering this outcome will require skillful macroeconomic management as well as structural reforms to strengthen the resilience to shocks and boost growth.
   L.A. also needs to be careful about complacency when things are going well. Currently, global conditions have combined to create two very strong tailwinds that are helping L.A., easy external financing and strong commodities prices.
   Boosting productivity and competitiveness remains the key policy challenge over the medium and longer term, although the reasons for low productivity are complex. there is a need for progress on several fronts.
   PUBLIC INVESTMENT - Which is low relative to the more dynamic emerging economies, must be boosted from current levels to address the infrastructure gap. The development of human capital, through better schooling and training, is also essential.
   BUSINESS CLIMATE and OVERALL GOVERNANCE - Improvements in these areas are also essential to harness private investment. This will require diverse efforts, ranging from trimming red tape to improving business security.
   EXTERNAL TRADE - Trade with the faster-growing economies can be deepened and exports can be diversified more generally to reduce over time reliance on advanced economies and commodity exports.
   Countries will also need to accomodate the demands of a growing middle class and increased global competition by upgrading the quality of services in the area of education, health and public security.
   These challenges must be met without compromising the sustainability of government finance, this will require boosting government revenue in some cases and being more careful about spending priorities in others.
   Policymakers will need to carefully manage the generally stimulative global conditions to avoid a recurrence of the boom-bust cycles of the past, while making new efforts to cement conditions for stronger and more equitable growth.