PANAMA CITY — Latin American countries face an economic “overheating” with high consumer inflation, the International Monetary Found (IMF) said on Wednesday.
Luis Cubeddu, assistant director of regional studies for the IMF, said the current favorable economic conditions for the region will not be permanent. Cubeddu was speaking at a joint press conference held here together with the IMF representative for Central America, Fernando Delgado.
The region “must begin to normalize its macro-economic policies, increase the monetary rates and reduce trade deficits” in order to prevent the economy from overheating, said Cubeddu.
He said that not all Latin American countries have the same pace of growth and in the case of South America “the winds are favorable” due to high prices of raw materials like mining, while in Central America the pace is slower.
Cebeddu added that Central American countries would benefit from implementing polices that make the business climate more attractive to both domestic and foreign investments.
The biggest risks to the South American economies are an increase in inflation, the fiscal deficits and the high price of fuel.
The Latin American economies grew an average 6 percent in 2010 and the IMF projects that the average growth rate in 2011 will slow to 4.7 percent.
Growth in Central America, meanwhile, slowed to 3 percent because of the impact of the economic crisis in the United States which has had an impact in all the countries receiving remittances from migrant workers in the U.S., as well as the slower world economy which has reduced revenues from the tourism sector.