This chapter analyses the main macroeconomic trends in Latin America for the next few years. In the short term, Latin America will continue to witness moderate economic growth amid strong uncertainty worldwide. Countries in the region have some fiscal and monetary space they can use to deal with falls in aggregate demand. But current forecasts suggest that developed countries are on the verge of a long period of sluggish growth. In response, countries in the region would do well to make sure their policies to stabilise the economy are consistent with the actions they need to take to boost medium-term growth while transforming the production structure. Region-wide, greater trade integration could be an effective response to poor demand from developed countries and would at the same time allow non-traditional sectors and activities to boost their competitive advantages. Special attention should be paid to currency fluctuations, which in several countries could threaten the competitiveness of goods that are not linked to commodities. Identifying the causes of these fluctuations and using the appropriate instruments to mitigate them is one of the challenges faced by current macroeconomic policies.

There is room to improve macroeconomic policy

The conclusion is that there is no room for complacency. Global economic prospects remain highly uncertain. Although initial response to the crisis has depleted resources and reduced the scope for future action, there is still room for policy action on both the fiscal and monetary fronts. Combining this with citizens who now appreciate and acknowledge the fruits of sustainable macroeconomic policy brings the chance for the region to improve and further institutionalise structural macroeconomic policy.

This year’s macroeconomic overview looks first at the nature and scale of the negative shock that hit Latin America in 2009, and then at the external and internal factors that lay behind the region’s comparatively good performance. Armed with this, we turn to the options that policy makers have available today, including – in particular – the role that financial regulation might play.

Christian Daude and Angel Melguizo on Channel 10 in Peru discussing the launch of the 2012 Latin American Outlook

Christian Daude on Channel N in Peru discussing the launch of the 2012 Latin American Outlook