The IMF called on Latin America to ‘tighten their belts’ – FORTUNE

BUENOS AIRES (Reuters) – The economies of Latin America will have to continue adjusting to the collapse in prices of raw materials, in an environment increasingly complicated mainly for the South American countries with internal imbalances, said the head of the International Monetary Fund (IMF) for the region.

The warnings were published on Friday in the “Latin America report, the Caribbean in 2016: Adjusting to a harsher “reality of Alejandro Werner, director of Western Hemisphere Department of the IMF, which highlighted the high financial volatility by concerns about the Chinese economy

. “The year 2016 will be a time for the authorities in the region to act with caution,” the report said. “It is necessary to allow the adjustment to continue and preserve the room for maneuver of economic policy,” he added, citing the differences in a region that wanders between the relative stability in Mexico and the crisis in Brazil.

This week, as part of a review of its global outlook, the IMF cut projections for Latin America and the Caribbean, anticipating a mild recession of 0.3% this year and 1.6% expansion in 2017.

Friday’s report provided more details about the outlook for the Latin American region.

By emphasizing the difficulties that lie ahead, the IMF said that “it now expects 2016 growth to be negative for the second consecutive year, the first time something like this happened since the debt crisis of 1982-83 that triggered the” lost decade “for the region.”

About Mexico, predicted that it would continue to recover at a moderate pace thanks to strong private domestic demand and the strength of the US, its neighbor and main trading partner.

For its part, Chile, Colombia and Peru continue a relatively orderly process of adjustment, with firm foundations for growth, he said.

Brazil and Venezuela, with dark picture

But in Brazil, the IMF said “a combination of macroeconomic fragilities resulting sluggish domestic adjustment, scandal large proportions involving government officials and businessmen, and political problems, has paralyzed the investment and dominates the outlook “.

In Venezuela, hit hard by the collapse of its vital oil revenues, the report said that “prices are climbing out of control, and we expect inflation to rise to 720% this year, after achieving a world record rate around 275% in 2015″.

Instead, he improved his vision of Argentina, saying that “the new government (of President Mauricio Macri) has initiated a major transition for correcting imbalances”.

One factor that adds to the concerns is that the authorities face an increasingly acute dilemma of policies, measures to encourage the expansion and efforts to avoid a surge in inflation, a problem that actually all governments, even beyond the region.