Due to the crisis affecting Nicaragua and paralysis of construction in Panama between April and May, the IMF has reduced the expectation of economic growth for the Central American region from 4% to 3.3%.
The International Monetary Fund (IMF) cut growth forecasts for the Central American economy, due to the uncertainty caused by the situation in Nicaragua and its effect on the region's economic activity, and the impact of the construction strike in Panama, which has halted works on 260 projects nationwide for the last 30 days.
In light of the European crisis and slow growth in the U.S., the best protection for Latin American countries is macroeconomic discipline.
Although it is believed that regional banks are "solid, liquid and stable," the recommendation for Latin America to avoid or at least mitigate the inevitable effects of the economic crisis in Europe and the slow recovery of the U.S., is to keep a lid on fiscal deficit.
Central America and the Dominican Republic have agreed together to ensure financial liquidity, create mechanisms for monitoring risk management and financial systems, as well as taking measures against the effects of the euro zone crisis and the weakness of U.S.
Carlos Acevedo, president of the Central Reserve Bank of El Salvador, told Prensalibre.com that "we are preparing a regional financial system and shielding mechanisms."
As a result of the the contagious effect of the financial crisis in Europe, along with slow U.S. recovery, commodity prices have reversed their upward trend and started to decline.
The IMF's report last September on expectations about the global economic situation indicated a slow recovery for the more advanced economies.
For Latin America the picture was different, with growth of 4.5% forecasted.
Authorities from the Central American countries will discuss with the IMF the outlook for the coming years.
Two years after the international financial crisis significantly affect the economies of Central America, the authorities of the isthmus nations are meeting to discuss progress of the fiscal and economic reforms that have been implemented.
An article in Infolatam.com reports: "regional monetary authorities and the IMF will discuss progress in rebuilding fiscal space and ensure debt sustainability, the strength of the financial, regulation and supervision systems and prudential framework, and the interaction between structural reforms and economic growth, among other issues, according to the official program.
The U.S. could be facing a possible reduction in their risk rating, due to levels of national debt and government deficit.
Democrats and Republicans have been debating in the United States Congress trying to reach an agreement that will raise the debt ceiling and secure public finances for the future, avoiding a potential cessation of payments or a reduction in the country’s risk rating.
The lack of definition of a comprehensive agenda focused on identifying the root of the problem seems to be the reason.
Latin American countries have shown significant levels of economic growth in recent years pushed by, among other things, the favorable international environment. However, the productivity of Latino workers seems not to have kept pace.
The IMF will open in May 2009 in Guatemala City, its new Central America, Panama, and the Dominican Republic Technical Assistance Center (CAPTAC-DR).
“CAPTAC-DR is an important component of the IMF’s far-reaching reforms that will enable the Fund to respond more effectively to the emerging challenges of the global economy,” said Murilo Portugal, Deputy Managing Director of the IMF.
The IMF will open in May 2009 in Guatemala City, its new Central America, Panama, and the Dominican Republic Technical Assistance Center (CAPTAC-DR).
“CAPTAC-DR is an important component of the IMF’s far-reaching reforms that will enable the Fund to respond more effectively to the emerging challenges of the global economy,” said Murilo Portugal, Deputy Managing Director of the IMF.
The International Monetary Fund urged Central America to unite to deal with the crisis.
IMF representatives present their report, "Central America: economy, progress and reforms," in Washington D.C. on Thursday, in a dialogue in which experts analyze the impact of the global economic crisis on the Isthmus' financial systems.
The IMF has kept its growth projects for the region through 2009 at around 3%.
The International Monetary Fund (IMF) will direct the resources to those economies suffering the most at finding financing.
The IMF announced yesterday its decision to increase its efforts to support those countries affected by the crisis, and is considering advancing liquidity for short periods, but on the condition that proper administration be of said funds be carried out.
The installation of the regional Technical Assistance Center (in the Banquat building) is set for April 2009.
The center will have six technical experts who will offer assistance to governments on topics such as: Customs, multiannual budget preparation, and public debt.
The scope of action will be countries in Central America and the Dominican Republic, said Maria Antonieta del Cid de Bonilla, president of the Bank of Guatemala (Banquat).
The International Monetary Fund (IMF) supports rescue plans but warns that the banks will have greater losses.
The IMF warned that losses related to loans in the US and financial assets linked to these could reach $1.4 trillion.
In a report published on Tuesday, the IMF says that it will be necessary to invest more public resources in order to guarantee a return to financial stability.
No matter what the cause, the old remedy for rising inflation was restricting liquidity with the increase of interest rates and a virtual paralyzing of credit markets, says César A. Garcia in a column in the Guatemala newspaper Prensa Libre.
Garcia continues: The President of the Bank of Guatemala, Maria Antonieta de Bonilla, announced in an interview Monday that the Monetary Committee will stop the rise in prices, which create an impoverishing rate of inflation of 12 percent per year.
Guatemala has been chosen as the base for the International Monetary Fund's technical assistance center for Central America and the Dominican Republic.
The decision was announced that Fund's annual regional conference, which closed in El Salvador on Friday. The conference discussed economic policies and sought to identify areas where regional cooperation could be stepped up.