Latin America Scoring the Best Economic Cycle in Three Decades

Latin America is going through its best economic upturn in the last thirty years said Luis Alberto Moreno, president of the Inter American Development Bank, IDB, in an interview with the French newspaper Le Monde.

“Latin America is living its best cycle in three decades”, pointed out Mr. Moreno who nevertheless admitted that the surge in Asian emerging economies is twice as fast. (China has been growing at an annual 8 to 9 percent since 1980 and is forecasted by the World Bank to expand 9,2 percent this year).

Mr. Moreno argued that in Latin America the “business climate is not as good as in Asia, micro economic reforms are hard to launch, the same can be said of government reform, the commitment of human resources is limited and investments are still short”.

The banker added that “for example Latin America has an annual infrastructure deficit, which is a priority for IDB, estimated in $80 billion”.

On the positive side Mr. Moreno underlined that the area has been growing since 2003 at an annual average rate of 4.9 percent with inflation of 5.5 percent in 2005.

Besides, “regional investment has jumped to 20 percent of GDP and the Debt/GDP ratio has dropped from 72 percent in 2002 to 53 percent in 2005. Budget deficits dropped from 3.3 to 1 percent”.

Therefore it´s not surprising that this synchronized growth has resulted in “an 80 percent surge in stock exchange values in the last two years”.

Mr. Moreno also pointed to improved social programs, “better designed and more efficient”, which have benefited Latin American middle classes, the most affected by the previous recession period.

“Over fifty million low income Latin Americans benefit in a dozen countries with these programs which distribute family subsidies so children can go to school and satisfy basic food and health needs”.

Finally, the banker revealed that the IDB is considering how best the remittances from Latin Americans working abroad, totaling over $55 billion in 2005, can be directed to contribute to the region´s development by linking them to a credit system for family businesses and small enterprises.