The World Bank expects Latin America and the Caribbean’s economy to grow about 5.1%this year, up from a previous forecast of 4.8%, but sees growth coming down slightly in 2008 given the stabilization of commodity prices and the impact of the US economic slowdown. While countries that export commodities have benefited from high prices, others, such as Central American countries, have been hit hard, as they are net importers of foods and energy, the Bank said.
‘The good news is that there is good news in Latin America,’ said Pamela Cox, World Bank Vice President for Latin America and the Caribbean, during an end-of-year press briefing in Washington. Cox added that Latin America remains well prepared to face the mortgage loan crisis unleashed in the US. ‘Latin America is in a far better position than it has been in the past. Countries are running good, external surpluses; we have seen a strengthening of budgeting policies and strengthening of financial sector policies in Latin America, which makes it much more resilient than in the past,’ she emphasized.
However, she explained that it is still unclear ‘what the impact will be in the rest of the world,’ and warned that dangers still lurk for the region, particularly in ‘those countries that have strong trade ties with the US and those countries that receive a large amount of remittances from the US’ Some effects have been noticed already in the last quarter of this year, though only in Mexico and Central America, where remittances sent by immigrants in the US declined, especially from those who work in the construction industry.
‘Overall, we are going into 2008 very positive about the developments in Latin America and very positive about the role of the World Bank in the region,’ Cox added.
‘A little competition is a good thing,’ she said, referring to the announced creation of Bank of the South (Banco del Sur). ‘No country in the region needs to come to the World Bank for financial services only,’ added Cox, when they do it is ‘because we facilitate development solutions, the help, and the assistance in working through the problems. Our role in the region is not just about money’it is also about the knowledge and the experience and the problem solving and implementation support we give.’
According to the regional Vice President, the World Bank differs from regional institutions in that ‘we are a global institution, and we provide more of the global perspective, the global experience.’ She explained that countries in the region often want to hear not just about how other Latin American countries do things but how China or India does it. ‘And vice versa,’ Cox added, ‘we have many countries coming to the region to see some of the things Latin America has done, for example, the conditional cash transfer systems. Egypt is looking at this, Indonesia is looking at this, and the City of New York is implementing this.’
To compete better globally against other regions like Asia or Eastern Europe, Cox said that the region should invest in improving the quality of education, research and development and innovation, as well as reducing the cost of doing business in the region. ‘China invests three percent of its gross domestic product in research and innovation, but Latin America invests only one percent as a region,’ she concluded.