WASHINGTON – Latin America faces “a second bad year,” which makes the countercyclical role of multilateral organizations so important, Luis Alberto Moreno, president of the Inter-American Development Bank, said on Tuesday in an interview with EFE.
“Like the majority of multilateral development banks, the IDB was created to be countercyclical, so that in lean times, institutions like ours can meet the needs member countries have,” Moreno said, days before the inauguration of the bank’s annual assembly in the Bahamas.
After a decade of solid economic growth, the Latin American region is expected to close 2016 in contraction for the second straight year.
Moreno acknowledged that “we face a second bad year, with negative growth” as a consequence of being “in a downturn cycle, largely due to the current globalization and the fact that China is not growing at the rate it did several years ago.”
As a result, the region seems to be working “at two different speeds,” with South America affected by the slowdown in China and the drop in commodity prices...while Central America, Mexico and the Caribbean are being driven by some good times in the United States as well as by low oil prices.
The decline in fuel prices for Caribbean countries and Central America is “the equivalent of a stimulus program,” Moreno said, noting that Central America is expected to grow close to 4 percent this year, and the Caribbean by some 2 percent.
In 2015, the IDB approved guaranteed loans for a total of $11.26 billion.
Moreno, 62, serving his third term as head of the institution he joined in 2005, said the current challenge for Latin America “is jobs, and our economies are capable not only of creating jobs but of doing it in a scenario of lower inflation.”
“A lot has been done about poverty, about providing services like health, education and housing – they’re things that Latin Americans who came out of poverty and ascended to the middle class now enjoy,” he told EFE during a conversation at the IDB’s Washington headquarters.
What mainly put the brakes on the regional economy are the problems facing Brazil, Latin America’s leading economy, and for which a 3.5 percent drop in GDP is expected this year.
“Brazil is undoubtedly the most important country of the region, so one expects that the quicker Brazil pulls through this situation, the better it will be not only for Brazil but for all Latin America,” the former Colombian diplomat said.