Latin America Facing Period Of Weaker Currencies:IMF
Latin American nations are looking ahead at a period of weaker regional currencies, while the widespread growth model based on commodities exports is nearing a "plateau", an International Monetary Fund official said on Wednesday.
Cooling economic growth, rising international interest rates and softer commodities prices have combined to pressure currencies in recent months.
"There are differences from one economy to another, but in general the international context points to a period of weaker currencies in the region," Alejandro Werner, the IMF's director for the Western Hemisphere Department, said at a conference in Chile.
Since the start of the year, Argentina's peso has fallen over 17 percent, Chile's peso close to 7.5 percent, Colombia's peso around 4 percent, and Mexico's peso and Peru's sol both about 1 percent.
Brazil's real has bucked the trend, appreciating about 1 percent.
Werner said that most Latin American countries were growing close to their trend rate and that there needed to be a concerted effort to improve productivity and promote investment, which has seen a recent sharp slide.
Latin American countries, which averaged economic expansion of 4.3 percent between 2004 and 2012, will likely average growth of around 3.3 percent over the next five years, he forecast.
"The cycle of development and growth led by exports is nearing a plateau ... the productive process needs to be fed by greater growth in productivity and investment," said Werner.
The IMF official pointed to Mexican President Enrique Pena Nieto's energy reform, which ended state-owned oil company Pemex's 75-year monopoly on oil and gas production, as a prime example of what can be done to lift productivity.
"For many years opportunities to develop (Mexico's) energy potential weren't taken advantage of and now those doors of opportunity are being opened," said Werner.
As a result of the energy overhaul, the bulk of new shale development can potentially be handled by foreign and private oil companies, although it will likely be 2015 at the earliest before Mexico's economy starts to feel any boost from the opening of the sector.
"There are many of these opportunities in many of the region's countries but politically speaking the fact that they haven't been taken advantage of in the past points to the trouble in taking advantage of them in the future," Werner said.
In Chile, President Michelle Bachelet, who took office on March 11, has said she wants to foster investment and productivity by making sweeping changes to the country's education system, funded by a tax reform package.
Werner sounded a positive note on her plans, brushing aside concerns that the tax reform could hurt investment in the Andean nation just as an economic slowdown deepens.
"Investment will be stimulated by having a more educated workforce and to the extent that these (fiscal) resources are put into projects with a high social return, that's going to help the economy grow more," he said.
(Reporting by Anthony Esposito; editing by Andrew Hay)