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New: Leading Latin American economists warn about fiscal dilemmas for region beset by COVID-19, weakened institutions & polarization

June 29, 2021
Contact: Eva Grant

Center for Global Development

+1 (202) 416-4027

egrant@cgdev.org

Puede leer esta nota en español más abajo

WASHINGTON – The Latin American Committee on Macroeconomic and Financial Issues (CLAAF by its Spanish acronym) issued their biannual policy statement Tuesday calling for smart fiscal expansion in the short term with a strong commitment to fiscal responsibility in the medium term as the region remains the hardest hit from COVID-19. Well used government resources cannot and should not be spared to respond to and mitigate the pandemic, but these large policy and financial responses should come hand in hand with active measures to strengthen structural fiscal positions, the group says, so as to avoid short-sighted populist policy responses and improve, not worsen, future prospects for working people and families in the region.

“Priority one in Latin America and the Caribbean is and remains getting the virus under control, but alongside that ongoing major public health intervention is the need for implementing short- and medium-term fiscal policies that can take advantage of the expected rebound in regional and global economic activity later this year,” said Liliana Rojas-Suarez, President of CLAAF and Director of the Latin America Initiative at the Center for Global Development. “Global demand, capital flows to emerging markets, and commodity prices are all up – important leverage for regional policymakers who will need to overcome pockets of resistance to reform, weakened political institutions and increased polarization in order to convert these anticipated gains to more jobs and better financial certainty for low- and middle-income workers.”

In their statement, the CLAAF members highlight the need for public policies that reduce insecurity and risk but that also make important transfers targeting low-income citizens. They point to Uruguay’s comprehensive social insurance system as a model that could go hand in hand with other poverty relief measures as one example.

CLAAF members also urged the International Monetary Fund to steer clear of calls for across the board fiscal expansions beyond pandemic response, and warn of increased inflation in the US and a possibly overly tight policy stance from the Fed.

Read the full statement: https://www.cgdev.org/publication/fiscal-policy-time-polarization-addressing-latin-americas-tough-dilemmas

About the CLAAF (www.claaf.org):

The Latin American Committee on Macroeconomic and Financial Issues (CLAAF by its Spanish acronym) is a group of prominent economists and academics who have served as government ministers, central bank governors, and/or senior officials at multilateral institutions like the Inter-American Development Bank, International Monetary Fund and the World Bank. Twice a year, the group convenes to analyze major national or regional macroeconomic issues and then release a series of policy recommendations to change course and advance greater economic and financial stabilization.

See link to full statement here, which was compiled jointly by:

  • Laura Alfaro, Warren Albert Professor, Harvard Business School, Former Minister of National Planning and Economic Policy, Costa Rica.
  • Guillermo Calvo, Professor, Columbia University; former Chief Economist, Inter-American Development Bank.
  • Augusto De La Torre, Former Chief Economist for Latin America and the Caribbean, The World Bank. Former Governor, Central Bank of Ecuador.
  • José De Gregorio, Professor of Economics, University of Chile. Former Governor of the Central Bank and former Minister of Economy, Mining and Energy, Chile.
  • Roque Fernandez, Economics Professor, UCEMA University; former Minister of Finance, Argentina.
  • Pablo Guidotti, Professor of the Government School, University of Torcuato di Tella; former Vice minister of Economy, Argentina.
  • Paulo Leme, Executive in Residence Professor of Finance, Miami Business School, University of Miami.
  • Enrique Mendoza, Presidential Professor of Economics, University of Pennsylvania.
  • Ernesto Talvi, Former Director of the Latin America Initiative, Brookings Institution, DC; Former Academic Director of CERES; Former Minister of Foreign Affairs, Uruguay.
  • Liliana Rojas-Suarez, President, CLAAF; Senior Fellow and Director of the Latin American Initiative, Center for Global Development; Former Chief Economist for Latin America, Deutsche Bank.
  • Andrés Velasco, Dean of the School of Public Policy, London School of Economics, UK. Former Finance Minister of Chile.

Reconocidos economistas latinoamericanos advierten sobre los dilemas fiscales de la región, amplificados por el COVID-19, débiles instituciones y la polarización

WASHINGTON – El Comité Latinoamericano de Asuntos Financieros (CLAAF) ha publicado su declaración bianual este martes. En un contexto en el que América Latina es la región en desarrollo más afectada por el COVID-19, el Comité hace un llamado para que la necesaria expansión fiscal en el corto plazo sea acompañada de un compromiso sólido con la responsabilidad fiscal en el mediano plazo. El grupo plantea que los gobiernos no deben escatimar en el uso de sus recursos para responder y mitigar la pandemia, pero estos recursos deben ser bien utilizados y estar acompañados por medidas proactivas que refuercen la posición fiscal estructural. Se deben evitar políticas populistas miopes y mejorar, no empeorar, las perspectivas de futuro de la clase trabajadora y las familias de la región.

“La prioridad número uno en América Latina y el Caribe es, y debe seguir siendo, controlar la expansión del virus. Pero, acompañando la fuerte respuesta sanitaria, se necesitan políticas fiscales de corto y mediano plazo que aprovechen el rebote que se espera en lo que queda de año en la actividad económica global y de la región,” dijo Liliana Rojas-Suarez, Presidenta de CLAAF y Directora de la Iniciativa Latinoamericana del Center for Global Development. “Se está dando un aumento en la demanda global, en los flujos de capital a mercados emergentes y en los precios de las materias primas. Este entorno es muy ventajoso para los formuladores de políticas en la región, que necesitan sobreponerse a la resistencia a las reformas que hay en América Latina, a la debilidad de las instituciones políticas y a la creciente polarización para convertir esta anticipada bonanza en más trabajos y más estabilidad financiera para los trabajadores de bajo y medio ingreso.”

En su declaración, los miembros de CLAAF destacaron lo necesarias que son políticas públicas que reduzcan la inseguridad y el riesgo y que faciliten transferencias focalizadas en las poblaciones de bajo ingreso. Destacan el caso de Uruguay, con un sistema de seguridad social muy completo, como un modelo que podría complementar a otras medidas destinadas a la reducción de la pobreza.

Los miembros de CLAAF también instaron al Fondo Monetario Internacional a evitar llamamientos a favor de expansiones fiscales generales que vayan más allá de la respuesta a la pandemia. Además, advirtieron del riesgo de que un aumento en la inflación en Estados Unidos lleve a una política monetaria demasiado restrictiva por parte de la Reserva Feder

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Senior Fellow and Director of the Latin America Initiative