Latin America's fashionable scepticism: Setting the record straight
Augusto de la Torre, Eduardo Levy Yeyati, Samuel Pienknagura 12 January 2014
There is a wave of fashionable pessimism over the future growth of Latin America. This column distinguishes between two main types of concerns – related to the trend of the long-term growth, and to the cyclical vulnerabilities of the region. While the first type is partially justified, the second type is not because such concerns overlook two fundamental changes in Latin American economies. First, the de-dollarisation of financial contracts reduces the adverse effects of currency depreciations. Second, a more credible monetary policy was implemented with a substantial decline in the exchange rate pass-through to inflation.
There is a wave of fashionable pessimism over Latin America’s future. Expressions such as 'submerging economies' and 'the party is over' have become common in analysts’ and investors’ parlance and, while mainly applied to the BRICS (Brazil, Russia, India, China, and South Africa), they have also contaminated perceptions about Latin America.
Latin America, long-term growth