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Mr. Alfred Schipke and Mr. Dominique Desruelle

Abstract

¿Cómo consolidar los avances logrados con tanto esfuerzo, acrecentar la capacidad de resistencia a los shocks y alcanzar un mayor crecimiento económico a fin de reducir la pobreza? Estos son los desafíos que se le presentan en el camino a América Central en el proceso de recuperación de la estabilidad macroeconómica. Este estudio analiza las políticas de América Central en los sectores real, fiscal, monetario y financiero a nivel regional, comenzando por un análisis del crecimiento y de las implicaciones macroeconómicas de las remesas. Seguidamente se abordan la sostenibilidad de los sistemas de pensiones, el desarrollo del sistema financiero, las vulnerabilidades de la deuda soberana y las formas de apoyar el avance en la reducción de la inflación fortaleciendo la credibilidad de los bancos centrales.

International Monetary Fund. External Relations Dept.

Acompetitive banking system is important for effective financial intermediation—channeling savings into productive investment—and this, in turn, is a key to economic growth. A new study finds that an uncompetitive market structure as well as certain other characteristics of the banking system and economy are hampering financial intermediation in Ghana. Thierry Buchs, who recently transferred from the World Bank’s International Finance Corporation to Switzerland’s State Secretariat for Economic Affairs, and Johan Mathisen of the IMF’s Policy Development and Review Department, spoke with Jacqueline Irving of the IMF Survey.

Mr. Alfred Schipke and Mr. Dominique Desruelle

Abstract

How to entrench hard-won gains, increase resilience to shocks, and improve growth performance to reduce poverty? As Central America moves forward in regaining macroeconomic stability, these are the challenges. This study analyzes Central America’s real, fiscal, monetary, and financial sector policies at the regional level, starting with a review of growth performance and the macroeconomic implications of remittances. It then looks at the sustainability of pension systems, financial system development, sovereign debt vulnerabilities, and ways to sustain progress in reducing inflation by strengthening the credibility of central banks.

Eduardo Laso

IN EACH OF THE FIVE Central American countries, Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua, the sound monetary policies which have in general been pursued in recent years have been helpful in promoting internal and external stability and in ensuring balanced and orderly economic development.1 Since 1950, both agricultural and industrial production have expanded in each of these countries. In several of the countries, the imports of food which formerly were necessary are no longer required, and in normal crop years there now are actually small export surpluses. Social capital has been expanded rapidly. New and better roads have been constructed, more electric power has been produced, and more schools and hospitals have been built since 1950 than in the whole of the preceding 20 years. This expanded social capital will facilitate an even more rapid increase of production in the future.

Mr. Dominique Desruelle and Mr. Alfred Schipke

Abstract

Central America has made substantial progress in regaining macroeconomic stability and has continued to integrate further both globally and at the regional level.2 The challenge now is how to entrench these gains, improve growth performance to significantly reduce poverty, and reduce vulnerabilities, including those that are associated with increased integration. This paper addresses some of these important issues. After reviewing recent developments, this chapter provides an overview of key policy issues facing Central America: economic growth, fiscal issues related to pension reform and sovereign debt structures, the development of capital markets, and monetary policy. It also briefly discusses the progress that has been made with integration and regional policy coordination.3 The subsequent chapters analyze these key issues in more depth.

José Brambila Macías, Mr. Guy M Meredith, and Ivanna Vladkova Hollar

Abstract

During the period of reforms that began in the early 1990s, economic growth in Central America recovered from the poor performance of the 1980s.1 Yet, in spite of the region achieving a welcome degree of macroeconomic stability, growth in the 1990s still fell short of the record achieved in the 1960s and 1970s. It also fell short of more dynamic emerging market countries, notably in Asia. Despite the more recent stronger performance, there continue to be concerns about the region’s ability to grow at a pace that will significantly raise living standards and reduce poverty.2 Underscoring this challenge, even while the incidence of poverty edged down in the region during the 1990s, it remained well above that of Latin America as a whole at the end of the decade (Figure 2.1).

Mr. Kevin Fletcher and Mr. Alfred Schipke

Abstract

Public pension systems are coming under increasing financial pressure around the world. As populations age, the number of pensioners is rising relative to the number of workers in many countries, resulting in increasing pension system deficits as spending on benefits rises relative to contribution revenue.

Mr. Jorge I Canales Kriljenko, Padamja Khandelwal, and Mr. Alexander Lehmann
We assess the current barriers to trade in financial services in the six Central American countries seeking a free trade agreement with the United States (the CAFTA) and examine the relative merits of regional and multilateral liberalization. Even though there are few formal barriers, deficiencies in regulatory and competition standards and in the judicial systems still restrict the participation of foreign institutions in the financial systems in the region. A greater presence of such institutions could support other objectives of trade and investment liberalization, though it would require several adjustments in prudential supervision at national levels and greater cooperation between members of the CAFTA.
International Monetary Fund. External Relations Dept.

In a move to strengthen the IMF’s ability to head off risks to the global economy, the institution’s 24-member Executive Board adopted on June 15 a landmark decision providing updated guidelines for monitoring the economic health of its 185 member countries (a process known as bilateral surveillance).

International Monetary Fund. External Relations Dept.

IMF Managing Director Horst Köhler on July 29 welcomed the report “Economic and Financial Issues Facing Argentina,” presented by the Panel of Independent Advisors (see IMF Survey, July 22, page 225). The panel was established to assist Argentina in addressing the complex challenges it faces on the economic and financial fronts: output and employment are depressed, the normal functioning of the banking system has been disrupted, the government is unable to service its debts, and substitute quasi currencies are circulating throughout the economy. “The views and conclusions of the panel,” Köhler said, “will be very helpful to the Argentine authorities and to the IMF as we continue our discussions toward an economic program for Argentina that will restrain inflation, restore macroeconomic stability, and put the economy on a path of recovery.”