With the U.S. economy leading the recovery, the Western Hemisphere is once again an economic locomotive for the world, Köhler said. But widespread poverty in many countries stands in sharp contrast to the region’s enormous potential. Although every country must find its own blueprint for success, Köhler pointed to three fundamental elements that all governments must seek to put in place:
Good institutions. Successful market-based economies have institutions that uphold the rule of law, protect property rights, combat corruption, and promote social stability. There is also scope for strengthening the role of the banking sector in domestic financial intermediation between savers and investors, which will benefit especially small and medium-sized companies and low-income households.
Sound long-term management of public finances. Persistent high levels of debt in the region could imperil what has been achieved so far. Kohler expressed understanding for the pressing infrastructural and social needs in many countries in the region and underlined that the IMF is committed to work with countries to address these needs. But, he said, there are no magic formulas: fiscal discipline remains indispensable, and governments will continue to face tough choices.
Trade expansion. Trade is the most important engine for economic growth in the region. Leaders should seize the initiative to eliminate intraregional barriers to trade. Their removal could help pave the way for a successful conclusion of the Doha Round of global trade talks.
The IMF’s financial support for the Latin American region currently stands at unprecedented high levels, Köhler said, adding that the institution remains committed to helping countries build a better future for their people. The IMF has programs in place with 13 countries in the Western Hemisphere—Argentina, Bolivia, Brazil, Colombia, Dominica, the Dominican Republic, Ecuador, Guatemala, Guyana, Nicaragua, Paraguay, Peru, and Uruguay.
Crisis prevention remains the IMF’s top priority. The institution is seeking to further improve its ability to provide rapid support to countries that have good policies but may face unexpected economic shocks. He noted that a strong IMF safety net is in the best interest of both the region and global financial stability.