By Olisemeka Obeche
The World Bank’s latest stress report — Latin America’s Deceleration and the Exchange Rate Buffer — has issued a clean bill of health to the Latin America and the Caribbean (LAC) economies, assuring that the region possesses enough shock absorbers and economic boosters to withstand pressures from a less-than-friendly global environment.
This assurance comes, even as the Bank predicts that LAC, together with other emerging markets, is entering a new phase of lower growth dynamics that has fallen from about 6 percent in 2010 to an estimated 2.5 percent in 2013.
However, according to the report by the World Bank Chief Economist office for the region, the low growth coupled with unfriendly global environment does not translate into the 1990s-style of financial distress as many skeptics fear.
“When you look at the ability of the region’s economies to buffer the effects of this less friendly international environment, you realize that the days when currency depreciation spelled disaster are today virtually gone,” explains Agusto de la Torre, the Bank’s Chief Economist for Latin America and the Caribbean.
According to Mr de la Torre, the Bank hinges its optimism on the region’s investment expansion, the flows of foreign direct investment that replaced short term portfolio inflows and a stronger regulatory environment.
“Looking forward, LAC needs to focus on generating productivity gains to ensure solid growth now that global tailwinds recede,” he adds.