Latin America, Macroeconomic Report, IDB

1. Comments on The Labyrinth
How can Latin American and the
Caribbean navigate the global
Economy (IDB)
Angel Melguizo
Head of the Latin American and Caribbean Unit
Joint Seminar OECD and Paris School of Economics
Paris, June 9 2015

2. Latin American Economic Outlook
1 Latin America and the Caribbean in the Report
Our view of Latin America and the Caribbean2
Latin America – Comments on The Labyrinth, IDB Macro Report
Open questions3
It’s a defining moment
‘Americas Latinas’
Key role of fiscal policy (taxes & expenditure)

3. Defining moment
3 Source: Powell (2015), The labyrinth. How can Latin America and the Caribbean navigate the global economy. IDB Macro Report

4. Americas Latinas
4 Source: Powell (2015), The labyrinth. How can Latin America and the Caribbean navigate the global economy. IDB Macro Report

5. Fiscal policy is key
5 Source: Powell (2015), The labyrinth. How can Latin America and the Caribbean navigate the global economy. IDB Macro Report

6. Latin American Economic Outlook
1 Latin America and the Caribbean in the Report
Our view of Latin America and the Caribbean2
Latin America – Comments on The Labyrinth, IDB Macro Report
Open questions3
It’s a defining moment
‘Americas Latinas’
Key role of fiscal policy (taxes & expenditure)

7. Defining moment
External and internal factors depict a poor 2015, and a cyclical
recovery in 2016
7
GDP growth in Latin America and the OECD (annual %)
Source: OECD-CAF-ECLAC (2014), Latin American Economic Outlook 2015. Education, skills and innovation for
development. Update using ECLAC for 2000-2015 and Consensus Forecasts (May 2015) for 2016
-4
-2
0
2
4
6
8
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
%
OECD Latin America and the Caribbean

8. Source: OECD data and forecasts in OECD Economic Outlook (June 2015) and Consensus (May 2015) for Venezuela)8
Americas Latinas
Country heterogeneity in growth forecasts…
GDP growth in selected LAC economies (annual %)
-8
-6
-4
-2
0
2
4
6
8
Argentina Brazil Chile Colombia Costa Rica Mexico Peru Venezuela
2002-2013 2014 2015 2016

9. 9
Americas Latinas
… so the ‘Latin American’ cycle is everywhere
Source: OECD Development Centre, using OECD Economic Outlook (June 2015) and IMF World Economic Outlook (April 2015)
Cyclical position of Latin American economies in 2015
(deviation from trend using HP filter)
Argentina
The Bahamas
Barbados
Bolivia
Brazil
Chile
Colombia
Costa Rica
Dominican Republic
Ecuador
El Salvador
Guatemala
Honduras
Jamaica
Mexico
Nicaragua
Panama
Paraguay
Peru
Trinidad and Tobago
Uruguay
Venezuela
-0.04
-0.03
-0.02
-0.01
0
0.01
0.02
0.03
0.04

10. 10
… although exiting the slowdown will not be fast in any case.
Way out?
Source: OECD Development Centre, using OECD Economic Outlook (June 2015) and IMF World Economic Outlook (April 2015)
Cyclical position of selected Latin American economies, 2015-2017
(deviation from trend using HP filter)
Argentina
Colombia
Peru
Chile
Costa Rica
Brazil
Mexico
Venezuela
-0.1
-0.08
-0.06
-0.04
-0.02
0
0.02
0.04
0.06
0.08
0.1

11. Fiscal policy is key - More than revenues
Good progress in macro-management (with caveats)…
11
Discretionary fiscal policy and output gap in selected Latin American economies
(output gap coefficient)
Source: Alberola et al. (2015), “Fiscal policy and the cycle in Latin America: The role of financial conditions and fiscal
rules”, Bank of Span Working Paper, forthcoming
-0.8
-0.6
-0.4
-0.2
0
0.2
0.4
0.6
Argentina Brazil Chile Colombia Costa Rica Mexico Peru Uruguay
1991-2001 2002-2013

12. Fiscal policy is key - More than revenues
… although tax collection remains (too) low in many countries
12
Tax revenues in Latin America and the OECD (%GDP, 2013)
Source: OECD-ECLAC-CIAT (2015), Revenue Statistics in Latin America 1990-2013
0
10
20
30
40

13. Latin American Economic Outlook
1 Latin America and the Caribbean in the Report
Our view of Latin America and the Caribbean2
Latin America – Comments on The Labyrinth, IDB Macro Report
Open questions3
Skills
Political economy of (fiscal) reforms
Integration

14. Low trust, but also higher aspirations
How to face this defining moment in challenging political times?
1414
Source: OECD Development Centre, IDB and Tulane University project. The emerging middle class and
Commitment to Equity in Latin America.
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
URY CRI BRA MEX COL PER BOL SLV GTM
Vulnerable Middle class
Informality in middle income households in selected Latin American economies
(% households without contributing members, circa 2010)

15. Latin America in Shifting Wealth: more an spectator than an actor
(Not enough) Integration – Are alliances the way forward?
Contribution to global growth (%)
50%
19%
8%
4%
1%
18%
1990-1995
32%
41%
9%
6%
3%
9%
2005-2012
Economies avancées Asie émergente Amérique latine
Moyen Orient et Afrique du Nord Afrique subsaharienne Reste du monde
Source: OECD-CAF-ECLAC (2013), Latin American Economic Outlook 2014. Logistics and competitiveness for
development
15

16. 16
Proportion of firms that consider the lack of labour force with the adequate skills a
significant restriction to growth (% formal firms)
LAC shows the largest skill gap, notably automotive & manufacturing
What works? More PPPs?
Source: OECD/ECLAC/CAF (2014), Latin American Economic Outlook 2015. Education, skills and innovation for
development.

17. 17
Estimated future’s share in services (%)
Challenge which will increase in the Shifting Wealth 2.0 world
Cooperate or compete?
Source: OECD/ECLAC/CAF (2015), Latin American Economic Outlook 2016. LatAm and China: Partners for development, forthcoming,
DRC/WB (2013), China 2030: Building a Modern, Harmonious, and Creative Society and OECD (2015) Economic Survey for China
Enrolment rates in secondary education (%)
0
20
40
60
80
100
120
1970 1980 1990 2000 2010
%
OECD average LAC China

18. Visit
http://www.iadb.org/en/research-and-data
Joint Seminar OECD and Paris School of Economics
Paris, June 9 2015