To complement existing balance-of-payment support programmes, the International Monetary Fund (IMF) has announced the creation of a new Short-Term Liquidity Facility (SLF) for countries with access to international capital markets. · Purpose: Create a facility to provide large upfront disbursements of short-term financing;
· Terms: Disbursements may be up to five times the country’s quota in the Fund, and will have a three-month maturity. Eligible countries may draw on these lines of credit up to three times during a 12-month period;
· Eligibility: Countries with a good track record of sound policies (based on the periodic assessments conducted by the Fund) and sustainable debt burdens may qualify. The credits will be disbursed promptly and will not be subject to the procedures and conditionalities that normally apply to the Fund’s other programmes.
Over the last six years, the region has made a number of improvements in terms of macroeconomic and financial policy. This has enabled countries to take advantage of the external boom and is now helping the region to face the crisis in a completely different way from in the past. The region has thus been able to continue growing even as the external situation seriously deteriorates. Nevertheless, many of the improvements are beginning to fade and in some cases revert.
As of late 2008, it is not yet possible to arrive at an accurate projection of the impact that the financial crisis will have on the real sector of the economy. With uncertainties spreading worldwide, the balance sheets of financial bodies are weakening owing not only to the loss of value of mortgage guarantees but also, more generally, to the impact of the recession and the severe shortage of liquidity. The uncertainties also extend to the prospects for other major financial-market components such as insurance companies, hedge funds and pension funds, some of which have already been the object of rescue operations.
The Latin American and Caribbean countries have adopted a variety of measures in response to the deepening international financial crisis. They are well aware that, although most of them have macroeconomic foundations that are significantly stronger than in the past, the region will not escape the impact of instability in world financial markets and the expected recession in the developed economies.
Within the framework of this generally bleak outlook, in which the factors driving growth in Latin America and the Caribbean in the past few years have all but disappeared, the international crisis is being transmitted through various channels that are, in turn, having different effects on each one of the countries of the region.
The economic growth rate for Latin America and the Caribbean is projected to be 4.6% for 2008. This will mark the sixth consecutive year of growth, as well as the end of a period which has very few precedents in the economic history of the region. Between 2003 and 2008, the region’s economy grew by an average of almost 5% per year, with per capita GDP increasing by over 3% per year. This growth was coupled with improvements in labour-market indicators and a reduction in poverty in the region. One of the most outstanding features of this period has been the fact that, in most of the countries, policymakers have placed priority on maintaining macroeconomic balances, which has helped generate surpluses in both their external and their fiscal accounts. The region has also benefited from the highly favourable external economic environment of the last few years.