Blog

Introductory Remarks at the IMF’s Western Hemisphere Department Press Briefing

By Rodrigo Valdés, Director of the Western Hemisphere Department
2025 Annual Meetings

October 17, 2025

Over the past months, Latin America and the Caribbean have been navigating through shifting winds of a changing and uncertain global environment. Our Regional Economic Outlook discusses how the region has fared and the challenges ahead. Let me share a few highlights from our report.

Growth in Latin America and the Caribbean has experienced no major disruptions in the first half of 2025. It is projected to remain steady at 2.4 percent in 2025 and moderate slightly next year, with risks tilted to the downside.

Despite uncertainty, global conditions have been broadly supportive:

1. Commodity prices have stabilized after a brief period of volatility;
2. Financial conditions have eased amid declining sovereign spreads and a weaker US dollar; and
3. Regional exports have kept pace with global trends.

Labor markets remained robust, generally supporting private consumption in most economies. Low trade exposure of many economies to the United States and lower tariffs compared with other emerging economies have also provided buffers.

Against this background, macroeconomic policy calibration remains a challenge in several countries. While most countries are expected to strengthen their fiscal positions, structural primary balances are projected to be lower than anticipated, indicating unwelcome delays in fiscal consolidation.

In fact, with public debt ratios rising, fiscal consolidation is increasingly important to mitigate risks of decompression in risk premiums. Insufficient fiscal effort complicates not only debt sustainability but also the effectiveness of monetary policy—I will come back to this later.

On the monetary policy front, inflation remains above target in some countries, amid relatively balanced risks. While robust labor markets and fiscal concerns slow disinflation, recent exchange rate appreciation is helping in some cases.

Central banks have responded appropriately, remaining data driven, and inflation expectations are stable but also remain above targets. Continued caution is warranted, especially in cases where economic slack is not evident and inflation remains above targets.

Looking ahead, the region’s potential growth remains stuck in its low historical average and lagging its peers. This reflects slowing labor force expansion, low capital accumulation, and stagnant productivity.

This year’s report has undertaken two analytical studies to better understand some policy challenges.

One focuses on interactions between monetary and fiscal policies. Reforms to enhance central bank independence have helped achieve price stability. However, high public debt and deficits can constrain monetary policy. To safeguard price stability, countries must focus on advancing fiscal consolidation and improving fiscal frameworks. Lower debt levels make monetary policy more effective, aiding convergence to inflation targets.

The second investigates some drivers of low total factor productivity in the region. Exploring firm-level data, we show that this is partly explained by persistent resource misallocation and sluggish productivity growth among firms. More productive firms face barriers to expand, which calls for reforms to address frictions—including size-based regulations, financial constraints, and limited competition.

---

The Fund remains closely engaged with the region through policy advice, capacity development, and financial support.

In terms of program engagement, since April, Barbados completed its arrangement under the Extended Fund Facility and the Resilience and Sustainability Facility, and a new Flexible Credit Line (FCL) has been launched with Costa Rica, while Colombia canceled its FCL.

---

To sum up, the global landscape is shifting, but this is no reason for inaction. As the saying goes, countries may not control the winds, but they can adjust their sails. Reinforcing policy frameworks, rebuilding fiscal buffers, and fostering growth opportunities are the sails to adjust.

---

Before returning to Julie, let me also remind you that I will be leaving the Western Hemisphere Department by the end of this month, moving to the Fiscal Affairs Department. WHD new director will be Nigel Chalk – sitting here – who already supervises several countries and activities and guarantees a seamless transition.

Accolades  |  October 17, 2025

World Tax

---

World Tax, the International Tax Review’s annual guide to the world’s leading tax advisory practices, has recognized Gibson Dunn in eight categories in the 2026 editions of its EMEA and APAC guides. The firm was recognized in France – General Corporate Tax; France – Tax Controversy; France – Transactional Tax; Hong Kong – General Corporate Tax; Hong Kong – Private Client; UK – General Corporate Tax; UK – Indirect Tax; and UK – Transactional Tax. Partners Sandy Bhogal, Elaine Chen, Jérôme Delaurière, Ben Fryer, Brian Gilchrist, Sanford Stark, and Jeff Trinklein were also recognized individually in the 2026 edition.

The guides were published on October 16, 2026.