By Herbert Lash
NEW YORK (Reuters) - Latin American governments have made great strides in putting their fiscal houses in order but they need to redouble efforts to ensure long-term growth and a reduction in poverty, the chief economist for Latin America at Morgan Stanley said on Friday.
Regional governments are enjoying an abundance of resources because of global liquidity in capital markets, allowing many to reduce their debt levels, said economist Gray Newman in an interview.
"How much is the improvement the result of this dramatic increase in liquidity, and therefore the concern is, if the liquidity is withdrawn does the region suffer?" Newman said at the Reuters Latin America Investment Summit in New York.
Every government has its own story but the country that has taken the biggest advantage of the abundance in capital has been Brazil, Newman said.
Just three years ago some analysts acted as if Brazil was on the brink of defaulting on its foreign debt, Newman said.
Today, Brazil is on the cusp of eliminating its net external debt, a remarkable transformation, he said. A stock of dollar-linked debt has been offset by other instruments, basically striking any exposure to the U.S. currency, he said.
But in many ways what Brazil, along with Mexico, have done is easy and what governments do after elections this year in both countries will determine whether inflation continues to slow and if economies grow moderately or at a faster pace.
"Brazil has been showing a level of fiscal resolve since the end of 1998," Newman said. "The verdict is still out, but the trajectory has been a positive one." Continued...
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