“Latin America’s economic boom could end in a “full-blown” crisis unless the region’s governments properly manage the situation, the International Monetary Fund’s top regional official said in an unusually stark warning to both policymakers and investors Thursday.
Nicolas Eyzaguirre, the IMF’s director for the western hemisphere, said that Latin America’s economic fundamentals appear to be in good shape. Yet he urged policymakers to take steps to keep their economies from overheating by trimming public spending, maintaining sound monetary policy and setting aside as much of the windfall from the current boom as possible.
Otherwise, he told a conference of central bankers in Rio de Janeiro, the region could see its currencies dramatically weaken as a result of a sudden external shock — such as a fall in global commodities prices or an unexpectedly fast increase in interest rates in the United States.”
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