The Inter-American Development Bank, IDB, indicated this Monday that Latin America’s public debt has been reduced and is close to reaching pre-pandemic levels.

According to the organization, public debt has been reduced in the region thanks to the reforms and fiscal adjustments applied.

According to the IDB, “public debt experienced a decrease of 11 percentage points in relation to the Gross Domestic Product (GDP), going from 71 % in 2020, to 66 % in 2021, 62 % in 2022 and 60 % in 2023.”

Although it recommends that countries continue implementing reforms, the IDB estimates that the increase in GDP this year will be 1.6 % and that in 2025 it will rebound to 2 %.

In general terms, the organization points out that the countries of Latin America and the Caribbean have demonstrated “unexpected strength” last year. However, they should not lose sight of factors that may influence the increase in debt, such as the El Niño phenomenon, since it could “lead to a 3% increase in debt as a percentage of GDP in three years.”

The IDB emphasizes the importance of governments working to develop “quality education, encourage small businesses, facilitate access to global markets, attract foreign direct investment and improve the credit market.”

M.Pino

Source: bancaynegocios

(Reference image source: Unsplash+, in collaboration with Getty Images)

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In a drastic economic turnaround, last Tuesday, the government headed by Javier Milei devalued the national currency by more than 50 %, setting the official exchange rate at 800 pesos to the dollar, compared to 391 at the close of the previous Thursday. The measure was announced by the Minister of Economy, Luis Caputo, who warned of the imminent risk of hyperinflation in Argentina.

Minister Caputo highlighted the root of the country’s economic problems, noting that the crisis has always been fiscal in nature. In an effort to address this problem, he announced austerity measures, including cuts in energy and transport subsidies. “The genesis of our problems has always been fiscal. The country must overcome its addiction to the deficit in public finances,” Caputo emphasized during his statement.

In his previously recorded speech, Caputo explained that the official exchange rate is raised to 800 pesos to provide appropriate incentives to the productive sectors and encourage the increase of production.

Despite the devaluation, the government will maintain, at least for now, the currency control system implemented since 2019, which includes a dozen different exchange rates.

Javier Milei, a 53-year-old economist who during the election campaign symbolized his commitment to reducing public spending by brandishing a chainsaw, took office last Sunday. He emphasized the need for a “shock” treatment to overcome the crisis, ruling out any gradual approach. The trustee aims to make a fiscal adjustment equivalent to 5% of the Gross Domestic Product.

“Today, the State artificially maintains extremely low prices in energy and transport tariffs through these subsidies,” declared the Minister, referring to public spending aimed at keeping prices low in various consumer sectors.

K. Tovar

Source: Descifrado

(Reference image source: X, @ElRepublicano09)

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