Study shows Caribbean could benefit from new global order

The Inter-American Development Bank (IDB) says the new economic order that emerged after the global financial crisis will likely generate an unprecedented favourable international environment for Latin America and the Caribbean in coming years.

A new study released by the IDB notes that policymakers in the region should seize the opportunity to adopt policies that reduce external vulnerabilities and ensure sustainable economic growth.

The study notes that increasing commodity prices, the rise of Asia as a main buyer of Latin American and Caribbean raw materials, low world interest rates and rising capital inflows mean large commodity exporters and importers in Latin America and the Caribbean would grow at different speeds, presenting distinct policy challenges.

"The rebalancing in the world economy is providing the seeds of what could be a sustained economic boom in Latin America and the Caribbean," said IDB principal economist Alejandro Izquierdo, one of the coordinators of the study.

New challenges

However, for this to happen, countries in the region need to address as soon as possible the new challenges posed by this emerging economic environment, particularly in terms of prudent macroeconomic management, new trade opportunities and higher productivity levels.

The study 'One Region, Two Speeds? Challenges of the New Global Economic Order for Latin America and the Caribbean,' was presented to the IDB Board of Governors at their meeting in Calgary.

The study provides a detailed analysis of current economic trends that have emerged since the global financial crisis and analyses the potential role Latin America and the Caribbean can play under this new environment.

The study notes that the composition of global economic growth has suffered a dramatic change after the financial crisis as North America and Europe increase domestic savings and reduce their current account deficits.

It said that emerging economies now account for 75 per cent of world demand growth, up from 50 per cent in 2006.

The IDB report forecasts the shift in demand will prevail for several years, leading to a much higher propensity to consume primary goods.

- CMC