He International Monetary Fund (IMF) think that countries Latin America they should pursue stricter fiscal policies, such as raising taxes on the wealthy to keep high inflation and thus deprive central banks of some weight in their monetary policy.
“Tighter fiscal policy would help rein in domestic demand, allowing interest rates to be cut earlier,” said a regional note Thursday, released on the occasion of the Fund’s spring meetings, along with The World Bank.
The Board is in line with the IMF’s statement at meetings where it called for fiscal tightening to complement monetary policy at a time when growth is being held back by high rates and general uncertainty. .
For the agency’s deputy director of the Western Hemisphere Department, Nigel Chalk, the persistence of inflation likely means that Guys they will have to stay elevated longer than we originally thought.”
However, due to the fact that many central banks, such as Mexico or Brazil, they acted very quickly against rising prices, inflation expectations remained well anchored, “something unusual in previous cycles,” the expert said in an interview with EFE.
Chuck said it also helped exchange rates in the region stay strong in the context of the dollar’s appreciation due to the high exchange rate policy. US Federal Reserve System (FRS), which also helped curb inflation.
However, if consumer price increases take hold, as they appear to be, the economic slowdown caused by restrictive monetary policy could weaken the financial sector and affect household consumption.
The IMF expects interest rates to remain high Latin America for most of this year, and in some countries even until 2024, and inflation may not fall to the target of the authorities until the beginning of 2025.
Raise taxes on the rich
To avoid the disproportionate impact of inflation on the most disadvantaged people, the IMF proposes to increase the contribution of the richest.
“Implementing a tax policy that makes the wealthy pay their fair share should be part of the solution,” the agency said in a regional note.
In a similar vein, Chok asked for a note during the press conference that Latin America’s tax systems are becoming “more progressive” due to high inflation and the prospect of slow growth in the region.
“I think we can clearly see that (…) in most countries in the region, taxes are not very progressive. The rich can evade or disobey taxes through exemptions,” Mel said.
Therefore, contractionary fiscal policy can be implemented without cuts in social spending to combat inequality, According to the organization, this is an ongoing problem in most countries in the region.
One of the main measures proposed by the Fund for the countries of the region is tax reform, so that the system serves to protect the most vulnerable, while ensuring that the richest pay a proportional share in taxes.
This recommendation is key during a global and regional downturn: the IMF’s latest forecast sees growth in Latin America at just 1.6% this year, after an unexpected 4% growth last year, driven mainly by increase in the price of raw materials.
At this point, Chock warned that the good performance for 2022 is primarily due to an increase in demand, not supply, and said that increasing productivity will be one of the most important challenges the region will have to face. future.
The expert believes that there are many historical reasons explaining the productivity problems in the region, such as low investment in infrastructure, the quality of the education system or institutional corruption, problems that are very difficult to solve because they require “money and fiscal resources.”
In particular, Chok mentioned foreign investment, that, with the exception of Mexico, it is gradually declining, and it is believed that a regulatory environment that provides incentives for international participation will “enhance long-term growth prospects” in Latin America.
(EFE)
Source: Aristegui Noticias

Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.