Brazil should grow 7.5% this year, says IMF

Brazil's economy should grow 7.5% this year and 4.5% in 2011, said the IMF (International Monetary Fund) report on World Economic Outlook. In Latin America, the IMF praised especially Brazil, Chile, Colombia and Peru, the group that the institution called "LA-4."

The IMF expects Latin America and the Caribbean continue to challenge the expectations and grow 5.7% this year and 4% in 2011.

The political structure of these four countries is generally described as more market-oriented than those of countries like Argentina and Venezuela. "Dramatic improvements in macroeconomic policy frameworks over the past two decades, combined with accommodative policy, terms of external financing easy and strong commodity prices are driving a robust recovery in the LA-4," the IMF said.

In Chile, it is estimated expansion of 5.0% and 6.0% respectively, while Peru's economy should grow 8.3% this year and 6% next year. For Colombia, the forecast is for growth of 4.7% and 4.6% respectively. Growth in Argentina will be 7.5% this year and 4% in 2011, while in Venezuela the recession will continue, with a 1.3% contraction this year and an expansion of just 0.5% next year.

For Mexico, which is separated from these countries because of its great dependence on the U.S. market, the forecast is for growth of 5% and 3.9% respectively.

According to IMF, the priority for the region now is to undo the economic stimulus measures implemented during the recent global financial crisis, with a focus on the first withdrawal of fiscal stimulus and monetary stimulus with being deactivated more slowly. The IMF also approved the use of selective capital controls to limit the flow of money.

However, he stressed that this should be accompanied by "continued flexibility of two hands on the exchange rate to discourage inflows of capital, fiscal consolidation (...) and better supervision and monitoring of the financial sector." (Source: Associated Press / Dow Jones)

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