The Latin American Shadow Financial Regulatory Committee (CLAAF), a group of economists from Latin America that includes former finance ministers and central bank governors, released a statement after meeting today in Washington, estimating that Latin American governments will need roughly $250 billion just to repay maturing debt and support budgets in 2009.
The statement described a marked deterioration of the region’s economic prospects in the past few months caused by a flight to high quality assets and the freezing up of international credit. The region would suffer from a sharp slowdown in the world economy and falling export prices, it said.
Unless credit found its way to the region, the economists said governments would be forced to choose between two unappetising alternatives: painful fiscal adjustment that would reinforce the downturn or distortive measures, such as import restrictions and capital controls.
“In the absence of adequate international actions, beggar-thy-neighbour policy responses may be politically inevitable, seriously undermining the basis of the global co-operative system that emerged in the aftermath of World War II [that] allowed for unprecedented rates of growth of trade and incomes and a reduction in global poverty.”