Latin America learns from its past crises to face a complex present

In his welcoming words for the participants, Guillermo Fernández de Soto, CAF's Director for Europe, highlighted that this forum "has become the most renowned reference for the analysis of the economic scenario in Latin America, Spain, and the European Union". In his participation, the Director stated that "the current moment of the global reality is particularly complex, so strong leaderships and consensus are needed to face the challenges of the present". 

The welcoming speech led to the analysis of Germán Ríos, CAF's Corporate Director of Strategic Affairs, and Rafael Doménech, Chief Economist of Developed Economies at BBVA. 

Rios focused his intervention on how in preceding decades, Latin America experienced a reduction in poverty rates, an improvement in democratic performance, and a positive evolution of the economy. With respect to this, in the economic practice Latin America is heterogeneous, showing wide differences in performance between countries. 

With respect to the idea of the "perfect storm", he listed the factors that negatively affect the region, such as the global downturn and the fall of international trade; deceleration in China and its change of model; volatility of financial capitals with uncertainty regarding the future of the world economy; monetary policy in the United States, and the fall of direct foreign investment flows. 

In ths context and with respect to Latin America, he underlined its structural problems such as low productivity; poor quality education; infrastructure deficit; lack of diversification in the economy; and low innovation and integration of the global productive value chains. He also mentioned the positive elements that the region has at its disposal to respond to this shock. Thus, Germán Ríos highlighted the significant number of natural assets, the take-off of the middle class and the demographic bonus, the "multilatinas" companies, the strength of the financial system, and the low level of public debt. 

One of the solutions that CAF's Director stated for Latin America in this tumultuous international context assumes going from what is macroeconomic to microeconomic, preserving what has been achieved in terms of reduction of poverty and strengthening the middle class. Productive transformation is a long process  in which not all countries work at the same pace and "the only way to grow is to improve educational standards, modernize the regulatory and institutional framework, strengthen regional clusters, eliminate infrastructure deficits, and create an entrepreneurship ecosystem".  

At the same time, Rafael Doménech analyzed the prospects of the Spanish and European economies. He highlighted that the economic scenario has improved and reduced uncertainties, although growth continues to be fragile. In this respect, he noted that "it is important to take into consideration that this new normality in the world has a lower potential growth than the one existing before the world crisis". 

Following, he talked about the performance of different economies, such as the Spanish, which he described as asymmetrical, where structural reforms are needed to create more stable and better quality jobs. The economist pointed out that one of the new developments "is the deceleration of growth in the trade of goods, that is, of globalization". In addition, with respect to the risks that must be monitored, which he determined based on their impact and probabilities, he pointed out a financial crisis in China, deceleration in the United States, the Brexit and the resulting institutional crisis in the EU, and the vulnerability of emerging economies.