Latin Amer­ica build­ing a re­li­able rev­enue base, says Shi­no­hara

The Pak Banker - - Front Page -


Mr. Shi­no­hara's Open­ing Re­marks for the Tax and Growth Sem­i­nar: It is a great plea­sure to be in Brazil, and to par­tic­i­pate in this im­por­tant gath­er­ing of pol­i­cy­mak­ers from Latin Amer­ica. We will dis­cuss and share ex­pe­ri­ences on the highly rel­e­vant and dif­fi­cult is­sue of strength­en­ing the struc­ture of gov­ern­ment rev­enue in a man­ner con­ducive to eco­nomic growth. In my short in­ter­ven­tion, I will touch on how the global con­text makes this is­sue par­tic­u­larly rel­e­vant for Latin Amer­ica to­day.

De­spite troubles else­where in the world, most of Latin Amer­ica con­tin­ues to per­form quite well. This suc­cess is largely the re­sult of the de­ter­mi­na­tion of pol­icy mak­ers to strengthen pol­icy frame­works over the past decade. The re­gion's re­silience has in­creased thanks to im­proved gov­ern­ment bal­ance sheets; lower ex­ter­nal debt and higher in­ter­na­tional re­serves; more flex­i­ble ex­change rates; and stronger fi­nan­cial reg­u­la­tion and su­per­vi­sion.

These im­prove­ments have al­lowed the re­gion to with­stand the se­vere ex­ter­nal shocks of re­cent years. How­ever, this suc­cess should not give rise to com­pla­cency, par­tic­u­larly given that the global en­vi­ron­ment re­mains com­pli­cated, and risks and un­cer­tainty are bound to per­sist for some time.

We project a grad­ual pick up in global ac­tiv­ity in the com­ing years, al­though this hinges on more de­ci­sive and timely pol­icy ac­tions, par­tic­u­larly in the ad­vanced world. Re­cent an­nounce­ments by Euro­pean lead­ers have helped calm down mar­kets, but these must be fol­lowed by con­crete im­ple­men­ta­tion steps to im­prove con­fi­dence and ease fi­nan­cial con­di­tions in the more vul­ner­a­ble euro area economies.

Pol­i­cy­mak­ers also need to present a cred­i­ble path to a stronger bank­ing and fis­cal union. In the United States, with the Pres­i­den­tial elec­tion be­hind us, a po­lit­i­cal agree­ment is ur­gently needed to pre­vent an un­duly large fis­cal con­trac­tion in 2013, with neg­a­tive im­pli­ca­tions for global growth.

Emerg­ing Asia has weath­ered the storm rel­a­tively well, but sus­tain­ing growth over the medium term is con­di­tional on grad­u­ally shift­ing do­mes­tic de­mand to­ward con­sump­tion.

In Latin Amer­ica, many coun­tries continue to ben­e­fit from the dou­ble tail­winds of easy fi­nanc­ing con­di­tions and high com­mod­ity prices. Re­cent de­ci­sions by cen­tral banks in ad­vanced economies in­di­cate that world in­ter­est rates would re­main very low for a pro­longed pe­riod of time. Mean­while, still healthy growth in Emerg­ing Asia sug­gests that com­mod­ity prices will re­main at rel­a­tively high lev­els from a his­tor­i­cal per­spec­tive.

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