The World Bank Group (WBG) committed US$ 17.9 billion in fiscal year 2010 – a slightly higher figure over last year’s record lending of 17.1 billion – to support countries in Latin America and the Caribbean (LAC) as they recover from the global financial crisis and resume a path of sustained growth, according to the latest report from the multilateral organization.
The region is expected to post 4.5% growth in 2010, with Brazil leading the recovery with a projected 6.5% expansion on account of strong commodity demand.
Other South American economies such as Peru, Argentina and Uruguay are also expected to reach or pass the 4% growth mark. Mexico’s expansion is projected to rebound to 4.3%, marking the fastest growth pace in almost a decade, while Central American economies will lag in the recovery on weak workers’ remittances from the United States, projecting a 2.7% growth for in 2010.
Excluding Haiti, growth in the Caribbean region will accelerate modestly to 3.2% in 2010, from 2% in 2009.
“We continue to see the fruits of our unprecedented support to the region’s recovery as it heads towards solid growth in 2010 and beyond, while renewing our commitment to improving human opportunities for all its citizens,” said World Bank Regional Vice President Pamela Cox.
In Latin America and the Caribbean, the WBG maintained its strong support for the region approving US$ 13.9 billion in new loans in fiscal 2010, US$ 13.6 billion from the International Bank for Reconstruction and Development (IBRD) and US$ 300 million from the International Development Association (IDA).
Mexico, Brazil, and Colombia were the largest borrowers, while transportation, public administration and health and social services received the most funding this fiscal year. Support to the region represented 31% of IBRD lending and nearly 24% of total IBRD/IDA lending.
The WBG’s International Finance Corporation (IFC), which supports sustainable private sector development through financing and advisory services, committed US$ 3.9 billion to private sector projects in Latin America and the Caribbean, of which 897 million were in syndicated and parallel loans, a 25% increase in mobilization over the previous fiscal year. IFC’s investments spanned 23 countries in the region, with a focus on Central America and the Caribbean.
“In an unpredictable economic landscape, IFC directed significant financial resources into regions where we could do the most good,” said Lars Thunell, IFC’s Executive Vice President and CEO.
“We mobilized capital to address the major development challenges of our time. We leveraged our global expertise, developing innovative products and services to help our clients succeed. We catalyzed investment in emerging markets, demonstrating to investors that development and commercial success can go hand in hand in these markets.”
To help countries during the economic recovery, the WBG’s Multilateral Investment Guarantee Agency (MIGA) in fiscal year 2010 provided $18.1 million in guarantees for financial sector projects in the Latin American and Caribbean region.
In addition, last year MIGA signed a Memorandum of Understanding (MoU) with the Central American Bank for Economic Integration (CABEI) aimed at promoting foreign direct investment in Central American countries by jointly providing non-commercial risk guarantees for projects in a variety of sectors, mostly through coinsurance arrangements.
“MIGA remains committed to helping the economies of the Latin American and Caribbean region continue on a path of growth by supporting investments that create jobs, lending services to the real economy, and infrastructure,” says MIGA’s Executive Vice President, Izumi Kobayashi. “Countries in the region are also continuing to become major sources of outward investment, and we stand ready to support such developmentally-beneficial activity across borders.”
Several LatAm countries were able to conduct countercyclical policies, particularly on the monetary front, for the first time in decades. The effectiveness of these policies was complemented and enhanced by the sizeable, flexible, and timely provision of liquidity and budget-support financing from multilateral institutions.
By early 2010, the region’s international reserves were more than three times what they had been five years earlier. Public sector debt remained manageable, averaging 30% of GDP, and the region underwent no banking crisis, despite the sub-prime-driven global turmoil.
The current pattern of global recovery has favored the region so far. Countercyclical policies have supported domestic demand in the larger countries and external demand from fast-growing emerging economies, especially China’s, has boosted exports and terms of trade for LatAm net commodity exporters.
