Amid a slump in commodity prices, the International Monetary Fund is forecasting a second straight year of recession for the region. Jeanne Yurman reports.
Latin America has long been addicted to commodities. But can it shake the habit? Amid a slump in commodity prices and cooling in China's economy - its biggest trade partner - the International Monetary Fund is forecasting a second straight year of recession for the region with GDP falling almost a half a percent. Latin America, however, has a weak fiscal position and has few levers to stabilize its economies. The continent has leaned on agricultural exports as a support in the last few years and some places may continue to do so in the near term. SOUNDBITE: RACHEL ZIEMBA, MANAGING DIRECTOR, EMERGING MARKETS, FORECASTS RGE, SAYING: So Brazil and Argentina are best places to be increasing agriculture exports, particularly soy beans, also sugar and other goods. The challenge is that there's increased competition in agriculture as well as oil and metals. But to become less reliant on commodities, experts insist the region's way out, long term, is to shift its economic structure. Following global trends, they say Latin America's focus should move away from fixed investment and manufacturing to the services sector like developing healthcare, education. Latin American governments in general though have overspent and are highly levered leaving funding for this economic shift to outside investors who have grown much more cautious. SOUNDBITE: RACHEL ZIEMBA, MANAGING DIRECTOR, EMERGING MARKETS, FORECASTS RGE, SAYING: The question mark will be will that capital find its way into different projects in the service sector, in the infrastructure sector and the like. Analysts say one factor to help attract investment…Latin America's governments will need to offer more regulation friendly environment.