Latam growth to slow in 2011 as stimulus withdrawn

* Counter-inflationary measures main drag on growth

* Capital flows to remain near record levels

CALGARY, Alberta, March 26 (Reuters) – Latin American
economic growth will slow this year to 4.5 percent from 6.1
percent last year as countries raise interest rates and rein in
spending to curb inflation, a global banking group predicted on
Saturday.

The Institute of International Finance’s outlook on the
region noted that inflationary pressures and sharp currency
appreciation are the main challenges facing policymakers as
they consider how quickly to put the brakes on the economy.

“The strong performance of these economies and the search
for yield by international investors are combining to challenge
the skills of governments and central banks in the region,”
Rick Waugh, IIF vice chairman and chief executive of Bank of
Nova Scotia, said in a statement.

“We believe that most governments and central banks will
take the necessary fiscal steps and pursue appropriate exchange
rate policies,” he said on the sidelines of the annual meeting
of the Inter-American Development Bank.

Central banks have delayed rate hikes for fear of fueling
further currency appreciation, despite inflationary pressures
caused by emergency low rates in the United States, rising food
prices and robust growth, the report said.

Growth will come in at about 4.6 percent in 2012, it said.

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Graphic on Latin American growth, inflation vs G7
economies: http://r.reuters.com/bex68r

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Investors will continue to flood Latin America with capital
over the next two years as they favor high-yielding assets, the
group believes. It estimates private inflows of about $215
billion in each of the next two years.

Waugh said new global banking regulations aimed at avoiding
future crises by forcing banks to hold higher capital and
liquidity levels would be “suffocating” for Canadian and Latin
American banks that did not fail during the global crisis.

He urged Latin American authorities to “adapt new global
banking regulatory requirements with great care” to ensure they
do not stifle growth.
(Reporting by Louise Egan; editing by Peter Galloway)

Latam growth to slow in 2011 as stimulus withdrawn