WRAPUP 2-Latam economy rising, doubts about Europe

* Latam nations say must be careful trimming stimulus

* Inflation not a problem in the short term, ministers say

* IMF says emerging markets leading global economic growth

By Eduardo Garcia and Patricia Velez

LIMA, May 28 (BestGrowthStock) – Latin American countries are
entering a period of robust economic growth but should exercise
caution if they decide to remove fiscal stimulus given
uncertainty in the global economy, finance ministers said on
Friday.

High-ranking finance officials from the Americas met in
Lima amid strong growth prospects for the commodities exporting
region, tempered in part by doubts about contagion from
Europe’s financial woes.

“Although there is consensus that economic recovery is
happening in the region, there are still many questions, and a
lot of uncertainty coming from other regions such as Europe,”
said Mexican Finance Minister Ernesto Cordero.

Cordero and Peruvian Finance Minister Mercedes Araoz called
for caution before deciding when and how to withdraw stimulus
measures implemented to offset the global financial slump.

“Looking at the impacts (of the crisis) we’ll look for the
right moment to pull out the stimulus plans or, for instance,
the right moments to act jointly if there were another external
shock … if there were changes in commodity prices,” Araoz
said.

In a press conference with other Latin American finance
officials, Araoz also said inflationary pressures are unlikely
to be a problem in the region in the near term.

“I think that most of us are not seeing the possibility of
prices increasing rapidly,” she said.

Still, Brazil and Peru raised rates recently to forestall
inflation as they are both expected to have the fastest
economic growth rates in the region this year with expansion of
some 7 percent.

Mexico and Chile have held rates steady, while Colombia
recently took a more expansionary monetary policy stance to
help lift growth.

Both Araoz and Cordero expressed concern that local
currencies could strengthen against the dollar, which could
make the region’s exports less competitive. Capital inflows
have surged as investors flee low-yielding advanced economies.

The officials did not issue a final declaration, but said
they had agreed to continue to coordinate economic policies and
be fiscally prudent.

EUROPE CRESTFALLEN, LATAM OVERHEATING?

Also attending the meeting in Lima was IMF chief Dominique
Strauss-Kahn, who warned of potential overheating in rebounding
emerging market economies. [ID:nN28190732].

“The recovery in advanced economies is lukewarm. the
situation is dramatically different in emerging markets,”
Strauss-Kahn said.

The IMF sees global economic growth of 4.25 percent this
year and next, faster than previously expected, as many
emerging markets boom, Strauss-Khan told the meeting.

He encouraged hard-charging emerging markets to begin
withdrawing fiscal and monetary stimulus.

“As recent events in Europe have reminded us, the dark
clouds have not yet passed,” he said, referring to fiscal woes
in Greece and Spain that have rattled financial markets.

“In emerging markets, including in Latin America and the
Caribbean, the concerns are a bit different. With the recovery
more advanced, a natural starting point would be to remove
temporary fiscal stimulus,” he said.

Strauss-Khan on Thursday said that the U.S. economy should
grow about 3 percent this year, while Europe may post growth of
between 1 percent and 1.5 percent. [ID:nN27252899]

Cordero said Mexico was sticking by its latest growth
forecast of 4.1 percent despite global market turbulence caused
by fiscal shortfalls in Europe and moderate growth in the
United States, the country’s main trading partner.

“We’re very conservative regarding the extent of economic
recovery in the United States,” he said.

Many of the finance officials will go next month to Canada,
which hosts a meeting of the G20 leading developed and
developing economies.

Among the issues likely to be discussed there is a
controversial proposal to impose a new global banking tax to
prevent and pay for bailouts. No firm consensus emerged at
Friday’s meeting, with Canada and Mexico voicing opposition to
the tax [ID:nN27128240]

Penny Stocks

WRAPUP 2-Latam economy rising, doubts about Europe