In Transition: The Outlook for Latin America and the Caribbean by Alejandro Werner published by IMFBlog (7/2016)
“Following a rough start at the beginning of the year, both external and domestic conditions in Latin America and the Caribbean have improved. But the outlook for the region is still uncertain.
Commodity prices have recovered since their February 2016 trough, but they are still expected to remain low for the foreseeable future. This has been accompanied by a brake—or even a reversal—in the large exchange rate depreciations in some of the largest economies in the region.
Most recently, the U.K. referendum on Brexit led to a sharp increase in volatility in global financial markets, especially in equity prices and exchange rates. While direct trade exposures of countries in Latin America and the Caribbean to the U.K. are small (on average about 1 percent of total exports), the region is exposed to the broader slowdown in the rest of the world—through trade and financial linkages—and fickle investor sentiment. At the same time, however, a more gradual pace of monetary normalization in the United States, with compressed U.S. term premium, should help contain funding cost pressures for both the public and private sector…”
