The IDB’s Calgary Stampede Strut

The Inter-American Development Bank’s annual gathering in Calgary Canada, known for its cowboy lore, reflected an upbeat mood and outlook as $12 billion in record lending was revealed, and public and private sector delegates released positive 2011 growth and policy forecasts. US Treasury Secretary Geithner won attendee praise with appeals for passage of the long-stalled bilateral Colombia free-trade pact and for increased multilateral funding from the G-20 as Republicans now controlling the Congress in Washington look to gut appropriations to the Bretton Woods institutions to show fiscal prudence. Attention was also focused on Haiti, as first-round presidential elections proceeded peacefully and the bank prepares for a full-day dedicated conference in June, convening donors and government and business leaders. Former president Aristide returned from exile in South Africa on the eve of the poll and indicated he will not again seek political office but instead would promote faster rebuilding and anti-poverty progress. The Institute for International Finance in a side meeting with members circulated a report that regional GDP growth will slow to 4.5 percent but that foreign direct and equity-driven portfolio investment will continue near historic highs and sustain currency appreciation. Both domestic and external demand supported a 6 percent output increase in 2010 with Argentina’s almost 9 percent at the top and Venezuela’s 2 percent shrinkage at the opposite end. Average inflation hit 8 percent with the highest readings from non-targeting countries. With better terms of trade, the current account deficit was under 1 percent of GDP and private capital inflows were four times the gap at $220 billion, with commercial bank credit at almost $30 billion after the previous year’s outflow. Sovereign debt spreads improved and stock markets saw double-digit upswings, as currencies in Brazil, Chile and Colombia regained pre-crisis levels.

Capital controls and monetary tightening have been responses with routine sterilized and unsterilized interventions, and higher benchmark rates and reserve ratios. Brazil’s anti-appreciation package encompasses a half-dozen components from taxes to derivatives limits and authorities have also begun to withdraw related fiscal stimulus. Restoring budget balance is a near-term priority, and Latin America’s external debt profile continues to advance with exports almost equal to the amount outstanding and interest charges at under 5 percent of overseas commodity and manufacturing shipments, especially to China and other emerging market partners. Argentina is in a final stage of resolving sovereign arrears from a decade ago as it tackles $7 billion owed the Paris Club, which must follow the comparable treatment standard for private creditor reductions to date even as economic boom times otherwise may be incomparable.