Which Latin American countries are most in debt? » latinapress news

The United Nations has called on international financial institutions to write off the sovereign debt of several Latin American and Caribbean countries and create more favorable financial conditions amid ongoing global inflation fueled by the Russian invasion of Ukraine and post-pandemic delays. To bring about a “great boom” in these economies. The request was made by UN Secretary-General Antonio Guterres during a meeting of the Economic Commission for Latin America and the Caribbean (ECLAC) in Buenos Aires, Argentina. But how feasible is this demand and how high is the debt of countries in the region? “This is a reasonable and sensible request. Guterres certainly took into account that countries cannot pay their debts in the current budget, if we want to fight poverty and inequality in the region, and we urgently need climate policies,” explained Mexican economist and political analyst Mario Campa. In an interview with “DW” (Deutsche Welle).

According to the latest figures from the “IMF” (International Monetary Fund), Venezuela is the most indebted country in the region, accounting for 307 percent of the Gross Domestic Product (GDP). Guatemala ranks last with debt at 30.6 percent of GDP. To obtain these comparative parameters, Gamba explains, public debt, also known as government debt, is divided by the size of the economy. GDP is usually used for this purpose.

During the pandemic, many Latin American economies have increased tax expenditures to boost social spending. Three of them stand out: “Colombia, Chile and Brazil, despite being large economies, spent more than they took in. “On the other hand, there are countries like Argentina and Ecuador, which now have substantial debts to the IMF and are among the economies that pay the most for extension payments,” explains Gamba. For this reason, some countries are now introducing more frugal households, as Gabriel Boric has already done in Chile. In addition, due to the current inflation, the central bank interest rates are increasing rapidly, as in Colombia, even Gustavo Pedro complained about the policies of his country’s central bank.

“So there is a combination of tight fiscal spending and, in many cases, already tightening monetary policy. This leads to a low growth rate in the region. Hence the call from Guterres,” says the Mexican expert. But two weeks before Guterres’ call, the United Nations Development Program (UNDP) report, 10 The agency warned that 54 countries, including Latin American countries, home to more than half of the world’s poorest people, need help. Failure to restructure debt will result in a significant increase in poverty and a lack of critical investment to mitigate climate change, the agency says. Argentina, Venezuela, Cuba, Ecuador, El Salvador and Haiti. Countries are in the list.

“The IMF, the World Bank or the IDB should first expand their project portfolio or make lending more flexible, redirect funds to countries in need, and take into account the needs of climate change,” says the economist. Campa. Asked whether countries in the region could use the “facilitating mechanisms” suggested by Guterres, such as “credit transfers for climate adaptation projects,” the expert said it was possible. “All that is missing is the political will. But it should be an equal policy not just for some countries but for all parts of the world,” stresses the economist. Most importantly, any country that wants to make this kind of investment needs to put in place an institutional framework to receive this kind of treatment.”

Although many economies in Latin America have returned to pre-pandemic levels, expert Gamba advises caution as developed countries such as the United States or the United Kingdom see a slowdown in GDP growth. “In our region, Brazil shows surprisingly little growth. The case of Mexico is a bit strange because it is distancing itself from the US, but it is also associated with a resurgent tourism, as is happening in Italy and France. Like Peru, Chile has had the advantage of being a country with very low debts for a long time,” says Gamba. Countries in the region that need the most help to restructure their debts or end surcharges, the expert said, include Argentina and Ecuador, which also have inflation problems. “In Venezuela, on the other hand, the GDP has probably fallen, so the debt is very high compared to this parameter,” explains Gamba, “and the country is very dependent on US sanctions.”

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