Although it is believed that regional banks are "solid, liquid and stable," the recommendation for Latin America to avoid or at least mitigate the inevitable effects of the economic crisis in Europe and the slow recovery of the U.S., is to keep a lid on fiscal deficit.
An article in Prensa.com reports that the president of the Latin American Banking Federation (FELABAN), Oscar Rivera, has recommended that countries in the region comply with the rules governing the economy and containing the fiscal deficit. These are be some recipes to avoid crisis being suffered by Europe. "The logical thing is for governments not to have budget deficits. Not having deficits and making any long tern debts shortened as much as possible. "
China, which is seen as the locomotive of the global economy, "in the second quarter posted its lowest growth rate in the last three years (7.6%)", meaning that it may not be the solution to the crisis in Europe which is one of the major markets for Latin American exports.
With the recent consent given by the Banguat for a new issuance of new debt totalling $1,917 million to finance the 2015 budget, the fiscal deficit could exceed 2.5% of GDP.
The private sector is not looking favorably on the approval given by the Monetary Board of the Bank of Guatemala for the possible issuance of $1.917 million in debt to finance part of the 2015 expenses, because the fiscal deficit would rise to levels above that considered acceptable in economic terms.
An immediate fiscal adjustment is needed in order to avoid the risk of a possible closure of credit to the country in the international market, which would force an abrupt adjustment.
The warning from the head of the mission at the International Monetary Fund (IMF), Lorenzo Figliuoli, has its origin in the government's fiscal deficit, which this year will reach 5.9% of GDP, while increasing public sector debt reaches 60.4% of production.
Fitch Ratings highlighted as a recurrent weakness of the Panamanian fiscal policy the inability to limit the growth of debt as a percentage of GDP.
From the statement by Fitch Ratings:
Fitch Ratings-London-03 October 2014: The Panamanian government's request to raise the 2014 non-financial public sector deficit ceiling highlights the persistent use of waivers of the country's Social and Fiscal Responsibility Law (LRSF), Fitch Ratings says. This is a recurring weakness in the country's fiscal framework as fiscal consolidation becomes more important in maintaining favourable debt dynamics. However, Panama's ratings continue to be supported by the country's relatively healthy growth rates and macroeconomic stability, its growing economic diversification and the decline in government indebtedness over recent years.
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