Argentina 2014 Blog: Panel on Global Economic Trends

By
Rachel Glickhouse

Financial experts examined economic challenges for emerging markets.

Speakers:

  • Andrés Velasco Brañes,  Former Finance Minister of Chile
  • Richard Peach, Senior Vice President in the Macroeconomic and Monetary Studies Function of the Federal Reserve Bank of New York., FUNDESA
  • Terrence Checki, Former Executive Vice President and Head of the Federal Reserve Bank of New York’s Emerging Markets and International Affairs Group, Visiting Fellow, Council on Foreign Relations (moderator)

During the panel on the global economy, experts shared their views on what's next for emerging economies and developed markets.

Terrence Checki said that persistent sluggish growth leaves major economies vulnerable to the inevitable bumps in the road. In major economies, the margin between recession and expansion is very, very slim, he added. Plus, he said, though he is a pessimist, he's positive about the emerging world. When discussing the tendency of some Latin American countries to lack savings, Checki commented that taxing savings to subsidize consumption isn’t just an issue in the developing world. On regional integration, he said that it's an important part of stability. "It limits the boundaries for bad behavior," he commented.

Richard Peach spoke about the United States and its economy since the Great Recssion. Since 2008, the country has been on a 2.1 percent growth path, though there's still an output gap. And while the unemployment rate has decreased, a large portion of the reduction came from a reduction in labor force participation. Also, the growth rate of compensation remains "extremely low," he said.

Andrés Velasco noted that since 2009, Latin America has seen high commodity prices, low U.S. interest rates, and lots of international liquidity. Currently, the region is divided among countries who lack commodities, and those who lack strong macroeconomic policies. But the region's economic success is due more to external factors and sheer luck than domestic policies, he said. When the commodities boom ends, these economies will need a policy shift. In Argentina, this change is one of the biggest challenges, he said, given that the problem is more political than economic, he added. 

Watch the panel: