Through prudent economic and fiscal policies, marked by loosened trade barriers and modest budget deficits, countries in Latin America have set upon a path to be modeled by the rest of the world, Federal Reserve Bank of Atlanta President and CEO Dennis Lockhart said Aug. 21.
Policy makers in Latin America during the so-called “lost decade” of the 1980s learned the hard way how protectionism and large budget deficits can lead to low growth, high inflation and multiple debt crises, Mr. Lockhart told a small gathering organized by the World Affairs Council of Atlanta and the Latin-American Chamber of Commerce of Georgia.
However, economic reforms in some Latin American nations like Brazil, now one of the world’s largest economies, over the last 30 years have dramatically changed their prospects for the future, he said during the event held at the Georgia Power headquarters downtown.
“It is my view that the policy reforms and the resulting transformations we’ve seen in the economies of the region contain important lessons for the rest of the world,” Mr. Lockhart.
These universal lessons should not be lost on countries like the United States, where high unemployment and weak growth have characterized the nation’s slow recovery since the summer of 2009, Mr. Lockhart said.
“This history suggests to me there exist certain basic realities, behaving almost like physics, that cannot be long ignored or avoided,” he said in prepared remarks. “These fundamentals include good fiscal management—especially debt management—and monetary policy that supports growth while delivering control of inflation.”
However, Mr. Lockhart warned of the dangers of using monetary policy unnecessarily, pointing out the risk of it “being employed too aggressively” without addressing problems that can only be solved through fiscal reforms.
“[Monetary policy] is not a panacea,” he added.
To that effect, Mr. Lockhart said he has not made up his mind as to whether the Fed should employ additional monetary easing measures.
However, he did characterize the slowly recovering economy as “disappointing.”
Closer to home, Mr. Lockhart also emphasized the connections between the Federal Reserve Bank of Atlanta and Latin America, pointing out the Atlanta Fed’s retail payment operations in the region and its partnerships with Latin American central banks.
Falling under the umbrella of the Americas Center, a Federal Reserve initiative launched in 2005 to tie together various private and public monetary interests in Latin America, the Atlanta Fed branch in Miami handles U.S. banknote exchanges with government and commercial financial institutions in the region.
In addition to his role as president and CEO of the Federal Reserve Bank of Atlanta, Mr. Lockhart also serves as the board chairman of the World Affairs Council of Atlanta, which is affiliated with Georgia State University’s Robinson College of Business.
For more information on the council, click here.