By Gustavo Adler and Sebastián Sosa
(Version in Español)
As a commodity exporting region, Latin America has greatly benefited from the commodity price boom of the past decade. But with talk of a new global recession, what will happen to the region if the boom turns to bust?
The IMF's latest Regional Economic Outlook: Western Hemisphere sheds light on Latin America's reliance on commodities from a historical perspective. Our study also looks at the effect of a sharp decline in commodity prices on emerging market economies and on the policies that could shield countries from that shock.
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More dependent but also more diversified
The reliance on commodity exports can be looked at as a share of GDP (commodity dependence) as well asrelative to total exports of goods and services (export diversification).
The first ratio tells us about the potential impact of a commodity price shock on domestic output, while the second tells us about the economy's ability to adjust to a commodity price shock. There are significant differences within the region across these two dimensions: