Fiscal policy key to stronger LatAm economy: OECD

---

SAN SALVADOR, Oct 28 (AFP): Latin American countries should focus on improving their tax and spending policies as they begin to feel the effects of the slowing world economy, the Organisation for Economic Cooperation and Development (OECD) recommended in a report released today.
"The continent is beginning to feel the effects of the global slowdown. Current account surpluses are weakening, inflation is rising and foreign credit is shrinking," said the OECD Latin American Economic Outlook, released on the eve of an Ibero-American summit of heads of state and government in El Salvador, Central America.
"Fiscal policy can be a key tool for economic, political and social development in Latin America," it argued.
Between 1990 and 2006, government income averaged a total of 23 per cent of GDP in Latin America compared with 42 per cent in OECD countries, while spending averaged 25 per cent and 44 per cent respectively, it said.
"A review of Latin American tax collection and spending systems shows high levels of volatility and underdevelopment of personal income taxes on the revenue side, coupled with poor public services ... on the expenditure side," it said.
The report called for policymakers to address the region's widespread informal economy, focusing on issues such as legal protection and contract enforcement as well as improvements in education, particularly beyond primary level.
Latin America cannot escape the economic crisis due to its integration in international markets, which has grown in recent years, said Angel Gurria, secretary general of the OECD.
However, the report's authors maintained a "prudent optimism about the economic resistance of the region," following annual growth of 5.6 per cent of GDP in 2007, and more than 100 billion dollars of direct foreign investment in the region.