Fiscal deficits raise debt concerns in Latin America

Subject

The deteriorating fiscal position.

Significance

According to the UN Economic Commission for Latin America and the Caribbean (ECLAC), government deficits in most South American countries and Mexico widened in 2015 for the third consecutive year, in a context of slower economic growth and lower commodity prices. Barring Brazil, the increase was generally small but government borrowing, rising for several years, is increasingly limiting administrations' room for fiscal manoeuvre.

Impacts

• Government borrowing is rising -- as are borrowing costs.
• Declining revenues may force unpopular spending cuts, worsening growth prospects.
• Caribbean countries in particular face unsustainable debt-servicing burdens that leave little for social and investment spending.