By Heather Scott

WASHINGTON (MNI) - Buffeted by repeated economic crises, Latin America is weathering the current storm better than developed countries and it is their willingness to open their economies that helped build this resilience, according to an OECD report released Monday.

The Organization for Economic Cooperation and Development released its outlook for Latin America, which found that despite an expected 3.6% per capita contraction in GDP, "the rate of recovery is expected to be substantial in 2010," with growth of about 1.6% per capita.

The report said, "It is already apparent that Latin America is rebounding from the shock more rapidly than the majority of developed economies. Most importantly, it is doing so without compromising its significant progress towards its long-term development goals."

Consensus forecasts project a contraction of 4.1% for OECD nations this year, the report said.

Countries have built up more fiscal resilience -- "running more sustainable deficits, extending the maturity profile of their public debt, and building foreign reserves against potential liquidity shortages" -- as well as monetary policy credibility which has allowed more room to act in the face of the latest global crisis, the OECD said.

"Contrary to prevailing wisdom, Latin American countries that have opened their markets to international competition during the last decade have not proved more vulnerable to the current global economic downturn," the report said.

"The key element this time is that trade and financial openness have been accompanied by the building of resilience mechanisms that bolster the ability to withstand negative shocks."

The OECD said "responsible and credible policy making in Latin America since the 1990s has created substantially more headroom for effective and sustainable fiscal and monetary stimulus than was the case in the 1980s."

It cites Chile as the best example, building up reserves during the boom in copper prices, closely followed by Peru and Mexico, and with Brazil and Colombia coming next.

At the same time, "Monetary authorities in most Latin American countries have worked hard to build credibility in recent years and are now rewarded with a more robust monetary-policy tool kit."

It said inflation targeting countries such as Brazil, Chile, Colombia, Mexico and Peru "appear to have most room for monetary-policy maneuver."

That newly developed credibility means "Policy makers can mobilise reserves to address liquidity shortages, rather than watching them haemorrhage in vain attempts to protect the value of the domestic currency," the report said.

The OECD said authorities must continue to support direct spending on the most vulnerable sectors of society. Poverty in the region could increase by seven percentage points, which would mean nearly 39 million more people falling into poverty and "almost entirely reverse the progress made during the five years before the crisis."

The report notes that growth as well as effective policies are key to poverty reduction, and points to Argentina which "made significant redistributive gains" but now lacks resources to maintain the policies that led to those improvements.

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