Latin America and the Caribbean in the World Economy. 2005-2006

The international economy has generally provided favourable conditions for the region in 2005- 2006, including strong international prices for its commodity exports, low international interest rates, low inflation and ready access to external financing. These trends are now gradually beginning to change somewhat, but without threatening the favourable international outlook for the rest of 2006 and for 2007. Within Latin America and the Caribbean, the debate about trade negotiations and their possible impacts on regional integration is heating up as renewed proposals are put forward for making integration schemes more pliant and adapting them to changing conditions by, interalia, introducing more flexible types of trade associations, both within Latin America and the Caribbean and between countries in this and other regions. Experiences of other countries with generous endowments of natural resources —such as Australia and New Zealand— that have used innovation and competitiveness policies to improve their position in the international economy also point up relevant strategic considerations for the region. All of these elements will have a strong influence on the Latin American and Caribbean countries’ economic and trade performance.