1. MACROECONOMIC VOLATILITY AND HOUSEHOLD VULNERABILITY IN THE CARIBBEAN Comments by Guillermo Perry Chief Economist for LAC, World Bank June 2002

2. OVERVIEW 4 EXCELLENT REPORT 4 CLEAR FOCUS FOR FURTHER WORK 4 UNDEREMPHASIZED FINDINGS AND AREAS: –OPPORTUNITIES FOR RISK DIVERSIFICATION WITHIN THE REGION (CYCLES ARE NOT STRONGLY CORRELATED: table 1.6) –IDIOSYNCRATIC RISKS (HEALTH; FRICTIONAL UNEMPLOYMENT) –MIGRATION AGREEMENTS

3. POLICY ISSUES (Areas to explore) 4 MACROECONOMIC SHOCKS AND POLICIES –TRADE –FINANCIAL –MIGRATION –FISCAL –NATURAL DISASTERS 4 HOUSEHOLDS –UNEMPLOYMENT AND INCOME –HEALTH –NATURAL DISASTERS

4. TRADE AND FINANCE 4 TRADE –DIVERSIFICATION OF SOURCES OF INCOME (SERVICES, EPZ) –DIVERSIFICATION OF MARKETS (TOURISM/REGIONAL) 4 FINANCE –REGIONAL (non correlation of cycles) –IFI’s: support risk diversification and insurance

5. MIGRATION 4 AGREEMENTS FOR PERMANENT AND TEMPORARY MIGRANTS (US/REGIONAL) 4 FACILITATING REMMITANCES –Clarify: Are remittances counter cyclical? Brain drain is not necessarily bad: keep the effort in education

6. FISCAL 4 RULES FOR COUNTERCYCLICAL FISCAL POLICIES: –Regional (EU) –Domestic (Chile) 4 STABILIZATION FUNDS: –Regional (EU) –Domestic (Chile, Colombia, Ecuador) –Clarify: How pro cyclical is fiscal policy?

7. NATURAL DISASTERS 4 CATASTROPHIC INSURANCE AND SELF PROTECTION –REGIONAL –IFI’S 4 EARLY WARNINGS AND PREPAREDNESS

8. UNEMPLOYMENT AND INCOME 4 FORMAL SECTOR: –Hybrid of individual accounts and (limited) unemployment insurance (subsidies when unemployment hits more the poor). –Health insurance 4 INFORMAL SECTOR –Public works (Trabajar) –Conditioned transfers (Progressa)

9. HEALTH 4 HEALTH INSURANCE (subsidies for AIDS and the poor) 4 ASSISTANCE: NORMAL TIMES, EMERGENCIES