1. LATIN AMERICA Inflationary Pressures Rising/Currencies Appreciating: To Tighten or not to Tighten? Carnegie International Economics Program February 16, 2011

2. 2 Policy Stimulus Resulted in Record Recovery from Global Recession Latin America f = IIF forecast Percent change over a year ago

3. 3 Fiscal and Quasi-fiscal Stimulus were Driving Forces Latin America f = IIF forecast Percent of GDP

4. 4 Latin America Monetary Policy: Tightening Cycle Beginning in Some Countries, but Rates Remain Accommodative percent *US$ / local currency Brazil Mexico Colombia Chile

5. 5 Food Prices Adding to Inflationary Pressure Trade weighted average price Latin America Source: UN Food and Agriculture World Food Price Index

6. 6 Inflation Above Mid-Point of Target Band in Most Countries Percent change over a year ago Latin America Actual Inflation Target Band Mid-Point

7. 7 High and Rising Inflation in Argentina and Venezuela Latin America f = IIF forecast Percent change over a year ago

8. 8 Higher Commodity Prices Continue Strengthening Terms of Trade Percent change over a year ago Reuters commodity price index Commodity Prices (RHS) f = IIF forecast Latin America Terms of Trade (LHS)

9. 9 Capital Inflows Close to Record Levels Latin America $ billion f = IIF forecast

10. 10 Latin America Risk-adjusted Returns on Sovereign Bonds Have Risen… (EMBIG Latin, 30-day volatility)

11. 11 …and Bond Issuance has Increased Latin America $ billion f = IIF forecast

12. 12 Equity Investment is Leading Private Capital Inflows Latin America $ billion f = IIF forecast

13. 13 Latin America Currencies Have Appreciated Back Toward Pre-Crisis Levels (January 2007 = 100) *US$ / local currency

14. 14 Real Effective Exchange Rates Have Appreciated Even More Latin America Index 2000=100 f = IIF forecast

15. 15 Brazil: As Inflation has Increased REER has Appreciated Jan 2006=100 percent change oya Latin America Inflation REER

16. LATIN AMERICA Inflationary Pressures Rising/Currencies Appreciating: To Tighten or not to Tighten? Carnegie International Economics Program February 16, 2011