Fiscal policy and the commodities boom: the impact of higher prices for non-renewables in Latin America and the Caribbean

Abstract

For countries specializing in non-renewables, the usual challenges for fiscal policy are compounded by the intrinsic characteristics of these commodities. The countries in which non-renewables account for over 20% of exports include the Bolivarian Republic of Venezuela, Bolivia, Chile, Colombia, Ecuador, Mexico and Trinidad and Tobago. This article reviews the relationship between the improvement in these countries’ terms of trade and the fiscal policy challenges they are having to cope with. To this end, it analyses the importance of the role played by the exploitation of these commodities, reviewing changes in their prices and their impact on the terms of trade. It also considers the performance of these countries in relation to the main characteristics of fiscal policy in the region and analyses developments in the public accounts following recent price rises, with emphasis on their impact and the policy decisions taken. Juan Pablo Jimenez Economic Affairs Officer, Economic Development Division, ECLAC ✒ juanpablo.jimenez@cepal.org

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