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[LIMA] Commodity-dependent Latin American countries must adapt to a "new normal" of slow growth and should not try to spend their way back to the rapid economic expansions of years past, Chile's finance minister said on Sunday.
Governments should instead reallocate resources to different sectors and carry out structural reforms to strengthen productivity and human capital, said Rodrigo Valdes.
Slumping commodity prices have dragged down investments in Latin American countries where metals and oil exports once drove surging growth rates during a decade-long boom. "We need to adjust to a new normal," Mr Valdes said during a panel discussion at International Monetary Fund meetings in Peru's capital Lima.
"This is going to be a low-growth period, and we should not offer what we cannot deliver." "You cannot do countercyclical things for a permanent shock," said Mr Valdes, who became finance minister in May. "We have to be nimble enough to accept that this shock has a large permanent component."
Chilean President Michelle Bachelet recently proposed a 4.4 per cent budget increase for next year, a slowdown in spending as a fall in the price of its key copper export has eaten into government finances.
The IMF expects the Latin American region's economy to shrink 0.3 per cent this year, partly because of slumping commodity prices.