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Latin America Copes with Volatility, the Dark Side of GlobalizationLatin American and Caribbean (LAC)
 region were bumping against capacity constraints with
 unemployment reaching historically low levels and economic
 activity hitting bottlenecks and central banks were thus
 engaged in combating upward price pressures through tighter
 monetary policies. The focus of attention was, as a result,
 shifting towards the longer-term growth and equity agendas
 in what appeared to be a more tranquil global environment.
 This LAC region continues on a relatively robust growth path
 after a remarkable performance in the aftermath of the
 global financial crisis. In effect, as discussed in our
 April 2011 report "LAC success put to the test,"
 the region's recession in 2009 was relatively short
 lived and surprisingly mild compared to other middle-income
 countries (MICs) and to its own past and its recovery in
 2010-2011 strong. This report starts by setting the stage on
 the external environment. It provides an overview of recent
 economic developments and the prospects for the LAC region
 in coming months, including an analysis of the sources of
 external risks for the region.
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Sovereign Wealth Funds and Long-Term Development Finance : Risks and OpportunitiesSovereign wealth funds represent a large
 and growing pool of savings. An increasing number of these
 funds are owned by natural resource exporting countries and
 have a variety of objectives, including intergenerational
 equity and macroeconomic stabilization. Traditionally, these
 funds have invested in external assets, especially
 securities traded in major markets. But the persistent
 infrastructure financing gap in developing countries has
 motivated some governments to encourage their sovereign
 wealth funds to invest domestically. This paper proposes
 some basic elements of a conceptual framework to create a
 system of checks and balances to help ensure that the
 sovereign wealth funds do not undermine macroeconomic
 management or become a vehicle for politically driven
 "investments." First, the risks and opportunities
 of domestic investment by sovereign wealth funds are
 analyzed. Central issues are the relationship of sovereign
 wealth fund financing to the budget process and to the
 procurement systems of sector ministries, as well as the
 establishment of appropriate benchmarks and safeguards to
 ensure the integrity of investment decisions. The paper
 argues that a well-governed sovereign wealth fund, with a
 sound mandate and professional management and staffing, can
 possibly improve the quality of the public investment
 program. But its mandate should not duplicate that of other
 government institutions with investment mandates, such as
 the budget, the national development bank, the investment
 authority, and state-owned enterprises. Establishing rules
 on the type of investment (for example, commercial and/or
 quasi-commercial) and its modalities (for example, no
 controlling stakes, leveraging private investment) is one
 way to ensure separation between the activities of the
 sovereign wealth fund and those of other institutions. The
 critical issue remains that of limiting the sovereign wealth
 fund's investment scope to that appropriate for a
 wealth fund. If investments that generate quasi-market
 returns are permitted, the size of the home bias should be
 clearly stipulated and these investments should be reported separately.
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Bangladesh Development Update, April 2014Bangladesh moved closer to achieving the
 sixth five year plan target of reducing extreme poverty to
 22.5 percent by 2015 as it sustained healthy gross domestic
 product (GDP) growth and moderate single digit inflation in
 FY2014. However, growth this year slowed relative to last
 year with declining remittances and losses due to political
 turmoil. Sound macroeconomic management kept inflation in
 check, although it increased somewhat due to the one-off
 effects of supply disruptions and wage increases. Official
 foreign exchange reserves increased to an adequate level as
 Bangladesh Bank intervened to keep the exchange rate stable.
 Weak demand for credit reduced interest rates. Monetary
 policy remained prudent while fiscal management challenged
 by shortfall in tax revenue, demand for support from sectors
 adversely affected by the political turmoil, and
 under-utilization of development budget. The fund's
 extended credit facility (ECF) is on track. Immediate
 challenges are to boost investments in power and roads;
 manage the transition in readymade garments; and stem the
 decline in remittances.