Cover -- Contents -- Preface -- Executive Summary -- I. The Global Economy and the Outlook for the United States and Canada -- Global Outlook -- Outlook for the United States and Canada -- II. The Outlook for Latin America and the Caribbean -- Overall Developments and Prospects -- Financial Sector Developments -- External Developments -- Monetary and Exchange Rate Policies -- Fiscal Policy -- Social Policies -- III. How Resilient Is Latin America's Expansion? -- Channels of Transmission -- Scenario Analysis -- Conclusions -- IV. Revenue Growth and the Strength of Underlying Fiscal Positions -- Structural Commodity Revenues -- Structural Noncommodity Revenues -- Expenditures -- Structural Primary Balances -- Conclusions -- Appendix -- V. Financial Sector Development in Latin America: Recovery or Overheating? -- Financial Deepening or Bubbles -- Credit Boom or Recovery -- Regulatory Responses and Options -- Conclusions -- Appendix -- VI. Caribbean Economic Outlook and Integration Issues -- Recent Developments and Economic Outlook -- Regional Integration Issues -- Financial Integration -- Tax Incentives and Investment -- Trade Preference Erosion -- Conclusions -- References -- Table -- Financial Sector Overview, 2006 -- Boxes -- 1. Recent Financial Market Turmoil: What Happened, and Why? -- 2. Latin America's Cyclical Position -- 3. Trends in Latin America's Balance of Payments -- 4. Real Exchange Rate and Competitiveness -- 5. Optimal Prudential Reserve Levels -- 6. Effectiveness of Central Bank Intervention-Evidence from Colombia 23 -- 7. Escaping Poverty in Latin America -- 8. Are Remittances to Latin America Influenced by the U.S. Business Cycle? -- 9. Will the U.S. Subprime Crisis Affect Bank Lending in Latin America? -- 10. Derivatives Markets in Latin America.