The International Monetary Fund warned Latin America on Saturday that economies across the region are overheating, and Canada urged policymakers not to underestimate the risks from rising inflation.
The calls for caution contrasted with an upbeat mood among many Latin American policymakers gathered in Canada for an annual meeting of the Inter-American Development Bank.
Countries such as Brazil and Chile are enjoying sustained strong economic growth, propelled by healthy demand for commodity exports and double-digit expansion of bank lending to their consumers.
The head of the IMF warned, however, that many Latin American economies are growing too quickly, putting pressure on a region where some countries suffered hyperinflation a few decades ago.
In many of them there are worrisome signs of overheating, IMF Managing Director Dominique Strauss-Kahn said in a blog, adding a credit boom created the risk of asset price bubbles.
Latin America's economy will likely grow 4.5 percent this year after expanding 6.1 percent in 2010, the Institute of International Finance said.
In Brazil, house prices in some cities have nearly doubled in just two years and the country's currency has strengthened nearly 10 percent since March 2010.
Bank of Canada Governor Mark Carney said the commodity boom may last longer than many expect, fueled by surging demand from emerging economies such as China and India.
It's a mistake to chalk this all up to cyclical factors, Carney said, referring to the argument that prices for raw materials such as copper and grains have risen only because of an upswing in the global business cycle.
We're in an environment that is probably going to be with us for several decades, he said during a panel discussion.
Treasury Secretary Timothy Geithner flew into Canada's snowy west for the meeting, but made no public remarks.
While the world recovers from recession, nations have clashed over foreign exchange policy as many countries adjust to ultra-low U.S. interest rates and China's reluctance to let its yuan currency appreciate freely. Investors seeking higher yields have snatched up Latin American stocks and bonds.
Several countries in Latin America have seen an uptick in inflation caused by high prices for food and other commodities. Brazil's inflation rate topped 6 percent in February for the first time since November 2008.
Policymakers have said the rise will be temporary and worry boosting rates could exacerbate the problem of too much money pouring into their economies, which hurts exports by boosting the value of their currencies.
Monetary policy is not enough, said Uruguayan central bank chief Mario Bergara, who was on the same panel as Carney.
The Canadian, however, appeared unsettled by the view. Can I jump in on this? I'm a little nervous where we are headed, Carney said. Monetary policy has to deal with inflationary pressures, first and foremost, he said.
He warned that misguided policies in emerging markets for dealing with high inflation and a flood of capital could lead to financial instability and weak global economic growth.
That's where one can make pretty big mistakes and delay too much, both on the monetary side, or on the pretty fundamental structural reforms, he said.
Argentina is growing very strongly, well above the global average, the country's economy minister, Amado Boudou, said.
After Argentina's economy surged 9.2 percent in 2010, the government says inflation is running at 10 percent. Boudou declined to comment on private-sector estimates showing inflation closer to 25 percent.
Canada raised interest rates three times between June and September of 2010. Brazil has pushed rates higher by three percentage points since 2009 but economists polled by the central bank this week nevertheless increased forecasts for year-end inflation. Brazil also plans to cut government spending to fight inflation.
Despite inflation concerns, countries are upbeat about their growth prospects after being a key support for the global recovery from recession.
There is a sense that this region as a whole is doing pretty well, Chilean Finance Minister Felipe Larrain told Reuters. Latin America has emerged strengthened.
(Additional reporting by Jeffrey Jones; editing by Peter Galloway and Philip Barbara)