IDB chief economist stresses 'stabilization' efforts to address AI cycle

Laura Alfaro, chief economist at the Inter-American Development Bank (IDB), emphasized the necessity of establishing stabilization funds in response to market volatility stemming from the artificial intelligence (AI) boom. At a press conference during the Global Financial Stability Conference 2026 in Seoul, Alfaro echoed South Korea's Future Fund, stating that saving during prosperous times and utilizing those reserves during challenging periods is a prudent approach.

Reflecting on Latin America's experience with resource fluctuations, Alfaro pointed out the recurring issue of countries rich in minerals and oil experiencing price volatility. She acknowledged the forthcoming volatility in the AI market, urging countries like South Korea to prepare for such price swings. In this context, Alfaro suggested that South Korea's Future Fund could aid the nation in managing fluctuations within the global AI cycle.

The Future Fund, which will draw from sources including windfall tax revenue from chipmakers amidst the semiconductor supercycle, comprises a general account for managing financial resources and four program accounts addressing youth, growth engines, regional development, and education and talent development. Alfaro also noted that paying off debt through the fund could be another form of stabilization.

Additionally, Alfaro highlighted Latin America's abundant green energy and mineral resources, such as copper, as potential catalysts for two-way flows between the region and South Korea in the AI industry. She emphasized that AI is a highly energy-intensive field, potentially the most energy-intensive wave of knowledge witnessed to date.

Recognizing the advantages of Latin America's green electricity grid, Alfaro suggested that partnering with South Korea could yield mutual benefits, given the region's advantageous position.