"The recovery in Latin America and the Caribbean is advancing faster than anticipated but at different speeds across countries," said the report, launched in the Uruguayan capital by Nicolas Eyzaguirre, director of the IMF's Western Hemisphere Department.

"Overall, we expect a good performance for the LAC economies in 2010.

"But within that regional picture, countries with strong ties to global financial markets are likely to stage a more vigorous recovery, helped by their access to ample external financing and by strong prices for their commodity exports.

"On the other hand, some of the smaller economies will experience more sluggish growth, and some of those will even contract," he warned.

He said policy approaches will have to vary considerably to ensure a sustainable recovery across the region.

Growth in the Caribbean-Latin American region is driven primarily by a strong rebound in private consumption and improved external conditions.

Earlier reports cited strong Chinese demand for commodities and raw materials as one of the reasons for economic regeneration in the region.

Gross domestic product in the Caribbean and Latin America as a whole shrank 1.8 percent in 2009 as effects of the downturn deepened during the year. This year, however, regional GDP is expected to grow by 4 percent, though not evenly across the board.

The regional outlook varies because, within the region, the countries are viewed by economists into four categories.

Top of the list are countries such as Brazil, Chile, Colombia, Mexico and Peru that are exporting commodities and have full access to global financial markets. Commodity exporters that aren't quite as well-connected are unlikely to do so well as the first group.

Caribbean countries that import commodities and rely heavily on foreign tourism for earnings will experience a different kind of recovery or possibly not at all.

Likewise, other commodity-importing countries, including many in Central America that rely on citizens' remittances from abroad, will face other challenges.

For the first group of countries, the key task ahead is how to best manage the upswing in the business cycle amid very favorable external conditions, the report said.

Other commodity-exporting countries will need to watch for fiscal controls, IMF said.

For many commodity-importing countries, the need this year will be to minimize risk.

In tourism-dependent countries suffering the effect of poor conditions in the advanced economies, more needs to be done to ease hardship of the poor and maintain macroeconomic stability.

The report warned the region's governments to beware of boom-and-bust scenarios.

"Episodes of cheap and abundant external financing raise the risk of a boom-bust cycle, since they can lead to surges in domestic demand and credit, as well as asset price bubbles and larger current account deficits," Eyzaguirre's report says.

"The arrival of easy external financial conditions is good news overall for emerging economies."

"But these temporary episodes come with risks that need to be managed. It's important not to let easy conditions trigger too-rapid growth of demand and credit, in new booms that could end badly later."

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