Latin America can ride out US recession
Sunday, 27 January 2008

Agence France-Presse. Sao Paulo

Latin America is in a better position than in the past to weather the global impact of a US recession, analysts say, though they warned that some sectors would fare worse than others. After muscular intervention from the US Federal Reserve to slash its rates to dampen a worldwide stock market plunge, and a proposal from US president George W Bush to implement a 145 billion dollars stimulus package, analysts said they were optimistic the region would cope with a global economic slowdown.

Latin America overall had growth of over five per cent last year, in large part thanks to the production of commodities such as oil, soybeans and wheat whose prices jumped to record levels. The region's economies 'are better prepared, including for a fall in commodity prices, that have been above the historic average for the past 10 years,' said Brazilian economist Jason Vieira, of the consulting firm Uptrend.

Jose Cesar Castahnar, of the Getulio Vargas Foundation, noted that Brazil's economy was growing vigorously when the US crisis first broke, and predicted that investment would not fall. Carmen Aldivar, an analyst with Bursametrica, said Mexico's economy had 'big shock-absorbers' in the form of a budget surplus and low levels of debt.

'It's likely that the sectors most linked to consumer activity in the United States, such as automobiles, could be more exposed to the recession,' the director general of Moody's in Mexico, Alberto Johns, told AFP. But, in contrast with previous years, now there is stron internal growth 'mainly from the service sector and above all, construction activity,' he said.

Nevertheless, Jose Antonio Cerro at the Iberoamericana University said the fear of a US recession 'will affect Mexico more than other Latin American countries' because 40 per cent of its gross domestic product depends on exports to the US. Camila Perez, an analyst with Colombia's stock market, said emerging economies 'are in their own cycle of good economic growth, of confidence, of investment that should give them a degree of protection even if the international situation worsens.'

Countries that had large resources still heavily sought on the international market, such as Chile's copper, Venezuela's oil or Argentina's soybeans, were in advantageous positions. 'Argentina is less vulnerable to a crisis and one of its defenses is the price of crops, such as soya,' said Daniel Marx, a former finance secretary. 'What's more, Argentina is protected thanks to a double surplus (budget and trade), but as long as commodity prices stay high, there won't be any major problems,' predicted Miguel Kiguel, of Consultora Ecoviews.

Comments Add New
Write comment
  We don't publish your mail. See privacy policy.
Please input the anti-spam code that you can read in the image.