Financial crisis: Latin America hit hard

Few governments will be praying for a quick resolution to the financial crisis as devoutly as those in Latin America.

By Andrew Downie in Sao Paulo
Last Updated: 7:27PM BST 12 Oct 2008

Countries across the continent have been hit hard with Argentina, Bolivia, Brazil, Colombia, Mexico and Peru all seeing billions wiped off share values and their currencies plummeting.

The crisis was a rude awakening for a region that was enjoying a decade of rapid and sustained growth. Brazil is the world's tenth biggest economy and President Luiz Inacio Lula da Silva had given its neighbours a lesson in fiscal responsibility.

In August, Brazil had a record $218 billion in foreign reserves, annual inflation of six per cent and a currency hitting a nine-year high against the dollar.

But the value of Brazil's stock exchange has now fallen by half and the currency has lost 53 per cent of its value against the dollar. Becuase Brazil and its neighbours rely on foreign trade, especially exporting commodities, lower world growth will damage them. But compared to the developed world, their predicted slowdown is relatively benign.

Economists forecast that regional growth in Latin American will be 1.5 - 2 per cent next year, compared to the predicted recession in North America and Europe.

"Without the support of strong growth and robust commodity prices, Latin America's fiscal stance is likely to worsen," said Gray Newman, head of LatAm research at Morgan Stanley.

But he added: "Latin American appears to be in better shape than in the past to deal with a downturn in the global economy."

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crisis-Latin-America-hit-hard.html