Nations given alert to fallout from U.S. economy

In the post-subprime crisis world, it's the U.S. economy that concerns financial leaders in Latin America and the Caribbean.

Posted on Mon, Apr. 07, 2008
BY JANE BUSSEY
jbussey@MiamiHerald.com



Top financial leaders warned bankers from around the Americas who have gathered for the Inter-American Development Bank's annual meeting to brace for the chilling effects of the U.S. financial crisis on regional economies.

''There is wide concern about how cold the winds will be when they start flowing across the continent,'' Charles H. Dallara, managing director of the Washington-based Institute of International Finance, said at a Sunday press conference.

The IDB has been meeting at the Miami Beach Convention Center since Friday, but the main plenary session begins Monday with an address by U.S. Treasury Secretary Henry Paulson. The meeting draws thousands of top financial officials from the region to discuss not only the business of the development bank, but also the economic affairs of the region.

Latin American finance officials and bankers found themselves in the unprecedented position of describing how they hope to insulate themselves from the credit problems triggered by the bursting of the U.S. housing bubble and the subprime loan crisis. Generally it's the other way around, with world financial institutions trying to bail out troubled regional economies.

In recent years Latin American and Caribbean economies have shown strong growth, but anxiety over the problematic U.S. financial sector and how long the economic slowdown will last has driven much of the discussion among those attending the development bank sessions and associated events.

''We are living in a world that has been turned upside down,'' said Phil Suttle, director of global analysis at the Institute of International Finance. ``The United States is going to perform poorly for quite awhile. Get used to it; we've already seen we can survive.''

For Latin America and the Caribbean, this means rising inflation spilling over from the rest of the world and lower demand for their products in the United States.

Institute First Vice Chairman William R. Rhodes warned that the world is facing prospects of sharp jumps in food and energy prices.

Also Sunday, U.S. Commerce Secretary Carlos Gutierrez reiterated the Bush administration's push for passage of a free trade agreement with Colombia despite objections by a Democrat-controlled Congress concerned about violence against trade unionists in the South American country.

''To deny Colombia a free trade agreement would not just be a step backward,'' Gutierrez said, ``it would be one of the biggest foreign policy mistakes.''

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