TPT January 2009

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From the AmericaS
January 2009 84 ›
In Latin America, Brazil’s booming growth is expected to cool a bit to
5.2 per cent in 2008, from 5.4 per cent in 2007. Mexico’s economic
growth will likely slow to 2.1 per cent, from 3.2 per cent the previous
year.
The neighbours
What does the ‘economic Pearl Harbor’ in the
US mean for Canada?
Columnist David Olive, who writes about business and political
issues in the Toronto Star, posed that rhetorical question and
commenced to answer it. Despite Canada’s close proximity to
the epicentre of America’s worst financial crisis since the Great
Depression of 1928-1932, Mr Olive declared, Canadians are “in
surprisingly good shape, all things considered.” (‘Why Canada may
dodge US crisis,’ 4 October).
Clearly of the same mind, Canadian prime minister Stephen Harper
had said the day before: “The economic and financial mess in the
United States is disastrous. The policies have been irresponsible.
We’ve made different choices in Canada. We are not bailing out
companies in Canada.”
Companies were being bailed out in the US, and without any
guarantee that the $700 billion rescue mission mounted by
Congress would arrest the credit crisis and the threat it holds of
triggering a global recession. In the view of Warren Buffett, the
legendary American stock-picker and designated wise man, the
state of affairs south of the Canada-US border constitutes “an
economic Pearl Harbor.”
The rosier prospects in Canada rest primarily on that country’s
stronger job market and healthier banks, which cushion the effects
of a stock market susceptible to oil-industry gyrations. Despite
tumbling commodity prices and the recent plunge of Toronto’s
benchmark Standard&Poors/TSX index to its lowest level in more
than two years, the Star’s Mr Olive was able to claim that the wider
Canadian economy was doing well.
He wrote: “The well-publicized loss of manufacturing jobs,
concentrated in Central Canada, amounts to 353,000 jobs since
2002. But in that same six-year period, Canada generated a net
increase of 1.5 million new jobs, and not only in relatively low-
paying . . .sectors but professional, scientific, and technical services
as well. Average hourly wages were $20.41 in 2007, up from $17.66
in 2002. And unemployment figures for Canada and the United
States are going in opposite directions. The Canadian jobless rate
for September was 6.1 per cent, down from 7.5 per cent in 2002.
The US unemployment rate also is 6.1 percent, but that’s up from
the 4 per cent to 5 per cent range earlier in the decade.”
And Canada’s good news goes on:
› While Canadian housing prices have retreated in various areas,
the declines are far from the 30 to 70 per cent drops experienced
in the hardest-hit US markets (California, Florida, the Midwest),
where foreclosures resulting from defaults on subprime loans are
concentrated and have created a glut of unsold houses.
› The Canadian banking sector is sound, having for the most part
resisted the packages of US subprime loans on offer at the top
of the US housing market. Canada has stricter rules on capital ratios
that banks must maintain and a higher level of regulatory scrutiny of
banking than the United States.
› Household debt is high in both countries, but a stronger job
market in Canada makes that less of a worry there than in
the US.
As if all this were not enough, Canada is the sole member of the
Group of Eight industrialized nations to have registered successive
federal budget surpluses over the past decade. As such, it is much
better positioned than the other G-8’s to provide fiscal stimulus if its
economy should falter.
Short of a global recession, ‘relatively healthy’
Latin America can expect to withstand the
fiscal unrest to its north
Reporting from Rio de Janeiro in the New York Times, Alexei
Barrionuevo supplied an early appraisal of Latin America vis-à-vis
the fiscal turmoil spreading from the US to Europe, awakening fears
of global recession and sharp curbs on development in many of the
world’s fastest-growing economies (‘Emerging markets find they
aren’t insulated from the tumult,’ 7 October).
Many economists expect that the regulatory reforms undertaken to
shore up the Latin American banking sector in the wake of previous