TPT January 2009

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From the AmericaS
85 January 2009 ›
crises make the region’s banks more resistant to failure than
their American and European counterparts. But, according to Mr
Barrionuevo, that ‘relative health’ is inspiring little faith in the stock
markets.
Illustrating his point, Brazil’s Ibovespa plunged 15 per cent on 7
October, closing down 5.4 per cent for the trading day. Argentina’s
Bolsa de Buenos Aires fell 6 per cent. Even Chile, the region’s most
stable economy, had one of its largest one-day drops in years. The
country’s IPSA exchange dropped 6.02 per cent. Its IGPA exchange
fell 4.89 per cent.
Even so, Mr Barrionuevo deems the region to be more resilient as a
result of ‘nightmarish memories’ of previous financial crises: Mexico
barely snatched from the jaws of default in 1994; Brazil watching
its currency, the real, tumble 43 per cent in early 1999 after the
government abandoned a policy of defending it.
“This decade,” Mr Barrionuevo wrote, “Brazil, Mexico, and Chile,
in particular, have saved wisely during a broad-based commodity
boom. They have reformed their financial institutions with stronger
regulations and, in the case of Brazil especially, diversified their
trade to be less reliant on the United States economy and more on
Asia’s.”
Now, this prudence enables Latin American countries, in varying
degrees, to tap reserves and stabilization funds to help ensure that
the higher cost of borrowing does not affect their exporters. The
governments of Brazil and Chile have already pledged themselves
to free up funds for key industries.
• Some Latin American countries (among them Venezuela,
Ecuador, Argentina), having saved less, will have less flexibility.
One of the Times’s respondents – Alfredo Coutiño, a senior
economist with Moody’s, the credit rating agency – said that the
global credit tightening could make it more difficult for Argentina
to renegotiate billions of dollars in outstanding debt and stave off
a fiscal crisis in 2009. But, he noted, because the country has
been shunned by international investors, capital flight is less of
a concern. “Latin America is in a much better macroeconomic
position now,” Mr Coutiño said. “But in the past few weeks [to
early October] the movie has changed, and now Europe is
involved. Two of the three main global locomotives for growth
are suffering. If we face a global recession nobody can escape.”
Automotive
Still harder times lie ahead for US and Canadian
auto makers, parts suppliers
Seeing no recovery in the key US vehicle market until at least 2010,
JD Power and Associates believes that the global market may
experience an ‘outright collapse’ in 2009. Jeff Schuster, executive
director of automotive forecasting for the influential marketing
information services firm, emphasized the broad reach of the crisis.
“While mature markets are being impacted more severely than
emerging markets, no country or region is completely immune to
the turmoil,” Mr Schuster said on 9 October.