TPT January 2009

From the AmericaS

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.

85

www.read-tpt.com

J anuary 2009

›