Regional Growth: Buckling Under

Mar 5, 2009

LatAm is better prepared for global crisis, and appears relatively comfortable versus Eastern Europe. But it is being hammered more than initially expected.

by Taina Rosa

It is common knowledge that LatAm entered this crisis better prepared than ever. But that does not mean it is not getting whipped. Most governments in the region are racing to implement countercyclical measures aimed at ensuring a soft landing, but the outlook remains bearish.

“To some degree countercyclical policies might help cushion the blow from the global recession,” says Shelly Shetty, senior director at Fitch. However, she adds that on the monetary policy side, the aggressiveness of central banks depends on the pass through impact that currency weakness has on inflation. On the fiscal side, many LatAm countries are not in a good position to implement countercyclical measures, adds Shetty.

Commodities, the bread and butter of LatAm growth, have seen a dramatic decline, undermining GDP. Prices are expected to remain in the doldrums for the near future: bad news for LatAm. 

Goldman Sachs says that average...

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