March 1, 2001
The US Federal Reserve's determination to deflate general market exuberance has been apparent almost since the first of its six interest rate tightenings in June of 1999. As a result, global capital markets have been more cognizant of risk through asset revaluation, market volatility and what has become an almost classic battle between fear and greed.
That the US economy is slowing is now clear. Whether the landing will be soft or hard, and how protracted the cycle will be seems to depend more upon market psychology and emotion than fundamentals. Globalization means that an economic slowdown in the US will affect the credit cycle and the growth of Latin America this year.
As the US economy ratchets down, the global credit markets will respond accordingly. The big question for Latin America is whether local borrowers can meet their capital needs by shifting to different pools of credit to fuel continued economic growth. Richard Madigan, a portfolio manager at Offitbank, argues that reforms across Latin America have broadened access to internal and external capital.