Most Latin American nations are well-prepared to confront a worsening debt crisis in Europe and slower growth in the U.S. as China’s commodities purchases give the region a “minimum” level of economic support, Moody’s said.
“We don’t anticipate ratings changes in the region,” said Mauro Leos, senior Latin America analyst for Moody’s, in an interview today in Buenos Aires. “Most countries are well-prepared” after suffering through earlier financial and economic shocks in the 1990s and 2000s, he added.
Mexico, Colombia and Central America are likely to be hardest hit by any global slowdown as a result of their close ties to the U.S., Leos said in an interview today in Buenos Aires. Argentina, which hasn’t had access to international debt markets since a 2001 default, and doesn’t have a contingency credit line with the International Monetary Fund, has more limited options to face a global slowdown, Leos said.
Growth forecasts for Latin America will likely be lowered through the end of the year and expansions will be below historic trends of about 4 percent in 2012, Leos said. China’s purchases of soybeans, copper, iron ore and other commodities, while stabilizing for the region’s economies, aren’t enough to outweigh a financial crisis in Europe and a U.S. slowdown, he added.
The IMF said in a report yesterday that it expects Latin America’s growth to slow to 4.5 percent this year and 4 percent in 2012, compared with a 5 percent expansion in the first half of the year. Mexico, Brazil and Venezuela will lag behind the rest of the region, while Panama will post the fastest expansion of 7.2 percent, the report said.
Policy makers in Latin America should be prepared to use interest rate cuts and consider fiscal measures to protect their economies in the event that the global economy stalls, the IMF said.
Should recessions in Europe and the U.S. materialize and spill over to Asia, commodity producers in the region may face a “triple shock” from weaker terms of trade, declining exports and tighter global credit markets, the Washington-based lender said.
Argentina, which hasn’t had access to international debt markets since a 2001 default on $95 billion of bonds, is less prepared than others in the region to confront an extended slowdown, said Gabriel Torres, Moody’s Argentina analyst.
Latin American nations such as Peru and Uruguay have strengthened institutions and follow more predictable policies that foster longer-term growth, Leos said during a presentation at a Moody’s conference in Buenos Aires. He cited investor concern about Peruvian President Ollanta Humala, a former ally of Venezuelan President Hugo Chavez, before he took office in July, as one example.
“The so-called ‘bad’ candidate won in Peru and policies haven’t changed,” Leos said.