Bright spots in Latin American economic debris

Geoffrey Dennis, a Latin America equity strategist for Citigroup, said the region’s economies are in relatively healthy condition compared to the big Western countries.

“We believe that because the regional fundamentals are good, because these economies are growing, Latin America is not going into recession,” Dennis said.

“We will have negative growth in the U.S., in Europe and in Japan, but we don’t have that in Latin America.”

Such reassurances come in the face of extraordinary market volatility.

Stock markets across Latin America have fallen sharply, while currencies are under attack, and commodity values are tumbling.

The governments of Brazil and Mexico in particular took aggressive measures this week to try to stop the long slide of their currencies against the dollar.

But Jane Eddy, managing director at Standard and Poors in charge of corporate and government ratings in Latin America, said the picture is not all gloom and doom.

“There is no doubt that there is a deceleration in the growth in Latin America,” Eddy said, “but we dont see the threat of a recession as we do for the developed world.”

Standard and Poors has downgraded Costa Rica from positive to stable, Jamaica from stable to negative, and the five biggest Mexican banks from positive to stable.

Some specific companies are taking hard hits, like Mexican cement giant Cemex, which is affected by the drop in construction in the United States and in Europe.

Eddy also warned that while recession may be avoided, potential growth will be cut right into next year, “which is never good for emerging economies.”

However, “if you look at Brazil, Mexico, Chile, Peru, Colombia — these countries have larger official reserves available, less external debt and generally in the last couple of years a better fiscal operation,” Eddy said.

“They are, by and large, in a better position. Peru, Brazil and Mexico are now rated investment grade.”

Arturo Porzecanski, a professor of international finance at American University in Washington, said: Latin America is “better prepared than ever before.”

But the worry is that this may still not be enough to survive what Porzecanski — echoing former U.S. Federal Reserve chairman Alan Greenspan — sees as the “storm of the century.”

“In these conditions you cannot work or plan, or do anything unless the panic stops.... We’ve already had a month of panic.”

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