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Whiffs of global economic slowdown reach Latinamerica

Wednesday, February 20th 2008 - 21:00 UTC
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The Latinamerica economic climate dropped to its lowest level since July 2005 because of the United States mortgage and banking situation according to the joint indicator from the University of Munich Economics Research Institute, Ifo and the Getulio Vargas Foundation from Brazil, FGV.

The economic climate indicator, ICE, which the two academic institutes jointly calculate since January 1998, show a drop to 5.2 points in last January, the same level as in July 2005 according to the FGV release on Thursday in Rio do Janeiro. It's the lowest ICE in two and a half years and reflects a fall in confidence in the region's economy compared to the 5.6 points of last October and 5.9 points of July 2007, the highest in three years. The fall back, according to the Latinamerican economic polling was caused mainly by the deterioration of the Expectations Index, (which measures future expectations in the region) and which dropped from 4.7 points in October 2007 to 4.1 points last January. The current situation index (which refers to the current situation of the economy) remained almost stable since it only slipped from 6.4 to 6.1 points in January. According to the FGV release the Latinamerican economy future expectations worsening tendency was already noticeable last October when the mortgage crisis smacked across all of United States and was even admitted by the Bush administration. The situation unleashed by the real estate and home credit market in the US has triggered intense debate about the possible effects on the world economy and "those results suggest two possible effects for Latinamerica: the current situation is relatively immune to the effects of the crisis but future expectations are worsening". "Consequently the hypothesis of a contagion of the crisis can't be discarded, although the current one is expected to have a relatively minor effect compared to the other crisis", adds the document. The ICE for Latinamerica dropped to 3.7 in January 1998 and to 4.5 in January 2002, when the region was under the full impact of other international crisis. The ICE by countries only improved in two of the twelve countries surveyed: Argentina where it increased from 4.3 in October 2007 to 5 in Jan 2008 and in Paraguay from 5 to 6.4 points in the same period. ICE remained practically unchanged for Brazil (6.5 down to 6.4); Costa Rica (stable at 7 points) and Peru (from 7.3 to 7.4). ICE continued to deteriorate in Ecuador (from 4.2 to 3.2 between Oct and Jan); Mexico (5 to 4.5); Venezuela (5.3 to 4.1) and Chile (6.6 to 5.3 points). Although the situation also deteriorated, ICE slipped much less in Uruguay, from 8.4 to 7.7 points and in Colombia from 6.2 to 5.5 points. By countries Uruguay leads with 7.7, followed by Peru, 7.4 and Costa Rica, 7. Brazil on the other hand climbed from position five to four (6.4) while Chile slid to fifth (5.3). The most striking case was Paraguay ranked eleven which shot to seventh position. Ecuador (3.2) and Venezuela (4.1) remained at the end of the ranking.

Categories: Economy, Latin America.

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