Latin America is in a good financial situation, but the problems currently being suffered by the US and Europe poses a threat, according to the region’s banks federation, FELEBAN.
”If the US problems and the Euro crisis become worse and the key emerging economies like China and India decelerate, the situation could get complicated for Latin America”, said Giorgio Trettenero, Feleban secretary general addressing the FIBA Risk Management Conference for the Americas in Miami.
The gathering of bankers, regulators and experts was organised for the first time by the Florida International Bankers Association (FIBA).
”Latin American banking shows a robust performance and managed to adequately confront the world crisis of 2008 and 2009”, Trettenero said.
In general, in the region there is low inflation, ample accumulation of global reserves, the banking industry is solid, the fiscal position of the governments is better than ten years ago and there are no difficulties financing sovereign debt in the international money markets, added Trettenero.
”In Latin America, the question of credit risk was managed with good levels of indebtedness and (in the mortgage area) very conservative policies were maintained. We were very prudent and the regulators (were) very demanding”, confessed the top banker.
However he admitted risk factors. Top of the list is Europe where the mix of over indebted countries with low growth, falling tax revenue and inflexible budget spending has led to a confidence crisis with a huge uncertainty component.
When those difficulties begin to impact consumers “it's obvious that what comes after that is a serious contraction of the domestic market”, which in turn has a double effect, less demand for Latin American goods and most probably an aggressive exports’ policy from the EU countries with these problems.
As to the US Trettenero said that “there is still no credible plan” to resolve the country's fiscal problems, given the split in the political system, and warned that Mexico is highly vulnerable because of its dependency on the US economy.
However, Trettenero also praised Mexican counter cyclical policies geared to increase spending, promote domestic demand and thus keep a reasonable growth outlook.