Fitch: Chile, Peru best prepared for downturn of global economy; Argentina and Venezuela most vulnerable
Chile and Peru are best positioned in Latin America to withstand a downturn in the global economy and a drop in commodity prices, while Argentina and Venezuela are the most vulnerable to any turmoil, according to a senior official from Fitch Ratings.
Both Chile and Peru have large rainy-day funds and their government debt is a relatively small fraction of their economic output at about 20% or less, indicated Shelly Shetty head of the sovereign ratings for Latin America.
The two countries have the fiscal flexibility to cope with a potential drop in capital in-flows, sharply lower prices for metals -their main exports- and volatile swings in exchange rates, Shetty said.
Colombia, Brazil and Mexico can also counter any shock waves from abroad, but to a lesser extent, she said.
Among the other large Latin American countries, Argentina and Venezuela would be the hardest hit by slowing global growth and a fall-off in commodity prices: oil in the case of Venezuela and soy prices for Argentina.
A slowdown in China will hurt the region's economies, especially those with large, commodity-based export sectors. A rule of thumb says a 1% decline in China's growth rate will cut growth by about 1.2% in the commodity exporters, she said.
The regional economies most exposed to China, the world's largest growth driver this past decade, are Brazil, Chile, Costa Rica, Peru and Venezuela, according to Fitch.
As for the impact of Europe's crisis on the region, trade exposure to Europe is concentrated more in the southern cone region of South America: Brazil, Argentina, Chile and Peru and less in Mexico and Central America, added Shetty.
“Our view is still that Latin America as a region is well placed to withstand external shocks that might emerge from the intensification of the Euro zone crisis,” said Shetty.
“Having said that, it's also true that Latin America would certainty not be immune to what goes on in the euro zone.”
Brazil is less exposed than Chile, whose economy is more open, she said. But Chile, which has the highest investment grade rating in Latin America, has a history of being fiscally prudent when necessary, she said.
“Trade exposure to Europe really varies across the region and that's an important point to make,” she said.
Government debt in Chile is about 10% of GDP, while in Peru it is about one-fifth of GDP, exceptionally low when compared to leading Western economies, which have ratios at least several times higher.
Peru's fiscal stabilization fund is more than 5 billion dollars, or about 3.5% of GDP.
The market value of Chile's Economic and Social Stability Fund (FEES) stood at 13.156 billion at the end of 2011, according to Chile's budget office. That is equivalent to just below 6% f GDP.
Since the financial crisis in 2008, most of Latin America is in a better position to withstand external shocks, Shetty said.
Foreign reserves, for example, have grown to about 750 billion dollars from 500 billion several years ago, giving countries greater ability to withstand exchange rate swings, she said. The debt burden in Argentina, Peru and Brazil has also declined in recent years.
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In fact, their collapse could cause a domino effect that would effect most if not all of South America.
Averting this potential disaster should be the top, if not the only subject discussed at the OAS, not bleating on about inconsequential and erroneous claims to territory that they haven't got a snowballs chance in hell of ever acquiring.
In fact the grown up members of the OAS should tell these children to grow up and start facing their problems, instead of burying their heads in the sand and hoping all the badness they created with their economic policies, just goes away.
However, countries like Argentina and Venezula are on a one way trip to oblivion, but they are incapable of taking responsibility for their own actions and mistakes, hence why they never seem to learn from them.
Why? Why would Fitch say this? Because it is true.
I don’t need fitch to say it, I can see it. You are blinded by political labels. Piñera occupies the same ground that Bachelet occupied. Humala is not interested in where Piñera is. He is interested in where Peru is going and the signing of the Pacific Alliance this week shows where that it. The further Peru can get itself from the influence of Chavez the better. Anyone who would suggest the contrary is at best uninformed.
Since the end of the Pinochet era, poverty in Chile has fallen from almost 50% to about 15%, whilst sustaining an average annual growth rate of over 5%. That is good. That is what everybody wants. I don’t care about your political colour if you can do that. Peru is years behind Chile but they know the way forward is to emulate Chile’s success. Do you not wish that for the people of Peru?
Taken from the Economist 2.6.12: 'From this week any Argentinian wanting to take a foreign holiday must not only provide his tax identification number but also tell the tax agency (AFIP) where and why he is going. Officials say this violation of privacy is needed to fight tax evasion and money laundering. In reality, the reason is that the government of CFK is starting to run out of dollars. Since the inflation rate is over 25% the government is terrified of letting the Peso depreciate and is resorting to a seige economy.'
Dollars were being withdrawn from Argentine banks at a rate of $100 million per day as savers grasp greenbacks. The curbs on access to the dollar have made Argentinians nervous about the policy of the Peso. The move was one of many government policies, including import curbs that have hurt confidence in the Argentine economy.
She says ,
I have the worlds best experts advising me , [BK][TOBY][TOBERS][TTT][MALVINO]SEARNOX]
[guz][ Marcos Alejandro ][ f0rgetit87 ][malen][geo][
And a whole host of others that would lay down there lives for me,
It’s a conspiracy against me .
just a idea .
Pay attention.
“[TOBY][TOBERS][TTT]” are not Kirchnerites.
they seem to play a lot .
You have forgotten one: 'I don't Think' aka The Turnip in Chief, no less.
:o)
Jun 05th, 2012 - 06:46 pm
Those you named are small time losers who get paid ARG$50 a day and a chorripan.
The big advisers are: Axel Kicilloff, Moreno, De Vido, Reposo, Timerman, Del Pont, etc. These are the dangerous ones, along with the rest of the La Campora, La Evita, La Kolina crowd.
When this troupe of performing monkeys (with appologies to the monkey race) fades away things might just get to be palatable in Argentina, but while the peronist plague exists we will never get anywhere.
You may well be correct,
But if these deluded halfwits, carry on the way they are,
South America will tear its self apart, all in the name of greed ect ect .
And again only the decent ones will suffer,
And as usual, the CFK disciples on here, just lap it up,
They wish to see there country go backwards,
.
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