MercoPress. South Atlantic News Agency

Latinamerica faces 14 elections in next 18 months

Risk assessment agencies anticipate that political rattling in the coming eighteen months when elections will be held in fourteen Latinamerican countries could delay the implementation of structural reforms in some of them.

Fitch Ratings estimates that in those countries with greater macroeconomic reform advances and economic opening such as Chile and Costa Rica, there should be no difficulties in continuing with the current process.

However the same can't be said about Venezuela, Colombia, Ecuador and Bolivia since they lack strong effective democratic institutions. Venezuela has seen its institutions "eroded", and Ecuador and Bolivia never really achieved effectiveness.

Fitch Ratings sees no problems with Chile, given the political consensus and support for "macro" reforms. However there's concern about possible "populist" initiatives in the region and Chile, regarding national income distribution, a growing controversial issue.

But Argentina is a different case and those responsible for the specific report are not too benevolent: "a coherent plan is needed to enable Argentina to address the holdout bond holders and a medium term agreement with the IMF. Besides structural issues such as public utilities rates and monetary policy adjustments are needed. None of this, figures as a main issue in the coming October legislative elections".

Fitch Ratings keeps Argentina with a risk assessment of DDD, because 23,85% of bonds are still out of the debt swap.

"The Argentine government still has no access to international money markets. Given this, it's crucial to reach an agreement with the IMF leaving aside any fears of a new default", reads the report pointing out that the current surge in the local bonds market is short lived and "investors who are betting in Argentine bonds are thinking of leaving in less than twelve months". Argentina is ranked next to Brazil, Mexico and Panama with "medium political risk".

Merrill Lynch on the other hand is more optimistic saying that most of the Argentine government actions so far have been adopted with "elections in mind", and many local analysts believe that a strong victory by President Kirchner will be followed by increases in public utilities rates, reductions of budget expenditure and a better relation with the IMF, and even when "this is desirable, but there's no certainty".

In regional terms, "global liquidity and solid political frameworks will enable Latinamerica face elections in the majority of countries, without major risks".

The "Statu quo, prudence without reforms" report from the Deutsche Bank is more sober pointing out that during his first mandate President Kirchner managed a strong economic growth in spite of not solving the legal disorders from the 2002 crisis.

Now the main question is "will he take advantage of popular support to address these central issues or will the Kirchner administration continue with the current policy of appealing to fiscal resources to substitute the lack of private investment in infrastructure and in other main sectors of the economy".

Finally all risk assessment agencies agree that the strong price for commodities and abundant global liquidity have had a positive impact on Latinamerican exports and a consistent recovery for domestic markets.

Fitch Ratings forecasts that world growth in 2006 will decelerate a percentage point if crude prices remain above 70 US dollars per barrel for a long period. However the world economy, so far, has managed to absorb the energy costs impact, but forecasts a greater volatility in the money exchange and other assets markets.