MercoPress. South Atlantic News Agency

Latam pumps billions to ensure liquidity and prop currencies

Latin-American countries moved quickly this week to face the global financial crisis and came out with a battery of measures pumping billions of US dollars to try and contain the threat of recession.

The region's largest economies, Brazil, Mexico, Argentina and Colombia, injected huge sums of money to protect their currencies, and further measures have been planned individually or in the framework of the G-20 scheduled to hold an emergency meeting in Washington on Saturday. Brazil, the region's major economy suffered a violent plunge of markets and the currency in spite of the authorities' insistence and guarantees that the country was protected from the US credit problems. On Wednesday the Brazilian Central Bank pumped 7.7 billion US dollars into the local Money market to alleviate credit restrictions and anticipated another 3 billion were ready for any other emergency. The bank also intervened three times to prop the rapidly deteriorating local currency Real against the US dollar. No figures were disclosed about the volume involved but Brazil has international reserves totalling 207 billion US dollars and on Thursday stock markets and the currency initially reacted positively. Mexico, the region's second economy and the most dependent on the US economy had 2.5 billion USD on stand by to support the Peso and announced an emergency plan of 4.3 billion US dollars to promote the economy. Investments are mainly in infrastructure and "they are not a financial bail out, but are rather focused to support the internal engines that prop the Mexican economy", said president Felipe Calderon on national television. Calderón said Mexico was facing a serious drop in exports, investments, remittances and tourism income. Growth forecast for this year is down to 2% from 2.4% and to 1.8% for next year. Meantime in Argentina the Central Bank rescued the peso from a strong depreciation by selling 3.5 billion US dollars in the market. The US dollar is at a "reasonable and controlled" level vis-à-vis the peso said Interior Minister Florencio Randazzo. Central bank international reserves dropped to 47 billion US dollars and Argentine authorities said they were concerned with the 30% depreciation of the Brazilian Real, since Brazil is Argentina's main trading partner. Foreign Affairs minister Jorge Taiana said an emergency meeting of Mercosur had been convened to analyze the global crisis and "coordinate and define positions". In Colombia president Alvaro Uribe announced more flexible rules for foreign capital coming into the country and proposed a fiscal amnesty for those Colombians who were intent in repatriating their monies. "We need to ensure liquidity, finance sources and contribute to a stable and competitive interest rate", underlined Uribe. However since all four countries are concerned about inflation none of the Central Banks joined the Federal reserve and the European central bank in the coordinated cut rate as happened on Wednesday. But again on Thursday Latinamerican markets were dragged at last moment by Wall Street's pessimism which after a balancing act during most trading, plunged in the last half hour 679 points, 7.33% below the 9.000 points threshold to 8.579. Brazil's Bovespa ended trading down 3.92% at 37.080 points in spite of having recovered in mid afternoon 5%. This is the sixth consecutive drop of Bovespa which has accumulated losses of 41% so far this year. The Central bank supported the Real with 911 million US dollars. Argentina's Merval was down 4.99% to 1.287,33 points after having gained 3.2%. In Chile both indexes slid: IPSA 1.61% and IGPA 1.12%. But the country's risk rating remains above 1.300 points of the EMBI index. Finally Mexico stock exchange after an initial positive response dropped 1.78% to 20.310 points, the sixth fall running.