The UN Economic Commission for Latin America and the Caribbean, ECLAC, expressed public concern about the ongoing discussions between the White House and Congress regarding the governments’ borrowing limit and the August 2 deadline to reach an agreement.
“The importance of the US economy for the world is beyond discussion, and its significance for the region, Latin America and the Caribbean, is of particular concern given its influence and the 700 billion dollars in assets held in the region”, said Eclac sources.
United States is the region's main economic partner, and is even more important for Mexico, Central America and the Caribbean. A very high percentage of investment and financial flows come from the US and additionally most remittances that alleviate the situation of many poor households are sent by Latin American and Caribbean people working in the United States economy.
According to Eclac, Latin America and the Caribbean have become the third main holders of dollar nominated assets from the US government, after China and Japan. The region holds over 700 billion dollars in international reserves and other assets according to the US Treasury Department.
The delay in approving a new ceiling for public debt in the United States is threatening the international financial system, and this could have a dramatic impact on the value of assets, exchange rates, levels of global activity and, as a result, on demand for goods and services produced and exported by the region.
Although Latin America and the Caribbean has shown itself to be better prepared than in the past to tackle a worsening international situation, failure to resolve the US public debt problem (default or lower rating) would seriously endanger the region's resilience and growth.
The gross international reserves of the region at the end of June 2011 in millions of dollars are as follows:
Bahamas (m) 1.144
Bolivia (Plurinat. State of) 1.0751
Costa Rica 4.745
El Salvador 3.059
Haiti (a) 1.301
Honduras (m) 3.116
Mexico (m) 131.174
Paraguay (m) 4.829
Dominican Republic (m) 2.953
Trinidad and Tobago (a) 9.599
Venezuela (Bol. Rep. of) 28.389
(a) Balance from end of April 2011
(m) Balance from end of May 2011
Source: ECLAC, based on official information