The United Nations Economic Committee for Latin America and the Caribbean, ECLAC warned on Tuesday that markets’ volatility will “persist” particularly because of the default-threat from several European countries.
“The danger is that the crisis expands to Italy and Spain” said Osvaldo Kacef, head of ECLAC’s Economic Development Division adding that the most probable scenario is a slowdown of the global economy while the situation in the US and the European Union will have an impact mainly in Mexico and Central America.
The economist said that there is a strong risk of a recession in the European Union and the US and in this scenario “there won’t be a major impact for Latin America until the end of 2012”
Similarly unemployment in the region which now stands at 7% will not continue to fall in 2012, but a major labour situation is not anticipated.
“There won’t be a major impact on employment”, insisted Kacef.
More specifically on the US, Kacef said that government-debt problems and a higher credit risk ‘should not anticipate a situation of some magnitude’.
“The issue in the US does not have such an economic repercussion it’s mainly political, although it sounds more spectacular than in Europe”.
Nevertheless he admitted that “all this means we will have a less dynamic business climate in the developing world” with an impact for Latin America.
“Obviously nobody is immune and it will have an impact on Latin American economies, but it will much depend on how exposed to the US and to Europe each country is”, said Kacef meaning both trade and investment links.
In this framework “we could expect a flight of capital from the region, even when the latest data show that the inflow of capital to Latin America persists.
Kacef also anticipates that growth in Latin America and the Caribbean will be in the range of 4% in 2012, which is slightly less than previous forecasts and coincides with estimates from other regional groups such as Mercosur and Unasur.
The Eclac economist revealed that the South American block will develop a “pro-active and pro positive attitude to strengthen relations with the US.
The statement is linked to the fact that Latin American region belongs to the short list of main US debt holders, (behind China), and any turmoil in the US could have an immediate effect on the region’s assets.