Latin America Should Avoid Recession, But It's Not All Good News

Argentine bank BBVA (BFR) says Latin America will avoid falling into recession for the first time during a global crisis. A period of high commodity prices has allowed countries in the region to build significant reserves. High capital reserves along with low indebtedness will help the region handle the global downturn better than many others.

According to BBVA's president, Francisco Gonzales, for the first time during a global economic crisis Latin America is going to avoid recession. Gonzalez expects the region to be one of a few with positive growth for 2009, growing at 2%, explaining at Foro Latibex that although the future is uncertain, the Latin American region is better prepared for facing a crisis than it has been in earlier years, thanks to the economic strength which has developed over the last years.

The president also explained that most of the countries in the region show a positive trade balance, and have a healthy supervision of the financial system. Adding that the economic reforms during the nineties have brought forward more open economies, with a more active role for private investment. Furthermore, the region is continuing to be a 'driver for global economic growth in the long term,' because of its young population, improving educational system, and availability of raw materials.

On the other hand, said Gonzalez, the region presents certain risks, with high dependency on exports of a few raw materials, as well as 'informalities' which limits the access to financial markets and services for individuals and small businesses. The governments of certain countries are still intervening excessively in the operations of the free market, and are frequently changing the rules of the game, 'creating a unfavorable climate for long term investments.'