Latin American Banks Better Off Than United States'
I must say I'm surprised by this news item:
This is not surprising to me. However, this is:
Emphasis added. In other words, while we've been spending money we don't have, buying houses and cars we cannot afford, and growing a ridiculous deficit, Latin American countries have done the responsible thing for governments and households alike: match spending to earnings and pay down your debts.
And what made it possible was more regulation, not less. It seems like there's something to be learned from this whole thing.
Three Latin American lenders pledged Monday to supply US$9.3 billion in emergency aid to help countries across the region ease cash-supply problems amid the global credit crisis.
This is not surprising to me. However, this is:
The cash will be available for governments, central banks and other financial institutions, as part of a needed joint effort to combat the crisis, the lenders said.Latin American economies might not necessarily need the aid though, because tighter bank regulations and stricter fiscal policies have left them in a better condition than other nations to weather the financial crisis, the Inter-American Development Bank said.
Most Latin American nations have used soaring income from commodity exports to boost currency reserves, narrow budget surpluses and pay down foreign debts, leading government officials and analysts to insist the region is well-positioned to withstand current turmoil.
Emphasis added. In other words, while we've been spending money we don't have, buying houses and cars we cannot afford, and growing a ridiculous deficit, Latin American countries have done the responsible thing for governments and households alike: match spending to earnings and pay down your debts.
And what made it possible was more regulation, not less. It seems like there's something to be learned from this whole thing.
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Well, the essential keyword here is "commodities". As the US' economy has effectively been allowed - perhaps it's more accurate to say "strongly encouraged" instead - to be stripped naked of its production arsenal and have it moved (mostly) to China and India, those two - and China in particular - have an insatiable appetite for raw materials; the commodities they need to produce good consumed in the rump economy that is the US and the increasingly more permeable markets in Europe.
Latin America has enormously benefited from that, as it's a key supplier. That has given vital financial margin to not only grow the economies' GDP, but also (especially) improve their debt position, in some cases even (intelligently) opting out of the IMF / Word Bank choke holds.
Their banks, at the same time, have had ample opportunity to build up necessary capitalization, which was further boosted by the massive amounts of capital flowing freely after the Cold War; Latin America has absorbed, although to a lesser degree, still respectable chunks of that same "new" capital that prompted the irresponsible lunatics in Wall Street to come up with their "derivatives". Those iffy products, backed by even iffier securities - the same that set off the current massive global crisis, when a few of those bad apples were called.
One of the bizarre effects of the crisis is that relatively protectionist economies (not just in Latin America, but also in Africa) are more "shielded" from the tidal wave of elsewhere tightly interconnected financial institutions and funds.
Be that as it may, Latin America is starting to get afoot, which isn't just a "good thing", it's necessary. Hopefully the Brazilian powerhouse will keep cranking out demand and trade, so that others can continue as well. It's places that suffer more from socio political instability that can throw a wrench in the works and, sadly, the current chaotic situation in for example Mexico (re: narcos) can be such a depressing factor. But that's aside from other risks, e.g. Venezuela going completely off the deep end, due to deteriorating political instability.
It's a fragile situation, but yes: there's no reason to adopt an inherently negative attitude toward Latin American countries' ability to actually come ahead, out of the current mess. It wasn't too many decades ago that, for example, Argentina was the major powerhouse, thriving precisely on its riches in commodities. It can very get there, again; as long as people remain sensible, careful, and thoughtful about moving forward collectively.
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