In-House Counsel

Latin America Is Going Fiscal At Full Speed

The Challenge is how to Turn Economic Packages Into Opportunities that Create Sustainable Growth and Competitive Advantage

Numerous market indicators already signal that the global economic crisis is now impacting Latin America.  Unless the U.S. economic stimulus package (or officially, the American Reinvestment & Recovery Act) works and each country in the region puts in place comprehensive counter-cyclic policies, the crisis? impact could be even longer and more devastating.

Countries across the region are experiencing a reduction in the demand on their exports in varying degree.  This reduction has generated rapid increases in trade deficits and difficulties in accessing international financing, a situation that has been exacerbated by the repatriation of funds from foreign investors. These elements have combined to create major pressure to domestic currencies; in just the last six months the Brazilian real has lost 32% of its value. The immediate impact in consumption, investment and employment has been more than evident.

To attack the different symptoms, countries in the region have adopted different measures. So far macroeconomic policy has been the medicine of choice. However, the crisis is so deep that for many economists and Governments, it is now clear that monetary policy will not be enough, and that the case for a major fiscal counter-cyclical policy is now essential.

Full post as published by Cisco High Tech Policy Blog on March 04, 2009 (boomark / email).