The economic outlook

Despite the recent havoc, most economic analysts remain upbeat on Latin American markets, which posted an overall 4.3-percent gross domestic product (GDP) reading in 2005, with expectations for 2006 around 4 to 5 percent. Economists at BNP Paribas forecast 4.3-percent GDP growth rate for Latin America in 2006, but a pullback to 3.1 percent in 2007 part of a projected world-wide economic slowdown.

Strong current account surpluses, healthy international reserve levels, and reduced external liabilities all favor the outlook for the main Latin American economies. Overall, the past several years have been positive for the region, which had emerged from a recessionary period. Many of its currencies posted healthy appreciation as higher global commodity prices bolstered the export dollars pulled into Latin America.

“We've obviously seen some very positive changes over the past few years, with domestic growth, fiscal performance, fiscal management, and debt management,” Wardle says.

“Many countries have been reducing foreign debt. It has almost been like a perfect recipe for many of these economies.”

Also, analysts point to the continuing contribution of commodity strength. Higher energy, metals, and agricultural prices have bolstered the terms of trade for many of the exporting countries in Latin America — Chile, Brazil, and Argentina are all net exporters. Chile is the world’s largest copper exporter, and Peru, Ecuador, and Bolivia also export the metal. Oil exporters in the region include Mexico, Venezuela, Brazil, Ecuador, and Argentina. Brazil, Argentina, and Chile are major grain exporters. ”We are seeing a continuation of the Latin American boom in part because of favorable conditions in the commodity markets,” says Alfredo Coutino, senior economist at Moody's Economy.com.