The current stability

“The one interesting and important dichotomy within the Latin American region today vs. 10 years ago is that the economies are so much more stable,” says Charmaine Buskas, senior economic strategist at TD Securities in Toronto. Of the mid-August global financial jitters she says, “the Latin American markets sold off but it wasn’t the type of aggressive sell-off you would have seen 10 years ago. It is a testament to how far they’ve come in the last decade.”

Lombardi agrees.

“The currency did not lose that much,” he says. “In the old days it would have been much worse. In general, emerging Latin countries have better buffers. They have higher international reserves and their response to an international crisis is much better.”

Alfredo Coutino, senior economist Latin America at Moody’s Economy.com says, “[It’s] a different situation than [10 years ago]. Back then, the region was not prepared to weather external shocks.”

Over the past decade, Latin governments have worked hard to strengthen their economies and implement needed economic reforms. Coutino says the regional economy is now more resistant to external shocks.

Most economists cite 2003 as the start of the latest Latin American expansion cycle, after a two-year recession in 2001-02.

Coutino says the region is benefiting from favorable external conditions, particularly in the global commodity markets. However, he adds that recent growth also has been fueled by domestic consumption and investment. Coutino forecasts gross domestic product (GDP) growth of nearly 5 percent for Latin America as a whole in 2007, vs. a 5.6-percent reading in 2006.

“We are seeing a mild moderation in growth driven by adjustment in the commodity prices in the international market,” he says. “[However], the region is doing very well and extended its fourth year of continuous growth without major inflation.”

Enrique Alvarez, head of Latin American research at Ideaglobal, agrees the region has been doing exceptionally well. Amid strong world demand, the area’s large commodity export base, which includes mining, agriculture, and petroleum, has been a bullish factor in recent years.

“[However], domestic demand has been kicking in a large portion of overall growth,” Alvarez adds. “There has been an increase in acquisition power throughout these economies. Corporations and the upper socioeconomic level have been doing very well.”