News Americas, WASHINGTON D.C., Fri. Aug. 12, 2011: A worsening of the current market turmoil could test the defenses of Latin American economies.
That’s according to World Bank Chief Economist for Latin America and the Caribbean, Augusto de la Torre.
De La Torre this week warned that a worsening of the current turbulence, or as he called it, “a global turmoil of immense magnitude,” could impact Latin America’s ability to grow.
“Not even the best immune system in the world could withstand these kinds of attacks,” he stated.
The chief economist said a ‘worsening’ would materialize if Europe and United States and other developed countries dip into recession once again.
Such a slowdown would have a larger impact on its close trade partners, including Mexico, the Caribbean and Central America, said De La Torre, while insisting that economies linked to China – essentially those in South America – would sustain a lesser impact, provided the Asian giant continues its current high growth trend.
This week global markets experienced a confidence roller coaster that wiped out more than US$3.8 trillion in investors’ holdings, forcing them to flee to safe havens such as Swiss francs, Japanese yen and gold. Latin American stock markets also zigzagged in this uncertainty, with their main indexes dropping an average of 7 to 8 percent, and then gaining around 5 percent in strong rallies.
Global markets calmed somewhat after the US Federal Reserve’s decision to maintain a very low interest rate – near zero percent – for the next two years. Experts attribute the global market turmoil to a loss of investor confidence following the US credit rating downgrade and Europe’s financial woes.
The World Bank’s most recent estimates suggest an annualized growth rate of around 4 percent for most regional economies, with the exception of the Caribbean.