Latin America Hit By Eurozone Uncertainty

Uncertainty across the Eurozone has begun to impact the recently promising economies across Latin America

London, UK (Pryce Warner International) November 22nd, 2011 – Several countries in Latin America recently posted promising economic figures though the continued Eurozone problems may cause a future setback.

Despite this, last week Standard & Poor joined Moody’s and Fitch in upgrading the credit rating of Brazil to BBB and its currency rating to A-.

According to S&P this is because: “We expect the government to pursue cautious fiscal and monetary policies that, combined with the country’s growing economic resilience, should moderate the impact of potential external shocks and sustain long-term growth prospects.”

Brazil's handling of debt problems is being seen as superior to many European countries, though retrenchment concerns have now led to suspicions that Brazil may yet encounter future problems.

Despite a promising start to the year the Eurozone problems led to a slow down of investment into country. This accounted for the amount of mergers and acquisitions dropping by half in the latter half of this year. For the first 11 months of 2011 the total for mergers and acquisitions was $63.95bn but over the equivalent period last year this was $138.34bn.

Some banks are now concerned about entrenchment and the possibility of having to let go of some new employees.

Argentina has also felt economic problems, though the government claims this is merely a “blip” due to the problems in the Eurozone.

This combined with political uncertainty over how the government plans to deal with continued economic problems has led to capital flight in recent months.

In previous the year exchange rate on the Peso and high commodity prices have led to an economic surplus but uncertainty in Europe has had a knock on effect on not only Argentina but also its fiscal ties with Brazil.

Despite this Venezuela has weathered the problems relatively well with all economic sectors posting growth after several years of recession. This trend also seems set to continue with forecasts looking better than expected due to an increased availability of imports of higher government investment in housing initiatives.

The latest figures show that the public sector grew 3.6%, communications by 7.9%, mining by 7.6%, commerce by 5.8% and manufacturing by 2.1%.

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By Aneil Fatania
Financial Editor
Pryce Warner International Group
For any corrections of factual information contained within our news items please contact our editor.
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