Good News from Latin America or Bad News from the States?

The financial and banking crisis is showing tangible signs of a recovery, according to the Presidents of the Central banks of the MERCOSUR countries in Latin America. However, all may not be rosy in the economy of the USA, where an apparent recovery could very well turn into a double dip.

The meeting in Ponta del Este, Uruguay, 140 km from Montevideo, was attended by the representatives of the Central Banks of Argentina, Uruguay, Brazil, Paraguay and Venezuela, as future member of the Mercado Comun del Sur (MERCOSUR) , or Common Market of the South.

The final declaration of the meeting stated that although there are positive signs, the Central Banks need to remain prudent and keep an eye on fluctuations in the monetary and exchange rate systems, while it stressed the necessity of beginning a period of consolidation. The responsible and active role played by the Central Banks of MERCOSUL and associated states (Bolivia, Chile, Colombia, Ecuador and Peru) was also stressed.

As for the future, analysts are maintaining a reserved prognosis because given that the economies of this region suffer strong influences from the economy of the United States of America, what happens in this country has profound knock-on effects on those of its neighbours to the south.

While macro-economists agree that technically, the USA is coming out of a sharp recession, the fact is that the micro-economic indicators continue to give mixed signals, as if there were two parallel economies – the real one with the bad news and the pseudo-laboratorial one with the good news. The micro-economic indicators show a country which is not pulling out of recession but instead threatening to confirm everyone’s worst fears – a double-dip, meaning it could be facing a deep and prolonged depression.

Business among SMCs is sluggish, if not almost paralysed, production is falling, unemployment is officially 10.2 per cent but the real figure if one counts the partially employed, jumps to 17.5 per cent.

Worrying indicators for 2010 not only for the USA, but also for Latin America and indeed the rest of the world.



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Author`s name Oksana Orlovskaya