Oxford Analytica says a ‘hard landing’ of China’s economy is potentially more dangerous for Latin America than the euro-crisis.
Excerpted from INTERNATIONAL: Latin America faces limited EU risk
After a vigorous recovery from the 2008-09 global crisis, Latin America’s economies slowed down in 2011. Deteriorating global conditions and cooling domestic demand, particularly in Brazil, contributed to lower growth rates. GDP expansion will again be moderate this year, and policy could become more expansionary even if most governments have less room for manoeuvre than in 2008-09.
A worsening of the euro-area crisis would affect Latin American countries through several channels, including a reduction in exports to the EU, falling commodity prices as a result of further global slowdown and a decrease in lending from euro-area banks.
Some countries, such as Argentina, would be hit particularly hard, while the effect on Central America and Mexico would depend more on how European developments affect the United States. However, overall a sharp deterioration in Latin America’s economic conditions is not probable — unless China suffers an unlikely hard landing.
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