Wednesday, 17 December 2008

Fitch Says Risk of Crises in Latin America is Growing

In an ominous note released today by David Riley, head of global sovereign ratings at Fitch, the Chicago-based ratings agency said the economic and credit outlook for emerging market nations has worsened dramatically as a consequence of the financial meltdown afflicting the most developed economies. 

The note says that countries in Latin America with weak credit fundamentals (call it growing trade and current account imbalances, widening budget deficits and a regulatory framework unlikely to be made more flexible in stress situations) and that are reliant on commodity exports remain ``especially vulnerable.'' Fitch said the credit fundamentals are better for most emerging market economies than in previous crises, suggesting that an increase in funding needs by governments and a hemorrhage of international reserves in most places is an unlikely scenario. High international reserves (such as the case of Brazil, Venezuela and Peru, for instance) provide these nations a buffer against financial and economic turmoil.

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