Thursday, 2 April 2009

Latin Governments are Resorting to Protectionism to Cushion Their Economies From Effects of Global Crisis, According to Analysis Piece by Reuters

Read this interesting analysis piece by Reuters reporter Helen Popper (click on this link to read the story.) Recent evidence found by ING Bank NV economists says Brazil, a country with a very closed economy and lots of restrictions on imports, is to benefit from shutting its borders to imports or awarding cheap credit to local companies during the current crisis. Brazil has been lending massively to companies through the BNDES, the state development bank, for expansion projects, the continuation of ongoing plans and debt refinancing efforts. Some see that as protectionist, since it may break some WTO rules -- we will soon see.

Among the few countries that aren't considering restrictions are those that used the boom of the previous years to build their cash position, reduce public debt and pursue long-term free trade accords: Colombia, Chile and Peru. Of those three, the latter two are better suited to weather the current global downturn. Colombia is struggling, partly because it has structural fiscal and external sector shortcomings.

Going back to the main purpose of the Reuters piece, Popper shows examples of recent measures by Ecuador, Paraguay and Argentina raising barriers on imported goods and tells us of the increased willingness from other governments in the region to retaliate against their partners. This should have implications for companies that, like Brazil's Embraer or steelmaker Gerdau, have some of their natural, more profitable markets in neighbouring Latin nations.

Worth reading it.

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