BY JANE BUSSEY
NEW ORLEANS -- As financial chiefs from across Latin America and
Caribbean prepared to open the region's most important annual economic
consultations, Mexican Finance Minister Jose Angel Gurria summed up the
mood: ``What a difference a year makes!''
A year ago, when the Inter-American Development Bank held its
in Paris, financial authorities, international banks and investors and world lending
agencies were braced for the worst because of the jolt of a major devaluation of
the Brazilian real.
But as many of the same officials prepared for today's opening
of the IDB's
meeting in New Orleans, most countries and the titans of international finance
were congratulating themselves that the crisis never materialized.
Brazil's economic downturn was surprisingly mild, and Mexico's
performance is being hailed in New Orleans as a sign that tight spending and
trade liberalization pay off with higher economic growth.
But most important for the region, the problems in Brazil never
region-wide crisis, and most countries outside the struggling Andean region of
Venezuela, Colombia, Ecuador and Peru were poised for economic growth this
Experts were also relieved that a number of tough political situations
A socialist in Chile, Ricardo Lagos, took office this month without
Presidential elections in Mexico are proceeding without the usual political and
Predictions for average growth in the region hover around 3.5
respectable figure given financial shocks that developing countries around the
world have undergone since 1994.
The IDB's own financial figures bear out the sobering reality
Currency crises like the Brazilian devaluation in early 1999 are costly for
The IDB, which was founded in 1959 to provide lending from industrialized
countries to the region for development projects, spent more than half of its
lending last year on emergency loans to counteract the effects of worldwide
financial volatility. The record $4.6 billion spent for the bailouts compared with
only $2.85 billion spent in 1998.
On the positive side, foreign direct investment had replaced the
billions of dollars
that investors had used buying bonds and company shares when emerging
markets were hot in the mid-1990s. Prices of commodities such as oil and
copper, among the region's main exports, were on the rise, easing payment
problems in Mexico, Venezuela and Ecuador.
If anything, speakers at IDB-sponsored seminars and conferences
commercial banks were more worried about the performance of the U.S.
economy. A stock market fall or higher interest rates would trigger problems for
Latin American countries. High interest rates mean they must pay more for the
large foreign debt. The United States is also the biggest market for Latin
American and Caribbean goods.
``Let's not fool ourselves,'' said Daniel Marx, Argentine secretary
``The biggest emerging market out there is the United States.''
Imports by the United States have been surging ahead of exports,
imbalances like several that hit Latin America just before major crises.
``We should turn to the U.S. authorities, to our friend [Treasury
Summers to ask what he is doing about it,'' said Sebastian Edwards, economics
professor at the University of California in Los Angeles.
Copyright 2000 Miami Herald