The Miami Herald
March 27, 2000
Economists gather in brighter mood
Inter-American Development Bank opens meeting today


 NEW ORLEANS -- As financial chiefs from across Latin America and the
 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 annual meeting
 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 economic
 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 sparked a
 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 had passed
 without mishap.

 A socialist in Chile, Ricardo Lagos, took office this month without problems.
 Presidential elections in Mexico are proceeding without the usual political and
 economic crisis.

 Predictions for average growth in the region hover around 3.5 percent, a
 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 of globalization:
 Currency crises like the Brazilian devaluation in early 1999 are costly for
 international markets.

 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 presented by
 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 of financing.
 ``The biggest emerging market out there is the United States.''

 Imports by the United States have been surging ahead of exports, creating
 imbalances like several that hit Latin America just before major crises.

 ``We should turn to the U.S. authorities, to our friend [Treasury Secretary] Larry
 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