"We've seen the crisis deepen in recent months  to critical levels in several South American nations," said Frederico Kaune, Latin American economist for Goldman Sachs in New York."

This is for those interested in the economic repercussions of y2k. Earlier this Spring there were a number of stories concerning the status of preparedness in Latin America. The conclusions were obvious. There will be major problems in this part of the world.

The spin in the local (read American) media is that the world is in a state of recovery from the Asian Crisis. This outlook will exascerbate y2k problems. The state of any economy at the time of y2k will have a large effect on the political and social impact of the rollover.

If an economy is suffering this will only increase geometrically on rollover. Please keep in mind that the weaker the economy, the harder y2k will hit those unprepared and the longer recovery will take.

A high percentage of Latin America is unprepared. Many do not know, nor do many care to know, that there are deep troubles here and the domino effect will rip these countries apart.

The table is set, and y2k is coming to dinner.

This from the Washington Post Thursday. A very good article.

LINK

Deep Recession Enveloping Latin America

By Anthony Faiola Washington Post Foreign Service Thursday, August 5, 1999; Page A1

BUENOS AIRES, Aug. 4  People here have their own economic barometers. For Argentine government officials, it is the battered stock market and high interest rates. For company executives, it is falling revenues and profits. But for Laura Ceballos, 28, an Argentine single mother of three, it is strawberry ice cream.

"It's been weeks since I've been able to afford any for myself or the children," said Ceballos, an unemployed secretary who was pushing a sparsely loaded shopping cart in a Buenos Aires supermarket. "When you don't know where your next paycheck is coming from, you learn to live without a lot of things."

Purchases of food and retail goods in Buenos Aires dropped last month because of a recession that has fueled soaring unemployment and cut deeply into personal income. But the recession in Argentina, Latin America's third-largest economy, is only part of a region-wide downturn, the depth of which is only now being understood.

Latin America is undergoing its deepest economic slump since the debt crisis of the early 1980s, analysts say. Nations across the region are burdened with low commodity prices, soaring public debt, high unemployment, currency de stabilization and a lack of foreign investment capital.

The slowdown has inspired doubts about whether governments should continue free-market reforms championed by the United States over the past decade. In nations that have wholeheartedly embraced the free market, such as Argentina, popular sentiment blames that economic policy for creating high unemployment, largely because of government downsizing, and for an inability to redistribute wealth substantially from a small elite to the majority of the population.

The recession marks a disappointing cap on a decade in which Latin America roared to life economically, with high growth rates fueled mostly by the widespread adoption of free-market practices. Until last year  when economists feared Brazil would follow East Asia and Russia into financial crisis  the region had become a magnet for money from mutual funds and U.S. companies, which became some of the biggest investors in newly privatized Latin American industries. But today, with the notable exception of Mexico, which is buoyed by the strong U.S. economy, almost every nation in Latin America is facing a measure of economic trouble.

"It's as if every time I feel like I'm getting ahead in life, we hit another bad spot, and it wipes out everything I've worked for," said Antonio Cassagne, 43, an unemployed industrial engineer who was lined up with about 50 other people in downtown Buenos Aires for a single job opening for a delivery man. "You've got to eat, so you get back into the lines and look for a job. But there are no jobs. The people can only take so much more of this."

Brazil, the country that had the whole world worried, is actually getting off lightly. Pleased with the pace of fiscal restructuring in the capital, Brasilia, financial analysts are predicting an economic contraction of just 1 percent this year  compared with earlier estimates of more than 5 percent. Peru, which suffered last year as a result of damage from the El Niqo weather pattern, is the only significant Latin economy  other than Mexico  that is expected to grow this year. Its fishing industry, a vital component of its economy, has recovered significantly, and mining activity has surged.

Other major Latin nations  such as Argentina, Venezuela and Chile  are doing worse than analysts had anticipated only a few months ago, and Colombia and Ecuador are facing their most serious recessions in 50 years. This has caused leading analysts to forecast a 0.5 percent economic contraction for Latin America as a whole for 1999. Compare that with 1995, the year most affected by the Mexican peso crisis, when the slowdown in the region still yielded growth of 1.7 percent.

"We've seen the crisis deepen in recent months  to critical levels in several South American nations," said Frederico Kaune, Latin American economist for Goldman Sachs in New York.

But despite the gloomy picture, some analysts say the downturn may be hitting its lowest point and likely will not result in collapses such as those in East Asia or Russia. In fact, many analysts are predicting a mildly positive rebound for much of Latin America in 2000.

But the situation is code red in some small nations, such as Ecuador, where the banking system is in chaos and a foreign debt default threatens. But in far larger countries, including Brazil, Argentina and Chile, the economic fundamentals are healthier.

Although the economic situation is clearly more dire in nations that have yet to adopt free-market reforms, even the economies that have embraced that philosophy are suffering major setbacks. Although they may be temporary, they are generating a backlash as voters and political candidates in some nations turn against such reforms. Anti-government protests  often opposing free market policies  are becoming more widespread and violent.

Argentina has been rocked by several weeks of violent demonstrations by angry state workers that left several dozen people wounded. One leading presidential hopeful shocked world stock markets two weeks ago by suggesting he may declare a temporary moratorium on foreign debt payments if he wins the October election.

In Uruguay, a left-wing politician is leading in voter preference polls for next October's presidential election. In Chile, a more moderate, European-model socialist, Ricardo Lagos, has emerged as the presidential front-runner. He could become the first socialist to govern Chile since Salvador Allende was ousted in a bloody coup by Augusto Pinochet in 1973.

In some nations, the backlash is causing serious instability. In Ecuador, where the government is desperate to strike a $400 million deal with the International Monetary Fund to stave off a debt default, massive protests against proposed privatizations of state industries and congressional opposition to fiscal reforms are hampering talks with the IMF and threatening the durability of President Jamil Mahuad.

And in recession-plagued Venezuela, supporters of President Hugo Chavez, a left-wing firebrand who is promising a "democratic revolution" to redistribute wealth, last month won 96 percent of the seats in a powerful new assembly that will redraft the constitution and likely dissolve the legislature and Supreme Court.

"We're seeing a trend of instability created by serious economic and political problems in the region," said George Vickers, executive director of the privately funded Washington Office on Latin America. "In a number of countries, you're seeing a loss in faith in the free market, and in others, you're seeing a stronger desire to prevent [liberalizing economic] changes from being put in place."

Although the reasons for economic downturns vary by nation, most countries are facing serious problems as a result of the decline of important export commodity prices, such as those of oil and copper.

In addition, currency jitters that began with the devaluation of the Brazilian real last January have continued. Colombia, Ecuador, Venezuela and Chile have experienced steep declines in their currency values in the past six months. This has reduced interest in the region by foreign lenders and investors at a time of high debt levels and low government revenues.

But in countries that have implemented free-market reforms, such as Argentina, substantial economic and social problems have arisen chiefly from high unemployment rates  now officially 14.5 percent. Those rates have been caused by massive firings in recently privatized state companies and the inability of private businesses to grow fast enough to absorb former state workers, analysts say.

) 1999 The Washington Post Company

-- Mike Lang (webflier@erols.com), August 05, 1999

Answers

http://www.washingtonpost.com/wp-srv/inatl/daily/aug99/latin_econ05.ht m

-- Mike Lang (webflier@erols.com), August 05, 1999.

Thanks Mike.

I really was hoping that the worlds economies would actually start to pull through. It's starting to seem as if things will already be difficult, at best, when the roll over occurs.

When I read about the problems still happening in Japan, this article regarding the state of Latin America, the strange things going on in Europe and now even here in the US I'm left to ponder if Infomagic is much more correct in his take on things.

Combine the unrest in the worlds economies with the tensions overseas and things just aren't looking too great.

I'm still gonna keep smiling and hold on to hope : )

Mike

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-- Michael Taylor (mtdesign3@aol.com), August 05, 1999.