Fitch: Latin American Sovereign Outlook 2009

Fitch expects that Latin America’s real GDP will contract by 0.9% in 2009, with Brazil’s economy stagnating at best and Mexico contracting by over 2%.

Friday, March 20, 2009

Latin American economies have recoupled with the crisis in the developed economies. Since September 2008, Latin American countries have been buffeted by stronger external headwinds, as evident from the fall in regional currencies and stock markets and from widening bond spreads.

Three simultaneous shocks of global recession, lower commodity prices and a reduction in private capital inflows will adversely affect macroeconomic performance in 2009.

Despite the magnitude of these shocks, Latin America’s starting point is perhaps the best it has been in recent decades. Five years of current account surpluses, combined with rapid capital inflows, have led to a substantial increase in the region’s external buffers. Many countries in the region have strengthened their policy frameworks by adopting inflation-targeting regimes and implementing flexible exchange rates, improving their ability to confront external shocks.

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FMI: Central America Outlook

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Slow recovery tied to a lagging U.S. economy, 3% growth in 2010 due to increased domestic consumption and rising remittances and international trade.

The countries in Central America are recovering gradually, led by a rebound indomestic demand (following its sharpcontraction in 2009), which has partly spilled over into imports.

Latin America Sovereign Outlook

April 2010

Latin America is poised for an economic recovery in 2010 with Fitch Ratings forecasting the region's real GDP growing by 4% in 2010.

Currently, Fitch has three sovereigns on Positive Outlook and only one on Negative Outlook suggesting that the credit cycle in Latin America has turned. Fitch expects the trends in sovereign creditworthiness to be broadly stable to slightly positive in 2010.

Fiscal credibility and sovereign risk

January 2010

Fitch Ratings warned that although Central American sovereigns have resisted the global crisis pretty well so far, they now require fiscal consolidation in order to maintain their credit ratings.

Summary
Fitch‐rated Central American sovereigns have thus far withstood the destabilizing effects of the global economic and financial crisis, despite monetary and exchange rate policy challenges.

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