By Herbert Lash
NEW YORK (Reuters) - Brazil, Peru and Chile, while exposed to swings in commodity prices, are best able in Latin America to withstand a U.S. slowdown because of flexible policies, a Merrill Lynch & Co economist said on Thursday.
A sharp drop in commodity prices would slow Latin American growth; but Asian demand is still booming and unlike the past, emerging markets are now less dependent on the U.S. economy, said Felipe Illanes, Merrill's chief Latin American economist.
"The three countries that come out on top in their ability to address their vulnerability to a slowdown are Brazil, Chile and Peru," Illanes told the Reuters Latin America Investment Summit in New York.
"A lot of people are coming to the realization that this group of countries are probably the strongest," he said.
Among the main regional economies Illanes examined regarding vulnerability, Mexico came next and then Colombia, Argentina and Venezuela. Doubts about the reliability of Argentine inflation figures put it second to last.
Flexible exchange rates, prudent government spending and the paydown of U.S.-denominated debt have made many Latin American economies, with the main exception of Venezuela, more resilient to a U.S. recession than in the past, Illanes said.
Merrill Lynch expects commodity prices to remain buoyant because of supply constraints; and demand from a big consumption driver, China's work force, won't wane anytime soon.
"You have demand from Asia still booming, as again that cycle is on a cyclical upturn and unlikely to run out until you run out of the main input, labor. And China certainly is nowhere near that situation at present," Illanes said. Continued...
© Thomson Reuters 2008. All rights reserved.
| Japan Investment | Jul 01 - 2, 2008 | Country Summits |
| Global Real Estate | Jun 23 - 25, 2008 | Real Estate |
| Consumer and Retail | Jun 16 - 18, 2008 | Consumer Retail |
| Investment Outlook | Jun 09 - 12, 2008 | Financial Services / Exchanges |
| Global Energy | Jun 01 - 5, 2008 | Energy |
