By Antonio de la Jara
SANTIAGO (Reuters) - Latin America's economy will weather a likely soft U.S. recession, the head of the U.N. Latin American Economic Commission (ECLAC) forecast on Monday, but he reduced his regional growth forecast to 4.5 percent for 2008.
"We are thinking there will be a soft recession (in the U.S.), and think there will be a slowdown in Europe and some impact in China," Jose Luis Machinea told a Reuters Latin America Investment Summit in the Chilean capital, Santiago.
"In that context ... we are forecasting there will be an impact in the region, but relatively minor."
ECLAC originally forecast Latin American growth of 4.9 percent in 2008, but Machinea trimmed it to 4.5 percent in January.
Machinea cut his Mexican economic growth target to 2.7 percent for 2008 from 3.3 percent, and forecast Brazilian economic growth at 4.8 percent this year down from 5.0 percent. He trimmed his outlook for Chilean growth to 4.5 percent to 5.0 percent from 5.0 percent originally.
"The enormous difference with the (19)30s (in the U.S.), is that everybody knows what we have to do and what not to do," Machinea added.
"I agree with those people who say this crisis is structurally the deepest since the Great Depression. But what you have to keep in mind is the reaction from the monetary authorities, which have implemented the biggest monetary and fiscal policies in history."
Still, the interest rate-raising strategy of Latin America's central banks is inadequate, he added.
"If we must slow demand, then we must do it with fiscal policy. If not, exchange rates will appreciate very strongly."
"Central bank intervention should go hand in hand with interest rate differentials and certain controls on capital inflows (in the short-term)"
(For summit blog: summitnotebook.reuters.com/)
(Writing by Simon Gardner; editing by Jeffrey Benkoe)
((simon.gardner@reuters.com; +562 370 4250; Reuters Messaging: simon.gardner.reuters.com@reuters.netas
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