Latin America Can Weather the Storm
Every crisis is an opportunity.

According to Mary Anastasia O'Grady (Wall Street Journal), Latin american must take advantage of the global turmoil. Given 1990s economic reforms, most of Latin american countries are ready to face this financial crisis because they are showing high level of reserves and low inflation although exposed to commodity price volatility.


"A selling tsunami emanating from the U.S.-European panic has clobbered Latin currencies and stocks. The Mexican peso has lost more than 20% against the dollar since August and Mexico's Bolsa closed at a two-year low on Friday. Peru, Colombia and Chile are also getting slammed."

"Given the magnitude of the selloff, some observers may be surprised to learn that the banking systems of these countries are not infected with the financial bird flu spreading through the G-7. Rather, investors are piling out of Brazil, Mexico, Chile, Peru and Colombia in a flight to quality. They are also fleeing because of the credit squeeze, the end of the commodity boom, and a slowdown in rich-country growth that will reduce demand for the region's output. Growth is expected to slow in most of Latin America."

"Thanks to the reforms of the past two decades the most open Latin economies are in a much better position today than they were in the 1980s when Federal Reserve Chairman Paul Volcker tightened credit to attack inflation. They should not be allowed to backslide. This is the time to accelerate liberalization with an eye toward greater economic flexibility."

"There is not much Latin America can do about the leadership vacuum in the U.S. or Europe. But it can anchor its own ship. Serious Latin economies -- obviously we don't mean Argentina, Venezuela, Ecuador, Nicaragua, Honduras or Bolivia -- have spent the past two decades preparing for such a moment.'

"To that end, the region has much work left to do. Brazil's entrepreneurs are burdened with punishing tax rates and complex regulation. Mexico restricts investment in energy, telecommunications and air travel, and in recent years it has increased protectionism. Colombia and Chile still fiddle with capital controls. Peru has insecure property rights, which discourage investment. Labor markets throughout the region are inflexible."

"Every crisis offers opportunities and this one is no different. The region's reformers have already done much heavy lifting. Why not seize the moment and finish the job?"