Latin America and Caribbean “Resilient” to European Debt, Chinese Deceleration

By: Caribbean Journal Staff - March 18, 2012

Above: Nassau (CJ Photo)

By the Caribbean Journal staff

The economies of Latin America and the Caribbean remain “resilient” to a possible slowdown in world economic growth stemming from a potential deepening of the European debt crisis deceleration in China, according to the Inter-American Development Bank’s 2012 Macroeconomic Report.

The report looks at two major risks to the region — a faster-than-expected deceleration of China’s economy and deepening problems in Europe.

According to the report, even if both of these events were to occur, the region might suffer only a “relatively mild” recession.

“We are cautiously optimistic for Latin America and the Caribbean,” said Santiago Levy, Vice President for Sectors and Knowledge for the IDB. “The region has grown strongly in the last couple of years and it has shown it is resilient to shocks.”

“Most importantly, the region has developed a set of policy tools that have proven to be effective during economic downturns,” he said.

The report said the region’s dependency on commodities remained high, and a surge in capital inflows has increased private-sector, foreign-currency portfolio liabilities.

The presence of a large number of European banks also could make the region’s banking sector vulnerable to a credit squeeze, however.

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