LOS ANGELES – A few weeks ago, the world was on the edge of disaster. Fortunately, the decisive actions taken by the advanced countries’ monetary authorities – including provision of unprecedented amounts of liquidity – prevented a complete financial meltdown. The world has avoided the “Argentinization” of the international financial system.
What has not been avoided is a recession that will be deep, long, and global. In the coming months, nearly every region in the world will experience economic deceleration, with exports declining and unemployment increasing.
Recent events have disproved the notion that emerging nations had “decoupled” themselves from the advanced economies. The facts have shown the opposite to be true. Most emerging economies are still fragile and affected by what goes on in the advanced countries. The effects of this recession will be particularly severe in Latin America.
Brazil and Mexico have been the hardest hit so far, to the point that the value of their firms has fallen by approximately 50%. The situation in these countries is so serious that a few days ago the United States granted them credit for up to $60 billion.