For Latin American leaders, the place to be this week was either Davos, Switzerland or Belém, Brazil. For Mexican President Felipe Calderón and Colombian President Alvaro Uribe, the choice was the World Economic Forum in Davos. Joining his Venezuelan, Bolivian, Paraguayan, and Brazilian counterparts, Ecuadorian President Rafael Correa—scheduled to be in Davos—instead opted for what is often termed the “anti-Davos”—the annual meeting of the World Social Forum. And although both forums are making headlines, the real question remains: How can Latin America best confront the global economic crisis?
In its latest report, the UN Economic Commission for Latin America and the Caribbean estimates that the region’s combined GDP is likely to expand by only 1.9 percent this year—the lowest in seven years. For Mexico, the news got even worse this week. Guillermo Ortiz, the Central Bank governor, told reporters in Mexico City that the GDP may shrink 0.8 percent to 1.8 percent in 2009. This after growing 1.5 percent last year.
But Presidents Calderón and Uribe did not travel to Davos to wave a white flag. Instead, at a dinner on Thursday night, their message was clear: Latin America can be a “center of sustainability” during tough times. At a session on Mexico and the financial crisis, President Calderón sought to quell investors’ concerns noting that the country is well prepared to weather the financial crisis given the overall stability of its financial system. The Colombian President said the same of his country. But he used the opportunity to also take a swipe at un-named Latin American countries that “are not being attractive places for investment.”
In the Winter issue of AQ, to be released on February 5, Paulo Vieira da Cunha takes an in-depth look at Latin America’s ability to withstand the economic crisis. And he more or less agrees with the overall message of the two Latin American leaders at Davos. Colombia and Mexico, along with Brazil, Chile and Peru, “encountered the crisis at a moment of strength,” writes Vieira da Cunha. But while solid fundamentals are critical to withstanding the crisis, the key will be how each country responds to new shocks.
Fiscal stimulus packages—given the green light in countries from China to Chile with the U.S. House of Representatives agreeing on an $819 billion package this week—are the hope for many countries across the globe. But the key is figuring out how much money needs to be invested to help prop up an economy. Mexico’s package was recently characterized as too small and too slow to lift the economy out of recession.
The truth: we may still have a while to go before figuring out the right ingredients to pull out of this financial mess. For Mexico and Colombia the good news is that they came into it better prepared than most countries.