MIAMI _ Across Latin America, cautionary lights are starting to blink as economic leaders fear the diminished economic power of the United States will spell financial disruption for the nations to the south.
The governments of Mexico and Brazil are already enacting plans to boost government spending to counteract the effects of the U.S. slowdown, and economists are warning that regional economic expansion will take a hit after five years of robust growth.
Still, regional business leaders, who are closely following the financial ups and downs in the United States, insist that many Latin American economies are better protected than they were in the past.
A hemisphere that once spawned its own global crises _ Mexico's 1994 Tequila Crisis, for example, or Argentina's 2002 huge debt default _ is preparing for a pounding from a recession many see approaching the United States.
"We're in round one or two. This is a 15-round fight," said Guillermo Ortiz, governor of the Banco de Mexico, the country's central bank. Ortiz spoke last month during a panel discussion at the World Economic Forum in Davos, Switzerland, where the state of the U.S. economy dominated discussions.
Mexico is particularly vulnerable because it is a major assembling center for U.S. industry under the North American Free Trade Agreement and sends about 85 percent of its export products to its northern neighbor.
Other countries, particularly those in South America, are big exporters of commodities such as copper, iron ore, soybeans and grain _ to Asia and Europe. In recent years China has had a voracious appetite for Latin American commodities.
But economists are now forecasting that a significant slowdown in the United States will also crimp growth in China and reduce China's demand for raw materials from Latin America.
Latin America, like other parts of the world, has long relied on the United States to spur its growth and trade. Investment agreements have increased those ties.
"It is true that Latin America is going to be subject to negative impacts from a U.S. recession," said Alfredo Coutino, senior economist for Latin America at Moody's Economy.com in West Chester, Pa. "But it is also true that local governments are better prepared."
Coutino said that governments can reduce the impact by taking the same steps that Washington is taking: lowering interest rates and stepping up government spending to spur consumption.
Mexico is planning to raise government investment by 1.5 percent of the gross domestic product, to 5 percent of GDP in total this year, he said.
Higher levels of concern in Latin American capitals contrast with more optimistic views last fall when financial analysts were confident the region's strong economic growth, ample foreign reserves, robust exports and rising consumer demand would cushion many of the countries from any problems in the United States.
Now no one can boast any longer that their country is completely shielded. Even Latin American stock exchanges fell in unison with Wall Street as many American investors pulled their money from the region.
"We are very concerned about what is happening, but the economic fundamentals of several countries in Latin America _ like Peru _ are very solid," said Aldo R. Defilippi, executive director of the American Chamber of Commerce of Peru.
"Peru will be fine," Defilippi said. "For a small country like Peru, its volume in the world market is very small."Miami Herald
