The United Kingdom will face a 2.8 per cent negative growth rate in 2009, the worst economic performance since World War Two (in fact, the British economy has already shrunk by 2.7 per cent since last April). In Spain, unemployment has reached 14 per cent and the government is offering a 'golden handshake' for recent immigrants to leave the country. Ireland is in dire straits and Iceland is bankrupt.

In the United States, the Dow Jones slipped below 8000 in the very week President Obama took office, the automobile industry continues its downward spiral (Toyota has already displaced GM as the world's largest automaker) and in one day in January, leading companies announced shedding 72,000 jobs. In Canada, 34,000 jobs were lost in December. Projections indicate the developed world will have a negative growth in 2009. What about Latin America?

The standard line about Latin America is that "when the United States sneezes, Latin America catches a cold". That was exactly what happened in the past. The Great Depression had a devastating effect on Latin America.

Something similar took place in the early '80s, when rising interest rates in the United States pushed the region into its worst debt crisis and a 'lost decade' in which countries such as Chile saw 14 per cent negative growth in 1982 and unemployment rates of 30 to 35 per cent.

Accordingly, Latin American economies should be heading for the doldrums with the Northern recessionary waves hitting Southern shores with a multiplier effect, leading to an even deeper economic downturn there.

Yet, this isn't happening. Yes, this is a global recession and the region has not been spared. Growth will be cut in half, commodity prices have dropped and so have export volumes, thus affecting regional exports, which reached a record US$902 billion dollars in 2008. International credit has tightened and some projected foreign direct investment is not materialising. Remittances to the region, which also reached a record (US$ 67 billion) in 2008, will take a hit.


After six consecutive years of economic growth rates above four per cent, the region is projected to grow 1.9 per cent in 2009. Unemployment, at 7.5 per cent in 2008, is projected to rise to between 7.8 and 8.1 per cent - not a recession.

Countries such as Peru may grow as much as five per cent in 2009, with smaller economies like Cuba, Panama and Uruguay clocking rates of four per cent or more. The larger economies like Argentina (2.6 per cent), Brazil (2.1 per cent), Chile (2.0 per cent) and Venezuela (three per cent) should perform quite respectably. In fact, South America as a whole, according to the Economic Commission for Latin America and the Caribbean, will grow at 2.4 per cent. It is Mexico (0.5 per cent) and many Central American and Caribbean nations that will be especially affected by the drop in tourism, in remittances and in lower demand in the US market.

This does not mean that if the financial meltdown continues to wreak havoc in the North it will not eventually have a greater impact in Latin America. My point is a different one. For the first time in a century, Latin America has managed, if not totally 'decouple', at least to partially 'cushion' itself from the seismic waves of economic turmoil in the United States and Europe.

That this should happen at a time when eight of 10 countries in South America are ruled by left or left-of-center parties is ironic. For much of this decade, we have repeatedly been told how Latin America, by veering towards the Left, was once again 'missing the boat' on economic development, on how it risked being caught in a time warp, left behind by the twin imperatives of globalisation and economic inter-dependence.

Yet, if anything, many Latin American governments seem to have shown a better understanding of the perils of unfettered globalisation and 'casino capitalism' than several of their counterparts in the North.

The modern left in Latin America is committed to greater social equality in a region that has the highest economic inequality. It believes in diversifying trading and investment partners, as well as the number and variety of export products, thus moving away from the econom'a monoexportadora syndrome of the past. Finally, it is fiscally responsible. Prudent economic policies combined with aggressive social programmes - like Brazil's Bolsa de Familia or Chile's recent pension reform - are at the heart of this approach.

It is these principles, and the policies that flow from them, that have allowed the countries in the region to pay down their foreign debt from 37 per cent of GDP in 2000 to 20 per cent today. They have permitted Brazil to start a US$48 billion infrastructure programme, and Chile to launch a US$4 billion stimulus package to deal with the global slowdown.

But, the region being partially cushioned from the worst effects of the latter is also due to something else. For large export-oriented economies today, diversifying their export markets means targeting Asia. This is what South America's leading economies have done. China, Japan, South Korea and India are the prize markets. For Chile, in 2007, China was its number one export market (displacing the United States), Japan was number three, South Korea number six and India number 10 (displacing Germany). Asia received 43 per cent of Chile's exports that year. Not surprisingly, a dip in the US market, which gets a little over 20 per cent of Chilean exports, is not a major blow to its economy. Though Chile, because of its Asia-Pacific orientation, is a bit of an extreme case, for Argentina, Brazil and Peru the pattern is not too different.

These are, make no mistake about it, perilous times, and the treacherous waters of the world economy need to be navigated with a steady compass. Nonetheless, it is refreshing to see, for once, that Latin America may well grow its way through a global recession, as opposed to being, once again, the region most seriously affected by it.

The opinions expressed in this article/multimedia are those of the author(s) and do not necessarily reflect the views of CIGI or its Board of Directors.