Latin Economies Offer Mixed Bag

NEW YORK — Latin American economies offer a very mixed bag for American direct marketers pondering a return or new entry into the countries south of the border, with Mexico and Brazil considered the real standouts.

Brazil, as South America's largest nation and the one with the greatest potential, is getting high marks from the International Monetary Fund for a policy of restraint in monetary and fiscal policy that brought the economy back from 1999's fiscal brink.

Mexico is in a state of euphoria following Vincente Fox's victory in the July presidential elections, the surge in oil prices, and the booming US economy to which Mexico remains closely tied.

Argentina and Chile, the other two growth markets in the region, are not doing as well. Argentina is mired in recession, while Chile is on its way to recovery from last year's deep recession.

Venezuela is becoming something of an odd man out under President Hugo Chavez's rule, but higher oil prices are steadying the nation's economy.

Surprisingly, Colombia, which only makes the news in terms of the drug war, is laying reasonably secure economic foundations and has even announced austere budget plans for next year.

In Brazil, analysts don't worry about budget deficits, balance of payments problems or the eruption of new crises. Instead, they debate the speed of economic growth over the next few years.

J.P. Morgan's chief economist in Sao Paulo, Marcelo Carvalho, called the current economic situation the best in two decades and said, “Brazil can resume faster real GDP growth on a sustained basis over the next decade.”

Interest rates are down, production is rising, and the flow of tax revenue is helping to pay down the debt. The country is not problem-free. July saw an inflation uptick, and the balance of payments could be worrisome.

Still, “most of the macroeconomic constraints have been removed, which will allow Brazil to grow at 3 [percent] to 5 percent a year,” said Edmar Bacha, a director at Banco BBA.

In Mexico, the pace of economic growth has been the strongest in 20 years, with investors increasingly confident that Mexico has earned its Moody's rating as an investment-grade borrower. Consumer confidence is high.

Some Mexicans are worried that the transition in presidential rule in December will produce another crisis, as it has so often in the past, but most believe it will not.

Economists expect inflation to decline to 8.8 percent, but wage pressures are mounting. The Bank of Mexico has already moved to tighten monetary policy and has called for more restrained fiscal policy.

Argentina's new president, Fernando de la Rua, has initiated needed reforms since taking office in December, many of them applauded by investors, but the economy remains in the doldrums with recovery slow.

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