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Did you pass the Financial Crisis?

Us banks list / Wednesday, August 18, 2010

In Europe, financial concerns are not exceeded and the United States has slowed recovery. Latin America must be vigilant.

Viewed from the side of Latin America the crisis of the developed countries seem a remote issue and overcome. They have improved the prices of main export products of the region, including coffee, sugar, soybeans and copper, all of which had large increases in July. Oil has remained steady, fluctuating slightly below $ 80 a barrel and the price of coal is 50% higher today than a year ago.

Even more encouraging are the signals coming from international financial channels. The yield on the benchmark U.S. Treasury is at its lowest level in decades and the risk premiums in Latin America are no longer far from the levels before the crisis in Greece. As a result, external financing of all kinds are cheap and plentiful.

But everything looks so good if you're on the other side. It is true that in Europe there is an air of relief, because most of the big banks passed the "stress tests" to measure its solvency against possible adverse shocks, and because the industrial production and consumer confidence have been restored in Germany and the UK. Even in Greece, which was the epicenter of the crisis of the early years, there has been good news, because the fiscal adjustment program has gone better than expected.

But the crisis of the countries of southern Europe is contained, not overcome. Would take a miracle for Greece to stay afloat of their debt problems over the coming years, because-despite the fiscal adjustment, the debt go up and down GDP. Simply, the Greek debt crisis is deferred for a couple of years, they are trying to exploit to strengthen the financial system from the rest of Europe, particularly of Spain.

Stress tests have been rightly criticized because they underestimate the potential cost would be for banks to restructure debts of Greek, and because, even if banks have solvency for addressing other shocks, they may not have the liquidity they needed less than continue depending on the European Central Bank. Therefore, the surge that is living in Europe could be disrupted if disturbances occur that destabilize the banking system. And even if there is no such disturbances, it is more likely that the euro area still recovering for years due to the lack of mechanisms to coordinate national fiscal policies. Fiscal austerity announced by Germany and the United Kingdom seems to have contributed to the confidence in these countries, but possibly detrimental to the countries of southern Europe, where it is needed.

The problems of the U.S. financial system are of a different nature. Unlike Europe, there is consensus that the stress tests that were made in 2009 were enough and helped to identify and overcome the weaknesses of bank solvency. As a result, large banks now have easy access to the resources of investors. However, they are paying very little for small and medium enterprises have on his neck the sword of Damocles that is the regulation of financial regulatory law recently signed by President Obama.

Also unlike Europe, where the latest news on economic activity have been encouraging, the United States have been disappointing and are certainly indicating that the recovery lost momentum. In the second quarter of 2010, growth (annualized) was only 2.4%, well below the previous quarter, when he was 3.7%. For the rest of the year, analysts expect rates of less than 2%, as the high household debt, high unemployment and the disappearance of the stimuli for the purchase remain depressed housing construction and consumption of durable goods. Although it is unlikely that the economy falls into a new recession, the recovery will be very slow. There is no political appetite or agreement between the economic advisers of the Government to implement a new fiscal stimulus package. Since the interest rate monetary intervention can not go lower, it is not clear what else can the monetary policy, especially if, as some fear, inflation fell into negative territory. As well it has warned the head of the Federal Reserve, Ben Bernanke, the times are "unusually uncertain."

Against this background in developed countries, good economic situation in Latin American countries should be a source of both pride and caution. The international crisis is not fully overcome and could return the financial turmoil. It is a good time to sow the boom in export earnings and the abundance of external financing for investment to help improve productivity, especially in non-tradable sectors. It is also a good time for governments to improve the profile of its debt and to save more in anticipation of future difficulties.

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