Friday, May 25, 2012

Global economy uncertainty.The Unsolved European debt problem consequence

The still unsolved European debt problem, is charging its fee on the global economy current prospect.It seems that a global economy slow down, has become unavoidable. Policy makers are preparing theirs best tools to deal with it.Latin America average economic growth expectations, close to 4% a few weeks ago, might also be hit.However, quite to the opposite to previous experience, this time Latin America has better and more effective options to overcome the impact of such slow down.It has an healthy external financial credit,a banking system isolated from the the risk exposures of other global banks, and policy makers capable to coordinate policy response, in case it is needed. No matter the good economic stand Latin America has to face the current uncertainty , the key issue is still related to the real impact the European events, will have on the global economy as a whole.European zone is still in a recessionary mood ,and it perform like a brake to the global recovery dynamics. Whether the Euro zone is capable of dealing orderly with Greece economy weakness, it can make a difference.After all , it is not just up to the Greek Government to decide on its own, what it has no way to get control of.Either, to leave or to stay with the euro zone ,would probably be a joint euro zone and Greek Government decision. This means that in case it is decided Greece is better off out of the euro zone , it will be based on a plan to mitigate the cost. The critical issue would be if it happens the other way around.With no guide line plan,no clear path where the Greece economy is headed to, after such a move. In time of uncertainty, there still some room for trust in the quality of judgement of global leaders , politicians and Global financial institutions.

Friday, May 11, 2012

Latin America : Looking forward for its best alternatives Although it might seem unusual, Europe with its debt problem is in an alike situation to the one America Latina had in the eighties.Is Europe next to also have a lost decadae.Maybe so. The point to address is what America Latina has learned from the past. 1.- Ideology is not the best path to solve the social problems 2.- The State is not an efficient partner to complement the private sector 3.- Private investment need clear and stable rules 4.- Inflation does not pay off 5.- Property rights matter for goods exchange and investment decision 6.- Financial markets ,needs regulation up to the point necessary to be in charge of systemic risk, but no more than what it requires to do its resource allocation task.- 7.- Markets flexibility helps to get more competitiveness advantage All of the previous conditons one or another, have been presents in the current pace of economic growth of Latin America economies.Those closer to them , have better performance regarding those more distant from them. The question is what comes next?. It seems that the option goes in one direction, to pursue the path already done. Thius does not means to deny some corrrections, specially when it comes to unequalities and key services (education and heakth). But the core of aditional progress, it is hardly different to the one proved.-