Claudia Luna Palencia
Not only in this double crisis that the world is experiencing in the last three years, the Latin American region has performed better than the United States and the European Union (EU), but also in the long subprime crisis – unleashed in 2008 – Latin American countries became a refuge from the crisis for many Spanish and other European companies.
In fact, they did not succumb, because within their diversified business basket, part of their volume rests in countries such as Mexico, Brazil, Argentina, Uruguay, Chile, Colombia, Panama, Ecuador and others.
In the current double crisis (one produced by the pandemic and the other by a shock derived from the invasion and its impact on commodities) we are going through a deep turbulence as if we were on a plane in the middle of a storm.
Europe is at the epicentre of this crisis and is the region of the world that will suffer the most, proof of which is the growing weakness of the euro – punishing the eurozone – which, since the invasion and all the sanctions measures and the intensification of the conflict, has been losing steam in a perverse dynamic because the rise in interest rates, fundamentally in the United States, works as a hoover of capital towards Treasury Bonds; and in any crisis, investors always look for safe havens.
The euro is being affected by the rising interest rate policy and the horizon in which the crisis can only be expected to worsen in European countries that are paying for their energy dependence on Russia with tears of blood.
If before the invasion – 24 February – the euro was stronger than the greenback, and one euro was equivalent to one dollar and 10 cents; in the case of the peso, one euro exceeded 26 pesos on several occasions. Now, seven months later, the euro continues its devaluation path: the single European currency is equivalent to 0.97 cents of a dollar, and with respect to the peso, one euro is exchanged for 19 pesos and 17 cents.
This is a true reflection of the fact that the current scenario is complicated, but with the technical recession that is already looming for Spain in the fourth quarter of this year and the first quarter of next year, in addition to the fact that Germany will also enter recession, as will Italy, and Greece, Portugal and Austria are not ruled out in 2023, according to IMF forecasts, the Eurozone will have a marginal growth of 0.5% &. But countries such as Germany and Italy would end next year with GDP falling by 0.3 % and 0.2 %, respectively.
On the other hand, in 2023, advanced economies will grow by 1.1 % and emerging economies by 3.7 %, and within these, Mexico would have a GDP of 1.2 % with inflation below 5 % & while the United States would have an estimated growth of 1 %. It is worth mentioning that Mexico and Brazil account for 60% of the region’s GDP and for Latin America, the IMF forecasts a GDP this year of 3.5% and in 2023, 1.7%.
ON THE SUBJECT
This week, here in Madrid, Ana Botín praised LA’s “strength” to face the crisis because she believes “it is better prepared” than people think.
The president of Banco Santander inaugurated the XIX Santander Latin America Meeting in which she highlighted the qualities that Latin America has to face the current crisis compared to other regions.
Not only for Santander, but also for BBVA and many of the large IBEX35 companies such as Repsol and Iberdrola, a large part of their income comes from their subsidiaries in Mexico and other Latin American countries.
Of course, Botín is concerned that the Aztec country has cushions to weather the economic storm, as do Brazil and Puerto Rico. These three countries contribute close to 50% of the Spanish bank’s profits.
Since the beginning of the privatisation of financial institutions and the opening of Mexico and the region to foreign capital in the 1990s, Santander has invested a total of 35 billion euros in the region, but has assets of 415 billion euros.
Botín reiterated that in the past and in the present, she continues to believe in the strengths of the region, in its capacity for growth and in the great business opportunity that AL provides.
The daughter of the late Emilio Botín believes that Latin American countries, as a whole, have the macroeconomic room to face what lies ahead, with better capitalised and much better regulated and supervised banking systems. The reality is that she is not wrong.
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