MEXICO CITY, Oct. 18 (Xinhua) -- International financial institutions are scrambling to help Latin America and the Caribbean region cushion the impact of the U.S. financial crisis which has already been felt across the region.
Some economists said the financial contagion has already reached many Latin American and Caribbean countries and is beginning to affect exports, tourism and money sent home from migrant workers.
The Inter-American Development Bank (IDB), the Latin American Reserves Fund and the Caracas-based Andean Development Corp. have pledged to provide a total of 10.7 billion U.S. dollars in emergency aid to help Latin American countries ease cash-supply problems, stimulate their exports and avoid intense turmoil in the region amid the global economic crisis.
IDB President Luis Alberto Moreno said the loan will be available for less developed countries in Central America and the Caribbean region and other small South American countries with weak economies.
The central banks, financial institutions or chamber of commerce and enterprises will use the special funds to expand market financing and to avoid economic recession, he said.
The International Monetary Fund (IMF) and the World Bank have warned that developing economies should prepare to face declining exports, reduced access to credit, fewer remittances, unemployment and even closures of some financial institutions and businesses.
Moreno said the IDB planned to provide more loan projects within one or two years, increasing its investment in Brazil, Mexico and Chile, which will become a new locomotive for the economic growth in the region.
World Bank President Robert B. Zoellick said the World Bank could double lending to Latin America if needed to boost cash supply and protect jobs. According to the bank, Latin American countries received between 35 percent and 45 percent of 13.5 billion dollars that it provided to developing countries in 2007.
"I could imagine that will go up considerably this year," Zoellick said.
In a report on the tendency of the financial crisis, the World Bank's chief economist for Latin America and the Caribbean Augustode la Torre said that the region has witnessed major declines in stock price indices and significant currency adjustments. Slower world economic growth could pull back the Latin American growth, which is expected to reduce from 5.6 percent in 2007 to an estimated 4.6 percent in 2008 and to between 2.5 percent and 3.5 percent in 2009.
De la Torre said that countries across Latin America and the Caribbean are feeling the effects of the global financial crisis as credit contracts, demand for exports declines, and commodity prices fall, resulting in a deterioration of terms of trade.
The report said basic products such as energy, minerals and agricultural products occupy a big share of Latin America's exports to other countries. About 90 percent of Latin American population reside in raw material-supplying countries, while over 90 percent of their economic activities have strong dependence on export growth.
In addition, it is estimated that Venezuela, Argentina, Chile, Mexico, Peru and Brazil will face a reduction in their public financial income due to reduced demands for basic products and softer commodity prices.
Meanwhile, Central American and Caribbean countries that are short of raw materials are net commodity importers. For them, the recent downturn in the international prices of fuels, industrial metals and cereals will provide some relief. Unfortunately, the relief will be offset by falling remittances inflows and stagnating economic growth, the report said.
De la Torre said that while there is great uncertainty about the ultimate impact of the global shocks on the Latin America and Caribbean region, downside risks have widened, forcing a reconfiguration of policy challenges and priorities.
He said authorities will be faced with the decision of whether and when to ease the monetary policy, and the answer will depend in part on the inflation level and the amount of stress on financial systems and currencies.
