Much of Latin America depends on trade with the United States (which absorbs half of Latin America’s exports, alone, for example). As such Latin America will also feel the effect of the US financial crisis and slower growth in Latin America is expected.
Due to its proximity to the US and its close relationship via the NAFTA and other agreements, Mexico is expected to have one of the lowest growth rates for the region next year at 1.9%, compared to a downgraded forecast of 3% for the rest of the region.
A number of countries in the region have come together in the form of the Latin American Pacific Arc and are hoping to improve trade and investment with Asia. Diversifying in this way might be good for the region and help provide some stability against future crises. For the moment, the integration is going ahead, despite concerns about the financial crisis.
However, the problems of a regional blocs, Mercosur (the Southern Common Market), shows that not all is well. While Mercosur is its relevance being questioned, an IPSoverview of its recent challenges also highlights that a number of South American countries are raising trade barriers against their neighbors as the crisis starts to bite more. Rather than regional integration and a unified position to present to the rest of the world, concerns of fragmentation are increasing. This also affects Brazil, as the regional economic superpower; more bickering within its sphere means distraction from the global scene.
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