South America looks for shield from economic crisis

BRASILIA: Finance ministers from 12 South American countries meet Friday in Buenos Aires to work on coordinating actions to confront the burgeoning economic crisis in Europe and the United States.

Many here are relieved they are not at the heart of the latest financial meltdown and that their economies are still growing, but they are also conscious of the need to prepare themselves for the potential fallout.

"If there's a new recession in the United States and Europe, it will end up affecting Latin America, particularly commerce," said Rubens Ricupero, a former head of the UN Conference on Trade and Development (UNCTAD).

After years of tough structural adjustment policies, often under the watch of the International Monetary Fund (IMF), South America now has "a solid fiscal situation, high international reserves, economic growth and employment," Ricupero said.

But he added: "That doesn't mean that we're immune."

The South American ministers hope to identify the region's weaknesses and find ways to respond to the crisis, said Carlos Cosendey, the Brazilian secretary for international affairs at the finance ministry.

A possible measure, discussed in the past week in Peru, would be "a mechanism to use reserves to help countries in difficulty," to complement actions by the IMF in the region, Cosendey said.

The region has a total 500 billion dollars in international reserves, according to the UN Economic Commission for Latin America and the Caribbean (ECLAC).

The South Americans also want to show their claws in business.

Massive Chinese purchases of the region's primary resources have been a lifeline in recent years.

But the nations also face strong appreciations of their currencies which translate into an increasing loss of competitiveness for industrial products, and a rise in imports.

"We have to define joint and concrete actions to defend our countries from the excessive liquidity which artificially values our currencies, and from the avalanche of manufactured products that, finding no market in developed countries, impact on employment and industry in our regions," Brazilian President Dilma Rousseff said recently.

The head of ECLAC, Alicia Barcena, recently warned that high commodity prices had driven inflation in the region.

A possible counter-measure would be to promote greater industrial and commercial integration to substitute imports with "regional providers," according to Argentina's Economy Minister Amado Boudou.

"We're working closely with all the economies of South America to find some very concrete measures," Boudou told daily Pagina 12.

The 12-member Union of South American Nations (UNASUR), which meets Friday, is however renowned for struggling to agree.

Secretary General Maria Emma Mejia has promised the Buenos Aires meeting will achieve "a strong political commitment... to respond to the crisis as a regional group."

"The task is to look after our region's economy faced with the crisis of capitalism," Bolivian President Evo Morales said Monday.

Analysts warn that a crisis in the world's most unequal region would reverse recent advances in reducing poverty and increasing incomes.

They also underline that the region's capacity for coordination is limited.

UNASUR comprises Argentina, Brazil, Bolivia, Chile, Colombia, Ecuador, Guyana, Paraguay, Peru, Suriname, Uruguay and Venezuela.

Copyright AFP (Agence France-Presse), 2011