China 'Black Monday' And Latin America: Brazil, Venezuela, Mexico Among Economies Showing Anxiety After Stock Market Meltdown
China 'Black Monday' And Latin America: Brazil, Venezuela, Mexico Among Economies Showing Anxiety After Stock Market Meltdown
"If China is about to slow down even more, then [one] can realistically expect commensurate consequences in places like Brazil, Peru, Colombia and elsewhere," comments AS/COA's Brian Winter.
As the plunge in Chinese stocks rattles global financial markets, Beijing’s economic slowdown is stoking fears of more dismal times to come for Latin America’s sluggish economies, many of which have come to rely increasingly on China as a financial lifeline. If the recent tumult in global financial markets is an indicator of deeper economic problems in China, that could have serious reverberations in Latin American countries in the months to come, analysts said.
Latin American stocks were not excluded from Monday’s massive selloff in financial markets that caused stocks to plunge to dramatic depths in Asia and Europe. Brazilian stocks fell Monday by more than 5 percent, with the benchmark Bovespa stock index dropping to a six-year low. Brazilian, Chilean, Colombian and Mexican currencies also have tumbled steeply in the past year amid trepidation over China’s economy....
Brazil is already a prime example of how falling Chinese demand affects Latin American countries, said Brian Winter, vice president of public policy for the Americas Society/Council of the Americas, a think tank based in New York City. “Demand from China started to slow down two or three years ago, and that has been a backdrop to all the problems we’ve seen in Brazil,” he said. “If this market turmoil is telling us that China’s about to slow down even more, then I think you can realistically expect commensurate consequences in places like Brazil, Peru, Colombia and elsewhere.”
The recent stock plunge also has exacerbated a drop in the global price of oil, which has particularly serious consequences for Venezuela and Ecuador, countries that have relied heavily on oil exports to fund social programs. The oil-price drop has already hit Venezuela hard as President Nicolas Maduro grapples with increasing scarcity of basic goods and rising inflation rates. Ecuador has also seen a growth in street protests against President Rafael Correa as the government has turned to tax hikes and other measures to make up for the budget shortfall....
