Latin American markets also unsettled

SAO PAULO (AFP) - Fears of contagion from Greeks listing economy have spread as far afield as Latin America, but so far the region once a disaster zone of fiscal failures has resisted the worst of the effects, experts say. In Brazil, the biggest Latin American economy, stocks languished this week, though losses were relatively limited. Exchanges in Mexico, Chile and Argentina likewise dipped lower. The Brazilian currency, the real, reversed its steady climb against the dollar as investors again flocked to the latters safe-haven status. But for the most part, the Greek woes buffeting Europe and the United States have had only a mild impact, even if analysts are watching carefully. How the crisis in Greece will affect Latin America depends on how it develops. It will depend on whether liquidity in world markets will seize up, explained Raul Feliz, from Mexicos CID center for economic research. It will depend on whether European banks enter a situation of bankruptcy or massive losses. If that happens, it will affect Mexico and Latin America, he said, but added, I see that as unlikely. Still, collateral damage is seeping through into some corners of the continent. Argentina, which struggled with its own financial implosion in 2001 that resulted in the biggest sovereign default in history, was reliving some of its nightmare in the Greek drama. With the violent Greek protests against budget, salary and pension cuts, we are lamentably reminded of what we went through in Argentina in 2001, Argentine President Cristina Kirchner said Wednesday. Rather than pointing the finger at the profligacy of Buenos Aires and Athens, though, she blamed the upheaval on austerity demands from the International Monetary Fund and other credit institutions that dont understand what is going on in the world and in society. The issue remains sensitive for Argentina, which is still struggling nearly a decade later to get access to affordable credit something that will prove even more elusive if Greece also defaults. Argentine economists, though, point out that Greece was part of the eurozone club an advantage in terms of winning a bail-out, but also a handicap if its own troubles cause other weak economies such as Spain and Portugal to stumble. Argentina was isolated. Greece is a member of the eurozone. Any Greek default would come with a very high cost, unlike Argentina at that time. Because in Greeces case, there are systemic risks in other European Union countries, said Alejandro Vinitzky, of the consultancy Maxinver. While Latin American economies for the most part are enjoying solid growth, controlled inflation and dependable currencies, skittish investors worried about a global downturn have been beating a cautious retreat. This 'Greek tragedy will provoke pressure for higher interest rates on (government) bonds for most of Latin Americas debt... The bond market is already under stress from what happened over the past months in the world, Gabriel Perez, director of the economy faculty at the Panamericana University in Mexico, said.

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