Latam finance chiefs urge calm as markets plunge
Reuters, Thursday, September 03, 1998 at 19:56
(Recasts with key Latam markets falling steeply)
By Roger Atwood
WASHINGTON, Sept 3 (Reuters) - Top Latin American finance
officials tried to work out how to defend their economies from
world market turmoil on Thursday at a meeting in Washington,
while back home key stock markets spiraled downward and
currencies plummeted.
Rattled by a devaluation of the Colombian peso that could
spark a currency crisis throughout the region, the officials
from Latin America's nine main economies urged investors not to
be stampeded into a blanket sell-off of all emerging markets.
U.S. Treasury Secretary Robert Rubin lent his support,
lunching with the officials during their two-day meeting at the
International Monetary Fund and saying developments in the
region were "profoundly important" to the United States.
But gloom and despondency hit most of the region's key
financial markets, especially after U.S. debt rating agencies
Moody's and Standard & Poor's entered the fray.
Brazilian stocks tumbled to close off 8.61 percent at a
two-year low after Moody's Investors Service downgraded the
country's speculative credit rating.
Venezuela's main stock index tumbled 7.5 percent on a
barrage of bad news, accelerating toward the end of the day
when Standard and Poor's said a devaluation of its bolivar
currency was likely in coming months.
The bolivar nevertheless closed only marginally weaker on
Thursday at 583.75 per dollar compared to 583.00 on Wednesday.
In Mexico stocks slid lower and the peso plunged to a new
record low of 10.14 per dollar in its widely watched 48-hour
rate, the first time it has closed below the psychological
barrier of 10 per dollar,
Mexican Finance Minister Jose Angel Gurria complained that
markets were overreacting to world financial problems and
failing to discriminate between emerging economies.
"Markets are certainly overreacting and not discriminating
at all between countries that have done their homework and are
taking care of their fiscal positions, taking care to have a
flexible, modern and responsive exchange rate regime," Gurria
told reporters as he arrived at the IMF.
"Everyone is thrown in the same basket, saying they are all
emerging markets."
Gurria denied that Latin American countries were in
Washington to seek IMF funds to ward off financial troubles.
"We have not come to ask for money. We have not come here
to organize a great fund to support Latin America," he said.
"The main purpose of this meeting is to analyze the
situation of world markets and the impact it is having on Latin
America and to send a clear message to the market that they
must differentiate (between economies)," he said.
Canada's Finance Minister Paul Martin, who was also
attending, said Latin America was committed to economic reform
and had taken the right steps so far.
Rubin told reporters after lunching with the visiting
officials: "We have felt from the very beginning...that what
happens in Latin America is profoundly important for the United
States...You have a host of nations in Latin America that have
been very forward looking in terms of economic policy and
reform. They have accomplished a great deal."
Finance officials from Argentina, Brazil, Chile, Colombia,
Ecuador, Mexico, Peru, Uruguay and Venezuela were attending the
meeting.
Analysts said Colombia's devaluation of its peso on
Wednesday was the first significant change in any Latin
American country's exchange rate policy since Asia's financial
crisis last year.
Colombia's Finance Minister, Juan Camilo Restrepo, has
repeatedly cited the "domino effect" of market turmoil in Asia,
uncertainty in Venezuela and the Russian meltdown for the
peso's vulnerability.
While Venezuela, which is Colombia's second largest trade
partner, is considered the most vulnerable, investor attention
has increasingly focused on Brazil, Latin America's economic
powerhouse, whose gross domestic product of $800 billion is
nearly twice that of Mexico.
Foreign investors pulled money out of Brazil at a frenzied
pace in August, causing the the fastest monthly drain in five
years and pressuring Brazil's currency, the real.
President Fernando Henrique Cardoso, seeking reelection
this year, has vowed not to devalue. Economists say a
devaluation could plunge the entire region into a recession.
Cardoso, speaking in Brasilia on Thursday, said the
nation's economic stability depended on the approval of
government reform projects already pending in Congress, and
that he would not announce a new fiscal package.
"Stability depends on the reforms," Cardoso told a news
conference. "Brazil has the resources to react to any emergency
... In this moment of turbulence, we have the conditions to
advance."
Copyright 1998, Reuters News Service |
