Wednesday October 7, 5:18 pm Eastern Time
CSFB sees recessions in Brazil, Venezuela in 1999
MEXICO CITY, Oct 7 (Reuters) - Credit Suisse First Boston said on Wednesday it expected Brazil's gross domestic product to
contract by 2.2 percent next year and Venezuela's by 2.3 percent.
CSFB said in a report it expected just 0.7 percent GDP expansion in Brazil this year and 0.5 percent growth in Venezuela for
1998.
For Latin America as a whole, the investment house said it expected economic expansion to slip to just 0.7 percent in 1999 after 3.0 percent growth in 1998.
''We have significantly revised our growth projections and the result is an overall cut in Latin America's contribution to global activity,'' CSFB said. ''Brazil and
Venezuela will experience recessions.''
The brokers said slower growth was inevitable in 1999 to prevent a widening of current account deficits while the financing environment gets tougher.
''Thus Latin America will contribute to a deflationary cycle that threatens to engulf the global economy in the near future. Still, that reduction in growth may not be
enough to maintain stability.''
CSFB said the regional current account deficit should be contained at about the same level as 1998 because of narrower trade gaps, especially in Brazil. In terms of
GDP, trade deficits are expected to average 4.2 percent, with Chile and Colombia recording the widest imbalances.
In addition, Credit Suisse said it expected foreign reserve growth to be minimal as most countries try to meet financing needs in an environment of substantially
reduced capital inflows.
However, preventive measures to seek financing from non-market sources suggested there would be no immediate credit crunch.
In addition to the negative growth forecasts for Brazil and Venezuela, CSFB estimated GDP expansion in 1999 of 2.6 percent for Argentina, 2.9 percent for Chile,
2.0 percent for Colombia and 2.5 percent for Mexico.
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