Hot Internet stocks seen hurting Latin America
By Michael Connor
BAL HARBOUR, Fla., March 26 (Reuters) - Rocketing U.S.
Internet stocks now attract many of the risk-taking global
investors normally active in emerging markets and will help
make foreign capital scarce in Latin America through at least
1999, the U.S. economist said.
Breathtaking returns for online bookseller Amazon.com
<AMZN.O> and other Internet companies were proving stiff
competitors to emerging markets for private-sector investment
dollars, economist Moises Naim said.
"Which would you rather have: Bulgarian bonds or Amazon.com
shares?," Naim said at a Latin American business executives
conference in Bal Harbour, Fla.
Returns on stocks in the Standard & Poor 500 index of top
U.S. companies have outpaced emerging market investments every
year since 1994, Naim said in a written report.
"The fact that an Internet-based company like Amazon.com
... has twice the stock market value as the entire Venezuelan
stock market or half that of Argentina illustrates the point,"
wrote Naim, also editor of Foreign Policy magazine.
But Latin America, still needing great sums to build
manufacturing plants and other infrastructure, was not just
being hurt by cyber stocks, economists said.
Low prices for oil, copper and other commodities and
investor fears of emerging markets caused by the Asian and
Russian financial crises of 1997 and 1998 ended Latin America's
long expansion for at least a year or two, economists said.
"The name of the game in Latin America in 1999 and 2000 will
be illiquidity," said Naim, adding he expects regional
investment inflows this year of $50 billion to $54 billion.
"This is half of what it was in 1997."
Net private-sector investment inflows to Latin America shot
from $10 billion in 1990 to a peak of $106 billion in 1997
before dropping back sharply last year, Naim said.
David Hale, chief economist for the Zurich Group, told the
executives at the conference that 1999 will prove difficult for
Latin American firms and governments seeking outside investment
monies.
"This year will be a correction, perhaps down to $40
billion," Hale said. "But this is very impressive indeed,
considering where we were just a few years ago."
The economists, as well as bankers, trade officials and
industry executives at the conference sponsored by Business
Week magazine, said Latin America, including troubled Brazil,
was showing pleasing economic stability through the slowdown.
Banks were better capitalized and government policy-makers
were largely keeping to pro-market reforms favored by global
investors, they said.
Domestic pension funds with substantial equity holdings
were a favorable element that did not exist in previous
regional economic crises.
Naim predicted waves of mergers led by bargain-seeking
investors from outside Latin America, a wave that will
transform the region's family-based company-boardroom culture.
"If we take a two or three-year view, Latin America will
come out of this quite well," Hale said.
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