Latin America] A look at the crisis in the region - How are the neighbours doing?(2)

• BRAZIL 

Brazil is the country most hit by the crisis, because it is the one most involved with the rest of the world (I know that accepted legend gives that slot to Chile, but it is only as a result of a statistical quirk caused by inflated commodity prices. You are not international because you have a supermarket in Buenos Aires or Bogota, and when your mind does not go beyond the Sunday lunch with your in-laws). Brazilian agricultural and industrial exports go round the world, its banks have a big presence in the region, and its engineering companies take on construction work all over the place. 

In the past months it has had to spend large resources (over U$ 200 bn) supporting its state and private banking system, shore-up large companies, extend unemployment benefits, reducing taxes for the middle classes, and even announced that it would use U$ 36 bn of its U$ 200 bn reserves to extend domestic credit lines (remember how everyone cried "foul" when Chavez started that trend?). 

What do the latest Brazilian figures show? One third of industries said they would shed staff and 0.65 million jobs were lost in December alone, a month when Industrial Production collapsed by 14.5 %. Agriculture is not much better, with an 8 % expected fall in total crop yield. The 2008 Current Account was U$ 28.3 bn in the red, compared to a 2007 surplus of U$ 1.56 bn, and the U$ 518 million trade deficit in January was the first since 2001.  Bank lending spreads last December were at their highest since August 2003. Inflation ended 2008 at a moderate 6 %.  

After an apparent improvement mostly last year, fiscal accounts looked pretty horrible again in the last quarter of 2008. The primary surplus completely disappeared (in fact it was in deficit to the tune of about U$ 200 million) which meant that there was nothing with which to cover the quarterly interest bill of about U$ 17 bn. The various support programmes are not going to make it any better. Still, Lula (whose son was robbed earlier this week at a traffic light) has an approval rating is a tremendous 70 %, and it is just about carnival time, so why worry about some dull statistics? Brazil has also been flexing its regional muscles on many fronts, probably posturing for that hypothetical permanent seat in a revamped Security Council. 

• COLOMBIA 

As philosophical and even Byzantine discussions continue on the advisability and likelihood of re-election for the cocky president Uribe (the polls are not due until 2010), his economy is not doing that well. For some reason, the country is slow on statistical reporting, but we know that Industrial Production dropped by 13.3 % in November, and unemployed in December was 0.7 up at 10.6 %. Foreign remittances in November plunged by 31 %, and the peso has been under downward pressure. The authorities still expect the economy to grow 3 % this year, though private analysts expect nil or even negative growth, following a preliminary estimate of 3.5 % for 2008. The economy was already showing signs of running out of steam before the world crisis set-in. 

Scandals of human rights violations against trade unions and peasants continue to surface regularly, and despite some highly publicised hostage releases, the FARC continues to sow bombs and make life difficult. 

With probably the largest "maquiladora" sector after Mexico, Colombia is bound to suffer from lower demand, to which the fall in remittances will add an aggravating factor. Meanwhile, huge amounts of resources are also going on fighting the guerrillas, in a conflict which is probably not winnable on the military front.