Mexico City and Sao Paulo, Brazil — As leaders in Washington rushed to stem the growing financial crisis in the United States, Latin American leaders thought they’d be unscathed. Brazil’s president, Luiz Inácio Lula da Silva, when asked what repercussions he expected at home, retorted, “What crisis?” Venezuelan President Hugo Chávez called it the “crash of capitalism.”
A few weeks later, the tone has changed remarkably for a region heavily dependent on the international prices of minerals, crude oil, and food – all of which have taken a hit – not to mention remittances, tourism, and investment.
Stock markets across the region are falling. Argentina’s has sunk 20 percent since Tuesday. Brazil’s dropped 10 percent Wednesday; Mexico’s, 7 percent; Chile, 6 percent.
Mexico and Brazil, the region’s two largest economies, spent chunks of their federal reserves to stem unexpected currency declines. Mexico introduced an emergency stimulus package, while Brazil offered $2 billion in loans to exporters through local banks. The era of uninterrupted economic growth and fiscal surpluses, it seems, could be on the wane.
Yet even as nations await the full impact of a crisis that is reaching every corner of the world, Latin America is better placed today to weather the downturn than at any other time in the past half century, says Gray Newman, senior Latin America economist at Morgan Stanley in New York. Countries in the region have, overall, kept spending within budget and built up their currency reserves. Many have solved external imbalances and adopted flexible exchange-rate systems.
“Faced with a global downturn the region’s largest economies are likely to face a relatively normal business cycle rather than a fully fledged crisis,” says Mr. Newman. “That is good news and represents a graduation from the past for some countries in the region.”
Still, the region will have to readjust after years of steady growth. Average annual growth rates across Latin America – at 5.1 percent from 2004 to 2008 – are expected to fall hard, with expectations for next year at just 2.8 percent, according to Rahul Ghosh, head of Latin American country risk and financial markets at Business Monitor International in London.
Commodities prices are a key reason. The metals, grains, and livestock that South America sends around the world, particularly to China, helped push Latin America to five years of unstinting growth. Trade surpluses that averaged almost $100 billion a year between 2004 and 2008 are likely to fall to around $23 billion next year, according to a Morgan Stanley report.
The nations that have worked to get their economies in order – such as Brazil, Chile, and Peru – are among the best placed to keep growing next year.
Argentina, Venezuela, Bolivia, and Ecuador are expected to face tougher times – both because they are dependent on commodity exports, says Alfredo Coutino, a senior economist for Latin America at Moody’s Economy.com, and because of greater needs for external financing.
On Tuesday, President Cristina Fernandez de Kirchner in Argentina sent a bill to Congress with a plan to nationalize the country’s $30 billion private pension system, in an effort she said was to protect retirees in the midst of the financial crisis.
The nation most directly affected by the US economy is Mexico, where more than 80 percent of exports head north, and where remittances represent one of the most important sources of income. Already, signs of trouble have surfaced in Mexico. The peso has plunged more than 20 percent this month after years of stability. Growth is now estimated at less than 2 percent for 2009.
President Felipe Calderón introduced a $4.4 billion “emergency spending” plan for a new oil refinery, infrastructure, and new hospitals and schools to stimulate job growth. He remained optimistic despite the problems. “Once these difficult moments pass, our economy will be stronger, will generate more jobs, and will grow more quickly,” he said.
It is optimism that Mr. Coutino shares. He says Mexico has taken proper measures such as reducing its external debt and accumulating sufficient foreign reserves, unlike in past crises. “The big difference with past crisis episodes is that Mexico is in a better macroeconomic situation now. They are not going into recession,” he says. “They do have resources they didn’t have in past crises.”
That is true across the region. In the past, Latin American economies were so tied to the US that when crisis hit there, the rippled effects were felt across the continent, in sales, income, and most noticeably in gross domestic product.
But nations such as Brazil have decoupled in recent years. Business Monitor International forecasts that only 14 percent of Brazilian exports in 2008, for example, will head to the US. For Brazil, Argentina, and other nations in the region, demand in Asia has been a buffer.
Over the weekend chief bankers from across the region met in Santiago, Chile, to address the regional impact. In a joint statement they said: “We’re in better shape to face the financial turbulence, thanks to solid economic fundamentals.”
Still, Newman cautions, some countries are being too optimistic. Argentina, Brazil, and Colombia, for example, still expect less than 4 percent growth next year, according to the International Monetary Fund; Newman estimates all will be closer to 2 percent.
The past half decade in Latin America has been one of boom times. Venezuelan President Hugo Chávez has been able to pour billions into social programs for the poor across his country and sent oil at subsidized rates around the rest of the region with oil windfalls. Lula has been able to tackle poverty, increasing the social spending budget fourfold in 2008.
Now the equation is changing. Oil prices, from highs of around $147 a barrel in July, has fallen to less than half that amount. The fall robs nations like Venezuela, Mexico, Bolivia, and Ecuador of much-needed cash, and many are being forced to adjust future spending.
“What I would say is that this is the first real test for Lula and Chávez,” says Mr. Ghosh. “This has been a great time for Latin America in terms of external conditions. It will be interesting to see if they stick by the market-friendly policies they’ve advocated. There will be a public clamor to spend in a bid to prop up growth and help consumers hit by slower growth and inflation.”
transformed the cost of visiting a number of other highly attractive destinations. Australia comes first. As recently as six months ago, the Aussie dollar was traded almost at parity to the U.S. dollar. Suddenly, the U.S. dollar buys $1.40 to $1.50 Australian dollars (the rate varies from day to day), and Australia has become 40 percent to 50 percent cheaper to the American tourist. Hotel rates and restaurant costs “down under,” sightseeing fees, clothing and souvenirs are today considerably below the price levels to which we’re accustomed. Mexico’s currency has also weakened substantially against the U.S. dollar. A year ago, you received 10.50 pesos for one U.S. dollar; today, you receive between 12 and 13 pesos to the dollar. In a country so easily reached from all parts of the U.S.—in Acapulco and Puerto Vallarta, Cancun and Mazatlan, along the Mayan Riviera and the new Nayarit district—prices were always moderate even before the strengthening of the dollar, but now they’re positively cheap. So the smart American traveler will dust off those travel plans and book a flight to this colorful country with its gracious, courteous people—and low, low costs. Thailand presents a mixed picture. Its unit of currency, the baht, has recently been selling at a rate of 34 to the dollar (earlier, the rate was 28 to the dollar), and a country that was always low-priced to the traveler with U.S. dollars has become cheaper still. Unfortunately, there’s considerable unrest in Thailand, culminating recently in street riots and some bloodshed. But the tourist has always traveled safely in this land of gentle Buddhist people. I would continue to recommend travel there and remain firm in my belief that the unrest will be short-lived.
Because we couldn’t afford the $15,000 per night Coral Suite at the Four Seasons (which includes a personal butler), we moved on a few miles to the charming surfing haven of Sayulita, 30 miles north of Puerto Vallarta.
fishing hamlet to a city that has outgrown its geographical boundaries.
Just one hour from the luxury and excitement of Puerto Vallarta, the village of Yelapa lures day trippers with the promise of rustic charm and exotic seclusion. Yelapa, meaning “gathering place,” was once just a sleepy fishing outpost, but has recently found new life as both an artist retreat and an outdoor recreation destination. As Yelapa has no streets or automobiles, visitors from Puerto Vallarta must reach the village by boat. After arriving, visitors can mingle with the eclectic locals, hike through the mountainous jungle behind the village or simply relax on the beach and enjoy the scenery. With so many possibilities just a short journey away, Yelapa might be the perfect daytrip for Puerto Vallarta visitors in search of an exotic detour.
American visitors to Mexico will find their dollars buying more than they have in a long time. Above, La Parroquia de la Purisima Concepcion, the main parish church in Tequila, Mexico, is virtually in the center of town. The plaza is a popular gathering spot where tequila tours are sold.
Now, we ask, where exactly are the Sierra Madres? Well, there are actually three mountain ranges in Mexico, all referred to as the Sierra Madres. The first is the Sierra Madre Oriental range that runs about 700 miles from north to the south on the eastern side of Mexico. On the western side of Mexico, the Sierra Madre Occidental range runs about 700 miles from the 
All Mexican land within 100 km of the borders and 50 km of the shorelines is considered as restricted zones and treated differently than the interior land. Since the beautiful western coastline property along the Mexican Riviera lies within the 50 km restricted zone, it is being slowly but surely acquired by foreigners through fideicomisos, as the ejido farmers privatize it. Of course, as it converts, its value and selling price skyrockets, thereby providing substantial new wealth for those fortunate land owning families or ejidos. There is so much magnificent coastline available, this process of conversion will probably continue for another generation.
While boating in Banderas Bay, you peer across the water and see countless beautiful villas and condominiums nestled in the foothills of the Sierra Madres and you must agree, “There’s gold in them thar hills”; the real treasure of the Sierra Madres is the hills themselves and the real estate contained therein. It all lies before your eyes and is now available to you in Puerto Vallarta. So, why hesitate? Come on down this winter and explore the opportunities that await you in Paradise.
Anyone can set up a real estate company in Mexico, even a foreigner. There are no special requirements or brokerage licenses to obtain. We can’t have escrow accounts as real estate agents, whether we are foreigner or nationals. Do not let us hold your money. 
If you are buying within the interior of Mexico, you don’t need to establish a bank trust, but you will receive a deed or escritura. All of the above still applies, be careful and get your own team.
Mexican discount carrier VivaAerobus said Monday it will launch new nonstop service from Austin to Puerto Vallarta starting next year.
Before John Huston’s 1964 film Night Of The Iguana, Puerto Vallarta (
