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Is Latin America resilient enough to withstand financial shocks?

How prepared is Latin America to cope with the prospect of higher interest rates in the United States and the possibility of a “super taper tantrum”?

This question was at the heart of a very interesting panel discussion on Latin America’s Macroeconomic Resilience I joined last week, together with Gillian Tett, U.S. managing editor at the Financial Times, the ministers of finance of Mexico and Colombia, the superintendent of the Central Bank of Chile, and the Executive vice-president of Banco Itau. The panel session took place at the recent meetings of the World Economic Forum on Latin America held at the Riviera Maya in Mexico.

Our take: we do not have one but three Latin Americas. The first—Chile, Colombia, Mexico and Peru—outward-looking, faster growing, with very high levels of international liquidity relative to short-term debt, access to the lender-of-last-resort facilities of the IMF, and a very well capitalized banking system. The second—Argentina and Venezuela—are already in managed-crisis mode and in full-crisis mode, respectively. And then there is Brazil: More inward-looking, slow growing, with serious structural challenges but with a war chest of international liquidity and very well capitalized banks. All in all well managed countries in Latin America are as financially resilient as they have ever been to weather a severe storm. Not bulletproof, but much better positioned than they were during past episodes of international financial turbulence.

All in all well managed countries in Latin America are as financially resilient as they have ever been to weather a severe storm. Not bulletproof, but much better positioned than they were during past episodes of international financial turbulence.

This blog was updated on May 18, 2015.

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