South American economic overview – October 6, 2008

General: The full-fledged global financial crisis will inevitably affect South America. Traditional exports will find fewer buyers, and less foreign capital is expected to flow in. The region has grown an average of 5.5% for the past few years, but this growth is now expected to take a serious fall. For this year, the yearly growth is still expected to reach a respectable 4.6% but the current outlook for 2009 is a bleaker 3.4%. Falling commodity prices for soy, gold, copper and oil will seriously challenge the region's individual governments.

Argentina: Initial numbers put the GDP growth for August at a very pleasant 8.3%. But farmers still have unresolved issues even after they forced the government to rescind export taxes on soy exports. Strikes in the agricultural sector are widely expected.

Steel Production: 524,000 mt in August, an increase of 8.0% over last year. In the first eight months of 2008,  3.9 million mt were produced or 14.0% ahead of last year's pace.

Brazil: Four successive interest rate hikes by the Central Bank seem to have curbed inflation somewhat. Preliminary numbers for August show the slowest pace in five months. The current-account-deficit  widened to $21.9 billion in August for the last 12 months. Industrial output fell 1.3% in August from the previous month. Economists fear that the inevitable credit crunch will put a stop to the fast growing consumer spending which has been behind Brazil's strong economic performance as of late.

Steel Production: 3.1 million mt in August or 6.9% more than last year. In the first eight months of the year, 23.8 million mt were produced or 7.5% more than last year.

Chile: The falling copper price as well as the fastest growing inflation rate in 13 years are the two main concerns for Chile's government. September saw the fourth straight increase of the benchmark lending rate, which now stands at 8.25%.

Copper Price: $2.7034 per lb as of October 3, as quoted at the London Metal Exchange.

Venezuela: President Chavez has declared that the country will not be immune to the global financial crisis and the prevailing credit crunch. His finance minister has called on his country to practice "austerity." Given the government's record of reckless spending, particularly on social programs, this call is none too convincing. Economic growth for this year is still expected to come in at around 6%.

Steel Production: 410,000  mt in August or 14.5% more than last year. In the first eight months of the year, 2.9 million mt were produced or 13.3% less than last year.