What if there is a longer-than-expected suppression of external demand for Latin American exports?
We are beginning to see the effects of this deterioration in external demand. Export sectors are just now beginning to contract in Latin America as the developed world cuts back on consumption. This drop in demand will cause a pullback by producers in manufacturing, mining, and harvesting, leading to widespread job losses. Finally, a rising unemployment rate will hit domestic demand and pull many of these markets into recession. The risk lies in a longer-than-expected world downturn. The discouraging part is that it’s tough to see a way out for these export-dependent Latin American nations without an upturn of external demand. Fiscal and monetary stimulus will likely not lead to full recovery. Thus, it seems reasonable to say that a rebound of Latin America will coincide with an increase in consumption around the world. What if a Latin American country were to default? In December 2008, Ecuador’s president, Rafael Correa, chose to voluntarily default on $30.6 million in interest paymen
