Latin America prepares for economic downturn
Washington, DC, United States (AHN) – Latin American finance ministers are trying to shield their countries from disaster amid predictions U.S. government budget cutbacks could hurt the region’s economies.
Economic ministers from the 11-nation Unasur organization met last week in Buenos Aires, Argentina, to discuss defensive strategies. They are working on an agreement that would create a roughly $12 billion emergency fund to bail out collapsing economies.
They also seek to reduce their dependence on the U.S. dollar for international trade and to develop policies to balance their trade deficits.
Unasur consists of Brazil, Colombia, Bolivia, Chile, Ecuador, Guyana, Paraguay, Peru, Surinam, Uruguay and Venezuela.
So far, Latin America’s economy has avoided the worst of the economic collapses in the United States and Europe that began in 2008 with a stock market collapse and recession. A brief drop in commodities prices along with government spending programs that shored up declining industries helped them avoid the worst of the crisis. However, economists predict the resilience of Latin American economies will not last much longer.
South American economies grew at an average of 6.6 percent last year, according to the International Monetary Fund.The Fund’s economists predict growth will slow to 4.7 percent this year and 4.1 percent in 2012.
By comparison, U.S. economic growth this year is running at 2 percent. Some European countries are showing no growth.
Stock markets in Latin American countries fell as much as 15 percent last week on news the credit rating service Standard & Poor’s downgraded the U.S. credit rating to double-A plus from triple-A.
Augusto de la Torre, the World Bank’s chief economist for Latin America and the Caribbean, said this week the outlook for Latin America is uncertain as concerns grow about another crisis for the United States and Europe.
China could be the next to falter as Western markets dry up for their manufactured products, he said.
“If China has a hard landing, that will hit us hard,” de la Torre told the Peruvian news media during an economic meeting.
Unasur leaders are exploring options to increase trade with China as its Western markets for manufactured products fizzle.
Protecting the economy is a major campaign issue in Argentina, where current president Cristina Fernandez won a landslide victory in primary elections this week.
She said at a press conference after the primaries that keeping Argentina’s economy strong would be a top priority for her if she is re-elected in October.
Low-income persons are most likely to be hurt by U.S. budget cuts that could reverberate around the world, including Argentina, she said.
Wall Street economists warn that her policies of price controls and using central bank reserves to pay debts could backfire for South America’s third largest economy.
The policies strengthen government control but depress market forces that help to balance the economy, according to some economists.
Argentina’s inflation rate is running close to 25 percent.
Other economic concerns are arising in Brazil, where inexpensive imported products are hurting the domestic manufacturing industry.
Chile and Peru still have stable economies as investors try to protect their assets by purchasing gold and copper, but economists predict declines in the precious metals market.
A decrease in demand for oil is depressing the economies of Venezuela and Mexico.
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Germany registers 1.5 percent economic growth for Q1; France logs 1 percent
Berlin, Germany (AHN) – Germany and France surprised the eurozone with strong economic growth rates for the first quarter of 2011. From January to March, Germany logged a 1.5 percent economic expansion, while France logged 1 percent.
The healthy gross domestic product growth rates of the two largest economies in the European zone contrasts with lame 0.5 percent growth experienced by Britain for the same period. Germany and France account for about half of the 17-nation eurozone’s GDP.
Germany’s growth rate, reported on Friday by the Federal Statistics Office, was higher than analysts’ expectations and is an indicator of Berlin’s full recovery from the global financial crisis and the recession. Germany’s growth was fueled by the country’s investment, construction and consumer spending.
France also surpassed economists’ expectation with its largest hike in GDP growth since spring 2006. Business investment – which expanded by 1.9 percent – was the driver behind France’s unexpected GDP growth rate.
For the fourth quarter of 2010, Germany’s economy expanded by 0.4 percent only, while France registered a 0.3 percent GDP growth rate. For the same quarter, Britain logged a 0.5 percent contraction.
Given these trends, economists forecast Germany’s economy would expand by 3 percent or more this year.
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Stocks end higher on positive economic data
New York, NY, United States (AHN) – U.S. stocks ended higher on Thursday boosted by a better than expected rise in the nonmanufacturing index, a 3.6 percent jump in productivity in 2010, rise in factory orders and decline in jobless benefits applications.
The Dow Jones Industrial Average was up 20 points or 0.2 percent to 12,062 with Cisco Systems Inc., AT&T Inc., Bank of America Corp. as the top gainers.
The Standard & Poor’s 500 Index rose 3 points or 0.2 percent to close at 1,307 with cosmetics maker Estee Lauder as the bigger gainer for reporting higher-than-expected profit and sales for the second fiscal quarter.
The Nasdaq Composite Index gained 4 points or 0.2 percent to 2,754. Sears Holdings and Ross Stores were among the big gainers in the tech-heavy index.
Oil for March delivery declined by 21 cents closing at $90 a barrel.
Gold futures for April delivery rose $4 to settle at $1,336 an ounce.
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Algeria joins Tunisia in widespread economic riots
Algiers, Algeria David E. Miller – Widespread riots raging in Tunisia for the past three weeks have spread to neighboring Algeria, where three demonstrators were killed and some 800 injured.
The first casualty, 18-year-old Azzedine Lebza, was shot dead while attempting to break into a police station in Ain Lahdjel, 330 kilometers (180 miles) southeast of Algiers. The second, 32-year-old Akriche Abdelfattah, was hit in the face by a tear gas canister in the town of Bou Smail, 50 kilometers west of Algiers. The third body was found in a hotel burnt by rioters.
Algerian Interior Minister Dahou Oul Kablia insisted the unrest was neither spontaneous nor caused by economic problems. In an interview with Algeria’s Channel 3 radio station, he described them as “criminal behavior” and a “vengeful trend” perpetrated by “youths who attacked public buildings and robbed commercial centers.” The minister threatened to criminally pursue the perpetrators, saying that 763 security personnel were injured in the riots, as opposed to only 63 civilians.
Riots erupted in Algeria Jan. 5 in response to soaring unemployment and a government decision to lift prices of staples such as sugar, flour and cooking oil. Government ministers met Saturday and agreed to slash import duties and taxes on those products, but the protests hadn’t abated by late Sunday.
“Following the ministers’ meeting yesterday where they decided to cancel tariffs and lower prices, the riots have calmed down and things in Algeria returned to normal,” a member of the editorial board of the Algerian daily A-Chourouk told The Media Line on condition of anonymity.
Algeria, a major exporter of oil and natural gas, has struggled to quell civil unrest caused by endemic unemployment and government corruption. Saturday’s opening editorial in A-Chourouk, titled “What are you waiting for?,” squarely put the blame for the riots on the government.
“It is strange that our country’s leaders have remained silent in the face of the dangerous deterioration, none of them uttering a single word to put out the flame of anger,” columnist Rachid Oul Bousyafa wrote.
Despite what it termed “significant progress,” the International Monetary Fund (IMF) said in November that the Algerian economy must act to create jobs for the younger generation by reducing the economy’s reliance on oil and gas. Even as gross domestic product is forecast to grow 4 percent this year, unemployment won’t fall much below its 2010 level of 10 percent, the IMF forecasts.
“Our officials have excelled in creating failures; despite the financial abundance Algeria enjoys … they dealt with the social anarchy with the utmost stupidity. Rather than taking urgent measures to quell the anger, they began spreading accusations left and right, trying to find hidden elements who mobilized the street. Well, they haven’t found the hidden elements and haven’t stopped the current deviation.”
Meanwhile, Tunisian police has reportedly used live ammunition against protesters Saturday night. Al-Jazeera reported that four Tunisian protesters were killed in Thala, near the Algerian border. The Tunisian army has deployed in Thala as police forces moved out, local sources reported.
U.S. State Department spokesman Philip Crowley commented on the Tunisian riots for the first time on Friday, saying the American administration was concerned by the Tunisian government’s interference with the Internet, urging “restraint on all sides.”
Masoud Ramadani, a member of the Tunisian Human Rights Union, said there was no organizational connection between the demonstrations in Algeria and Tunisia, but both countries suffered from the same economic and political problems: rising prices and regional cleavages between rich and poor.
“The government response in both cases is also similar: violent oppression, which even led to death in some cases,” Ramadani told The Media Line. “The protesters are simply shouting out against tyranny, and poverty. The situation is very volatile.”
Ramadani said the Tunisian government has still not engaged civil society, which would likely lead to continued protests throughout the country.
“A modern state cannot respond to legitimate civil society claims by police violence,” he added. “Currently the regime is only speaking to itself; not to civil society or the people. This is very sad.”
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Fed’s $600 Billion Economic Stimulus Plan Drives Stocks Up
New York, NY, United States (AHN) – The Federal Reserve’s announcement to buy $600 billion in bonds to stimulate the economy sent global markets rallying and U.S. stocks surging on Thursday.
The Dow Jones Industrial Average was back in the same height before the crash of Lehman Brothers in 2008 gaining nearly 220 points or 2 percent to close at 11,435.
The Standard & Poor’s 500 Index went up 23 points or 1.9 percent to 1,221 with financials gaining the most.
The Nasdaq Composite surged 37 points or 1.5 percent to end at 2,577.
Oil for December delivery rose $1.80 or 2 percent to close at $86 a barrel.
Gold futures for December delivery jumped $45 or 3.4 percent to a record high of $1,383 an ounce.
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