Why are Latin American Economies Booming? -- Exerpt from Victoria Saddi's post on Latin America EconoMonitor

Why Are Latin Countries Booming? The Role of Good Policies

- Victoria Saddi - July 8, 2008

There are two alternative views about the future resilience of the recent strong economic performance of Latin American economies:

1. One approach is that Latin countries have implemented deep macro and financial reforms. According to this view, the recent boom is something permanent and less dependent on the US business cycles than before. Hence, if the US experiences a recession, Latin countries will be affected but their solid macro foundations tend to soften the impact of US slowdown;

2. The second approach is that global conditions and luck helped a lot in the recent EM performance and a correction will come. Fundamentals have improved but spreads have tightened excessively relative to economic fundamentals

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