Latin America face to 'Enormous Stress' for Economic Crisis

Global economic downturn has cast a pall over the new year in Latin America. While the region's leaders initially struck a positive note in the face of bad news from abroad, most are now drafting plans to create jobs, keep financial systems from wobbling and shore up social programs in case of a prolonged recession.

"It's very hard to have an upbeat outlook about the region, where countries are going to be under enormous stress," Michael Shifter, vice president for policy at the Washington-based Inter-American Dialogue and adjunct professor of Latin American politics at Georgetown University, told Catholic News Service.

The worldwide financial crisis has ended a half-decade boom that saw the region's economy expand by an average of 5 percent a year, with some countries growing by more than 7 percent. The rate slowed to 4.6 percent in 2008, and the most optimistic growth forecast for 2009, by the U.N. Economic Commission for Latin America and the Caribbean, is 1.9 percent.

The plunge in world oil prices has hit countries like Brazil, Venezuela, Ecuador and Bolivia, while in Peru decreased demand for metals has led to the layoff of thousands of workers by mining companies and their suppliers.

One concern is that economic woes could have political fallout, especially in countries that have been retooling their political systems in recent years.

Bolivians will go to the polls Jan. 25 to vote on a new constitution that has been a source of controversy and protest. If it is approved, as most observers predict, Congress will have to bring the country's legislation into line with the new text, and presidential and congressional elections will be scheduled for December. Presidential elections also will be held this year in Chile, Uruguay, Honduras, El Salvador and Panama.

In Ecuador, where a new constitution was approved last year and President Rafael Correa will seek re-election April 26, indigenous organizations have staged roadblocks to protest laws encouraging large-scale mining that they say would threaten the environment and their way of life.

While some observers fear that the economic crisis will deflect attention from environmental issues in the region, the Amazon likely is to be a concern in 2009, said Rick Jones, deputy regional director for global solidarity and justice at Catholic Relief Services, the U.S. bishops' international relief and development agency.

The crunch also is forcing Latin Americans living abroad to make hard choices. Many families in Latin America depend on remittances, the money sent home by relatives abroad. In Central American countries, remittances amount to up to 40 percent of foreign earnings.

But those financial flows have slowed. While remittances jumped from $30 billion to $45.5 billion between 2004 and 2006, the figure leveled off to $45.9 billion last year.

Only half of Latin Americans living abroad said they sent money home in 2008, down from 73 percent in 2006. Cutting the remittance lifeline could push more families below the poverty line, spurring a new wave of migration, according to the Inter-American Development Bank.

People in desperate economic straits may take even greater risks to get past tighter U.S. border controls, Jones said, making them more likely to fall prey to traffickers who force them into virtual slavery to pay off their travel debt once they get to the United States.

Drug smuggling, migrant smuggling and human trafficking have converged under the control of the same cartels, making the migration gamble even more dangerous, he said.

Drug-related corruption and violence are on the rise in the region, especially in Central America and Mexico, but also in countries like Peru, at a time when governments are likely to free up fewer funds to fight them. Shifter said that conjunction of factors should pressure the administration of President-elect Barack Obama to review its approach to combating illegal drugs.

Ultimately, though, the best crystal ball turns cloudy when queried about 2009, because it is difficult to predict how long the worldwide recession will last or its precise impact on the various parts of an increasingly diverse region.

Both Jones and Shifter expect countries to scale back social programs as they pump more money into jump-starting their economies.