Latin America 2009-2010:  No Paradise without Banks  José Juan Ruiz  Chief Economist  División América  Banco Santander  M...
<ul><li>Some facts before opinions </li></ul>
<ul><li>Latam accounts for 9% World Population : around 600 millions citizens. In 2050 in Latam will live 725 million peop...
1 In spite of that…Latam a real convergence failed story See annex for sources and definitions
1 Why? : Volatility and Institutional fragility From 1980 onwards, 22 countries in LA have suffered either a financial sec...
1 Some Message from Latam to the World?  Source : Agustin Carstens, 2004. http://www.iadb.org/res/publications/pubfiles/pu...
1 The impact of Banking Crisis on  “economic values”  tends to be lasting… “ The banking system will never take you to par...
<ul><li>Where do we stand today? </li></ul>
1 Going South…but alive and ready to fight The global crisis that began in advanced economies has sent severe shocks aroun...
1 With a pretty sound financial system  .. both in absolute and in relative terms
1 With Central Banks which deliver credibility and low inflation
1 Basically sustainaible  savings/investment patterns and high levels external assets
1 Reasonable Public Sector Accounts after strong Public Debt Deleveraging in 2005/2008
Our latest beliefs: Good macro and sounds banks pay dividends Latin America's middle class  Adiós to poverty, hola to cons...
<ul><li>From Here to Where? </li></ul>
1 Fuente: Pär Österholm and Jeromin Zettelmeyer. “The Efects of External Conditions on Growth in Latin America”. IMF Worki...
Fuente: División  America  Step 1: USA Recovery. Real GDP 1980=100
Fuente: División  America y JP Morgan  Step 3: Country Risk  adjustment
Fuente: División  America  There is Growth in Latam !!
Fuente: División  America  In fact, a growing Latam is the central scenario for  investors..
Fuente: División  America  This is also our  view..
Fuente: División  America  With Brazil, Mexico and Chile playing a critical role in the next  stage
<ul><li>What about Risks? </li></ul>
Fuente: División  America  No always the worst happens: “No siempre lo peor es cierto”  A quien ya le ha persuadido la apa...
Fuente: División  America  Low External Financicng Risk: We are not anymore in Kansas!!!
Fuente: División  America  Low External Financing Risk: We are not in Kansas anymore !!!
We do not see a Credit Crunch <ul><li>No Credit Crunch: el crecimiento del credito se desacelera a elasticidades r/PIB nom...
We do not see a Liquidity Crisis
We do not see a Solvency Crisis
We do not see a Credit Crunch.
We do not see a Profitability Crisis
In Latin America POLITICS MATTERS <ul><ul><ul><li>High growth with Stability of Prices </li></ul></ul></ul><ul><ul><ul><li...
The Biggest Risk? To Frustate hopes of the New Emerging Middel Class 'Latinoamérica perderá entre 1,5 y 2,4 millones de em...
No Paradise without Banks and … without Good Central Bankers.. Prudent Fiscal managers… Experienced societies used to the ...
 
We have learnt… Now it is your turn.
 
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The current global economic crisis, its consequences, impact and the road to recovery

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José Juan Ruiz Gómez, Director of Analysis & Strategy, Santander Group, presented on the current global economic crisis, its consequences, impact and the road to recovery in Latin America, at Warwick Business School 02/06/2009

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The current global economic crisis, its consequences, impact and the road to recovery

  1. 1. Latin America 2009-2010: No Paradise without Banks José Juan Ruiz Chief Economist División América Banco Santander May- June 2009
  2. 2. <ul><li>Some facts before opinions </li></ul>
  3. 3. <ul><li>Latam accounts for 9% World Population : around 600 millions citizens. In 2050 in Latam will live 725 million people, equivalent to 60% OECDE population. </li></ul><ul><li>Latam accounts for 9% World GDP : 6.000 bill US $ PPP. This amounts to 40% Developing Asia GDP and to 20% all Emerging Countries GDP. </li></ul><ul><li>Latam GDP per capita is around 10.500 US $ PPP. This is twice Developing Asia GDP Per capita and 74% Central and Eastern Europe GDP per capita. </li></ul><ul><li>Latam holds 6.4% of world wealth stock but 15% of world stock of natural resources. Latam relatively lags in terms of “produced capital”- physical and human capital and in “intangible capital” – institutions, rule of law. - : in both areas Latam has 89% and 94% of world average-. </li></ul>1 Latam 2010: Can you afford to miss 10% of World GDP? See annex for sources and definitions
  4. 4. 1 In spite of that…Latam a real convergence failed story See annex for sources and definitions
  5. 5. 1 Why? : Volatility and Institutional fragility From 1980 onwards, 22 countries in LA have suffered either a financial sector crisis or financial system distress and averted crises. In total: 46 episodes of financial distress in 29 years: 1.6 crisis per year. Source : Agustin Carstens, 2004. http://www.iadb.org/res/publications/pubfiles/pubS-192.pdf
  6. 6. 1 Some Message from Latam to the World? Source : Agustin Carstens, 2004. http://www.iadb.org/res/publications/pubfiles/pubS-192.pdf <ul><li>Banking Crisis are lasting events and extremely costly in fiscal terms and in GDP/welfare losses </li></ul>
  7. 7. 1 The impact of Banking Crisis on “economic values” tends to be lasting… “ The banking system will never take you to paradise, but it can bury you in hell in an afternoon.” Julio Maria Sanguinetti Uruguay President
  8. 8. <ul><li>Where do we stand today? </li></ul>
  9. 9. 1 Going South…but alive and ready to fight The global crisis that began in advanced economies has sent severe shocks around the world, posing a test to the economies of Latin America and the Caribbean. The good news is that during this decade the region has made itself more resilient to external shocks, by strengthening policy frameworks and reducing vulnerabilities in its public finances and financial systems. These preparations mean that countries are now more able to respond to the external crisis, many for the first time, with active policies to boost output and employment and protect the most vulnerable groups. This will help contain the damage from the global crisis and speed up the region’s recovery. World Economic and Financial Surveys Regional Economic Outlook: Western Hemisphere Stronger Fundamentals Pay Off May 2009 http://www.imf.org/external/pubs/ft/reo/2009/WHD/eng/wreo0509.htm
  10. 10. 1 With a pretty sound financial system .. both in absolute and in relative terms
  11. 11. 1 With Central Banks which deliver credibility and low inflation
  12. 12. 1 Basically sustainaible savings/investment patterns and high levels external assets
  13. 13. 1 Reasonable Public Sector Accounts after strong Public Debt Deleveraging in 2005/2008
  14. 14. Our latest beliefs: Good macro and sounds banks pay dividends Latin America's middle class Adiós to poverty, hola to consumption Aug 16th 2007 | SÃO BERNARDO DO CAMPO From The Economist Faster growth, low inflation, expanding credit and liberal trade are helping to create a new middle class
  15. 15. <ul><li>From Here to Where? </li></ul>
  16. 16. 1 Fuente: Pär Österholm and Jeromin Zettelmeyer. “The Efects of External Conditions on Growth in Latin America”. IMF Working Paper, 2007. Fuente: División America. Ver texto para detalles Let’s imaging the external shock is partially reversed
  17. 17. Fuente: División America Step 1: USA Recovery. Real GDP 1980=100
  18. 18. Fuente: División America y JP Morgan Step 3: Country Risk adjustment
  19. 19. Fuente: División America There is Growth in Latam !!
  20. 20. Fuente: División America In fact, a growing Latam is the central scenario for investors..
  21. 21. Fuente: División America This is also our view..
  22. 22. Fuente: División America With Brazil, Mexico and Chile playing a critical role in the next stage
  23. 23. <ul><li>What about Risks? </li></ul>
  24. 24. Fuente: División America No always the worst happens: “No siempre lo peor es cierto” A quien ya le ha persuadido la apariencia de un engaño tarde o nunca el desengaño pondrá su queja en olvido y más cuando el de su parte tan poco hace por creer que pudo o no pudo ser… No siempre lo peor es cierto, 1649 Pedro Calderón de la Barca
  25. 25. Fuente: División America Low External Financicng Risk: We are not anymore in Kansas!!!
  26. 26. Fuente: División America Low External Financing Risk: We are not in Kansas anymore !!!
  27. 27. We do not see a Credit Crunch <ul><li>No Credit Crunch: el crecimiento del credito se desacelera a elasticidades r/PIB nominal en torno al 1 -1.5. </li></ul><ul><li>En el muy corto plazo cambia la composicion del Credito: de consumo a Empresas </li></ul><ul><li>Impacto sobre el crecimiento: + / neutral. El sistema bancario no es una remora </li></ul>
  28. 28. We do not see a Liquidity Crisis
  29. 29. We do not see a Solvency Crisis
  30. 30. We do not see a Credit Crunch.
  31. 31. We do not see a Profitability Crisis
  32. 32. In Latin America POLITICS MATTERS <ul><ul><ul><li>High growth with Stability of Prices </li></ul></ul></ul><ul><ul><ul><li>It was &quot;Governed&quot; without the pressure of a &quot;Crisis&quot; </li></ul></ul></ul><ul><ul><ul><li>Congress accompanied the economic direction established by their presidents </li></ul></ul></ul><ul><ul><ul><li>After the 2005-2006 elections : strong partisan fragmentation, &quot;center-left&quot; policies </li></ul></ul></ul><ul><ul><ul><li>2003-2008: Virtuous Five Year Period </li></ul></ul></ul><ul><ul><ul><li>Economic situation has deteriorated </li></ul></ul></ul><ul><ul><ul><li>Leaders are under stress. </li></ul></ul></ul><ul><ul><ul><li>Governments face the &quot;Crisis&quot; without too much popularity: hard political economy. </li></ul></ul></ul><ul><ul><ul><li>In scenarios of &quot;Crisis&quot;, economic answers subordinated to quality and autonomy of the institutions </li></ul></ul></ul><ul><ul><ul><li>The imminent electoral appointments exacerbates the intervention risks </li></ul></ul></ul><ul><ul><ul><li>Since middle of 2008 </li></ul></ul></ul>The economy faces a high Regulatory Risk.
  33. 33. The Biggest Risk? To Frustate hopes of the New Emerging Middel Class 'Latinoamérica perderá entre 1,5 y 2,4 millones de empleos durante el 2009': OIT En el 2008 número de desempleados en Latinoamérica fue de 15,7 millones de personas. ''Si estas proyecciones de CEPAL y del FMI se mantienen, entre 1,5 y 2,4 millones de desempleados se incorporaran'' a las filas de desocupación en Latinoamérica, Jean Maninat, director regional de la OIT. Latin America's middle class Adiós to poverty, hola to consumption Aug 16th 2007 | SÃO BERNARDO DO CAMPO From The Economist Faster growth, low inflation, expanding credit and liberal trade are helping to create a new middle class
  34. 34. No Paradise without Banks and … without Good Central Bankers.. Prudent Fiscal managers… Experienced societies used to the hardship of adjustments
  35. 36. We have learnt… Now it is your turn.
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