ECLAC: US debt threatens Latin America and the Caribbean

Sources: ECLACXinhua.

The delay in approving a new ceiling for public debt in the United States is threatening the international financial system, and this could have a dramatic impact on the value of assets, exchange rates, levels of global activity and, as a result, on demand for goods and services produced and exported by Latin America and the Caribbean, warned the Economic Commission for Latin America and the Caribbean (ECLAC).

ECLAC is concerned about the situation in the United States and discussions there about the Government's borrowing limits, and hopes the issue will soon be resolved in the most appropriate manner, given the importance of the United States economy for the world in general and for Latin America and the Caribbean in particular.

The United States is the region's main economic partner, and is even more important for Mexico, Central America and the Caribbean. A very high percentage of investment and financial flows come from the United States. In addition, most of the remittances that alleviate the situation of many of the region's poor households come from Latin American and Caribbean people working in the United States economy.

According to ECLAC, Latin America and the Caribbean as a whole has become the second main holder of assets in dollars (after China). The region has over 700 billion dollars in international reserves.

The delay in approving a new ceiling for public debt in the United States is threatening the international financial system, and this could have a dramatic impact on the value of assets, exchange rates, levels of global activity and, as a result, on demand for goods and services produced and exported by this region.

Although Latin America and the Caribbean has shown itself to be better prepared than in the past to tackle a worsening international situation, any failure to resolve the United States public debt problem would seriously endanger the region's resilience and growth.

The Executive Secretary of ECLAC, Alicia Bárcena, is urging institutions in the United States to find the best way for the world economy to continue the difficult process of recovering from the crisis that began in 2007, such that the region may continue to grow, while also closing any social and productive gaps.

Last week, Bárcena stressed that one of the biggest challenges facing the region is that it is becoming vulnerable to speculative capital movements in the quest for short-term gains.

"We have nothing against capital for the production sector. That is all welcome. But we are not interested in speculative capital which leaves the minute after it arrives, leaving damage as a tsunami," said Bárcena to Xinhua news agency.

ECLAC predicted this month that the regional economy will grow 4.7 percent in 2011 and 4.1 percent in 2012, but it also cautioned that the pace is contingent on how China, the United States and the European Union will fare, and recommended Latin American countries to use the profits from raw materials to boost their economic growth.