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The ongoing Iraq war will bring new uncertainties to Latin America's economy that has just walked out the troubles of 2002 with observers seeing different impacts on Latin American economies.
It is inevitable that the war-caused turbulence in the world oil markets and the instability of the US dollar will set back investment and consumption in Latin America, and consequently, will slow down the recovery. And the war would influence local economies in different ways.
In a short term, higher oil prices may greatly benefit the trade balance of the oil exporting states, such as Mexico, Argentina, Colombia, Ecuador, Peru and Venezuela, while Chile, which imports 94 percent of its oil, will suffer the worst consequences of the war.
But if taking a long view, the worldwide fall of consumer demands might led to sharp drop of exports of Latin American countries. Then, Mexico whose exports mainly go to the Middle East and the United States will be the seriously hurt.
Eighty-nine percent of Mexico's export goods are sold to the US markets. Since the Iraq war broke out, the lower consumer demands there have produced grave impacts on the export of Mexico's non-petroleum products.
According to statistics by Mexico's economic research center, the auto industry, civil aviation, machine and equipment manufacturing, cement and mining sectors, which all heavily depend on the US market, have seen their export falling by about 5 percent since the beginning of the war.
Meanwhile, due to higher oil prices in international markets and lower crude oil supply from the Middle East, the United States has had to increase oil imports from Mexico. Oil exports, which account for 30 percent of Mexico's budget revenues, have generated extra foreign exchanges for the Latin American country.
Regarding the Mexican economy, a German bank predicts that if the war in Iraq goes on longer than expected, foreign investments would continue to flow in the country in larger amount than ever before and the macroeconomic situation would remain stable.
The Iraq war will raise the prices of some primary products on the world market, benefiting Brazil's foreign trade. According to the statistics from the Brazilian Ministry of Development, Industry and Foreign Trade, the exports have been on the rise since February and the prices of main exported products, such as petrol, soybean, bean oil, rolling steel, cane sugar, pulp and coffee, have climbed markedly.
Analysts believe that in the past weeks Brazil's exports have increased because some countries were storing goods for the coming war, so if the war would end in a short time, its exports will go down. The Brazilian Central Bank and other 100 financial organizations estimate that the rate of economic growth of Brazil won't be over 2 percent this year.
Venezuela is the fifth largest oil exporting country in the world. The rising of oil prices caused by the war benefits that country, whose revenues are expected to increase 12.4 percent this year. However, the two-month general strike launched by the opposition on Dec. 2 and other unstable political factors will offset this positive effect. Analysts said that political uncertainty is the bottleneck of Venezuelan economy and no matter how long the war will last, that country would find it hard to come out of the economic bottom in a short period.
Chile is one of the countries practicing the freest economy in South America. The revenues from exporting products account for some 34 percent of its gross domestic product (GDP) and 92 percent of the crude oil is imported from other countries. A higher US dollar and dearer crude oil will produce negative impacts on Chile's internal commodity prices and energy outlays.
A report recently released by Spain's Bilbao-biscay Foreign Bank said that if crude oil price rises by 10 US dollars for each barrel, the percentage of Chile's favorable trade balance in its GDP will decline by 1.4 percent.
Argentina's goods are mainly exported to countries of South American Common Market and the European Union, with only 10 percent going to the US market. Therefore the Iraq war has quite limited consequences on the country.
It is estimated that Peru won't be heavily affected by the war due to its relatively low exporting volume.
(Xinhua News Agency March 30, 2003)
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