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3/16/09

Morgan Stanley is the first to be honest about LatAm 2009

Viaducts Break Ranks (1937)
Paul Klee

It had to happen eventually.

I don't have a copy of the report yet (any fwding appreciated), but here's the link to the Bloomie coverage of today's Morgan Stanley macroeconomic review that finally... FINALLY... has a heavyweight player injecting some much-needed honesty into the debate over growth (or non-growth) for LatAm in 2009. Here's the country by country rundown of the Morgan Stanley team's 2009 GDP forecast for the region:

Brazil: GDP to drop by 4.5%
Mexico: GDP to drop by 5%
Argentina: GDP to drop by 4.7%
Chile: GDP to drop by 1.4%
Venezuela: GDP to drop by 4%
Peru: GDP to grow by 0.9%
Colombia: GDP to drop by 1.6%

Regionwide LatAm GDP to drop by 4%

These forecasts are clearly far more pessimistic than the normal ones trotted out by the national governments and dependent economic bodies. They may turn out to be overly pessimistic, but at least they are in the realms of realism and not sugar-coated for sheep consumption. I'm limited to a media-filtered report of the paper for the moment, but even so one quote featured in the Bloomberg text has me vigorously nodding my head in agreement. Here it is:

It is difficult to imagine that credit growth will play a meaningful role in boosting economic activity even as monetary policy is eased, given the sharp declines that we envision in consumer and business confidence, the weakness in labor markets and the risks to the quality of the loan portfolio

Or in plain English, pushing on a string won't do a thing. The regional governments and their economic teams might be anything from smart to stupid, but they're all in the same boat here. And once again, those governments (e.g. Chile, there are others) that treat their fellow citizens as adults and don't try to mask the fact that there's a serious slowdown coming will fare better than those governments (e.g. Peru, there are others) that continue insulting people's intelligence by insisting everything is fine and all you need to do is think pretty thoughts and all the nasty stuff goes away.