Roundup: LatAm economies tackle inflation, growth slump

The rapid drop in commodities prices over the past few months has dragged down the already faltering economies in Latin America.

Belt tightening and budget cuts have become the order of the day for the region as major economies there are moving to cope with such challenges as rising inflation and weakening local currencies.

BRAZIL

The region's biggest economy Brazil has rolled out a series of spending cuts, but it has been cautious in this regard to avoid sparking a recession.

A conundrum for the Brazilian government is to rein in inflation while keeping interests at a low level in a bid to spur growth.

"We need a fiscal rebalance to resume growth, creating the conditions to lower interest rates and maintain employment," President Dilma Rousseff told lawmakers.

The Brazilian currency real hit a 10-year low against the U.S. dollar in February, following dismal economic indicators. But the government does not worry much about the depreciation since a weaker real could help drive exports and growth.

In an online economic outlook report for 2015, Goldman Sachs Global Investment Research analyst Alberto Ramos said Brazil should see "relatively contained growth between 0 and 0.5 (percent), relatively high inflation between 6 and 6.5 (percent), and a currency that should depreciate further."

According to the report, Brazil may still be struggling to energize its economy in 2016, but its long-term outlook is positive.

Brazil is a country with great potential and should be able to unleash that potential with "the right policies," said Ramos.

MEXICO

Faced with falling oil revenues, Mexico announced budget cuts on Jan. 31, mostly in the energy sector. The cuts also include cancellation or suspension of several highly-publicized train projects.

The country, however, is expected to benefit from an economic recovery in the United States, its northern neighbor and biggest trade partner.

Consumer confidence dipped 2.5 points in January, as the peso wobbled but ultimately remained steady. On the heels of that news, annual inflation fell to its lowest level in nearly four years, registering 3.1 percent in January, according to Focus Economics, an economic research company based in Barcelona, Spain.

ARGENTINA

Argentina, Latin America's No. 3 economy, is mired in foreign debt renegotiation after coming close to a default last year, but "China's financial support," and other factors are helping to buoy the economy, said Focus Economics.

In February, President Cristina Fernandez had a four-day visit to China, during which she signed a series of trade and investment deals.

"Argentina is becoming increasingly dependent upon China," the economic forecaster said.

VENEZUELA

Already buffeted by domestic political turmoil, oil-dependent Venezuela has been pummeled by historically low crude prices.

With one of the region's most devalued currencies, the country has been keeping a tight control on the dollar, but that led to brisk black-market trade in the greenback that further undermined the bolivar.

Against this background, the government announced a three-tiered exchange rates system: 6.30 bolivars to one dollar for strategic imports such as food and medicines, 12 bolivars to one dollar for non-strategic sectors, and a free-floating market-set rate for private companies and individuals.

So far, the three-tiered system appears to be working, dampening the black-market business and boosting cash flow, according to local monitors.

Endi