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TheGreat Recession in South America, primarily involved disruptions to the bond markets ofBrazil,Argentina,Colombia andVenezuela. As most South American countries are commodity exporters, they were not directly affected by the financial turmoil.[1]
The continent experienced a concurrentagricultural crisis in early 2008.[2]Food prices increased due to use ofarable land for the production ofbiofuels. Second generation biofuel processes increased productionsustainability, using biomass from inedible parts of food crops, such as stems, leaves andhusks.[3] Othernon-food crops, such asswitchgrass, grass,jatropha, whole cropmaize, andmiscanthus could be used to produce biofuels without impacting food production.[3] Industry waste products (such as,woodchips,skins andpulp) also replace the need to waste arable land for biofuels.[3] Food prices, rose significantly from 2002, reaching a peak during the first quarter of 2008, with the average food price rising 50% over one year.
Subsequently, South American countries were affected by the global slowdown and decreased food prices from declining demand.[4] In June 2008, theEconomic Commission for Latin America and the Caribbean (ECLAC) expected 4% growth for 2009. However, by year end it predicted 2009 would end the six years of prosperity whereLatin America benefited from highraw material prices.[5] The region'sproduction was expected to decline andunemployment to increase.[6][7] TheCenter for Economic and Policy Research emphasised carefulmacro-economic policies to mitigate damage, with South American countries increasingly independent of the U.S. economy.[8]
As the second-largest economy in South America and an important exporter of both machinery and agricultural goods,Argentina was affected by the global slowdown. The country saw slower economic growth, a steep drop in commodities prices, and a damaging drought in the farm provinces. Local economists expected recession.[9][10] Former PresidentNéstor Kirchner, husband of then president,Cristina Fernández de Kirchner, leader of the rulingJusticialist Party, gave a speech on February 17 2009, predicting the international crisis would cause Argentina's "most difficult year in the last century."[11]
Though escaping the early impacts of theGreat Recession,Brazil's economy shrank 3.5% in the fourth quarter of 2008, industrial production 17.2% lower in January 2009 than the prior year. GDP grew by 5.1% over 2008. Capital spending fell 9.8% and household consumption by 2% in the fourth quarter.[12]The Wall Street Journal showed a 13.6% drop ingross domestic product in the 4th quarter of 2008 on anannualized rate and industrial production for December 2008 18.6% lower than December 2007, with 700,000 fewer jobs between November 2008 and February 2009.[13]
TheInternational Monetary Fund (IMF) reported as soon as February 2008 that a U.S. slowdown would hurt the economies of theCaribbean Islands, especially the Eastern Islands. Thetourism sector is a large part of the Islands' economies, and are heavily dependent on U.S. visitors.[14] However, lowerinflation andcurrency depreciation in several Latin American and Caribbean nations may have offset this impact of the Great Recession, stimulating tourism.[15]
Ecuador sought todefault onsovereign debts incurred under the government ofGustavo Noboa, claiming the debts were incurred illegally.[16] An Ecuador default, would have been the firstdeveloping country to default on sovereign debt since the crisis began.[17]
