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Capital Markets

Absence of crisis is the limit of progress

Latin American bond markets have maintained unexpected buoyancy so far this year. But the restructuring of Argentina's debt still looms as a prerequisite of the investment flows it needs, and Brazil is yet to institute the reforms that will enable its private sector to generate growth. Trade agreements would help. Felix Salmon reports.

AS BANKERS, FINANCE ministers and thousands of other interested parties converge on Lima for the annual meeting of the Inter-American Development Bank (IDB) at the end of this month, regulars could be forgiven for wondering where the crisis is.

Argentina will be a prime topic of conversation, of course; the Dominican Republic and Haiti are in crisis; and the president of the host country, Peru, is still struggling to keep his approval rating in double digits. Nevertheless, the broader picture is pretty healthy.

The economy of the region as a whole is expected to grow by more than 4% over the year, and not a single major country seems to be anywhere near recession. The capital markets remain open to both sovereign and corporate borrowers, and there's even a hint of hope that there might be some equity issuance soon.

The strongest indication that everybody is pretty comfortable about 2004 is that they are already worrying about 2005. Will the US Federal Reserve start a tightening cycle after the US presidential election? Will Brazil's cyclical rebound fail to transform itself into solid, sustainable growth? Will the flood tide of liquidity that washed into the region's bond markets in 2003 ebb back north two years later, drawn inexorably by the tidal pull of the US current-account deficit?

So far, though, 2004 is going extremely well.

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