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Banking

Central America faces up to recession conditions

One region that will feel the force of a deep recession in the US is central America. However, recent financial reform could help soften the blow to an extent. Two of the region’s finance ministers tell Euromoney about their hopes and fears.

Participants: Juan Alberto Fuentes, finance minister, Guatemala; Guillermo Handal, finance minister, El Salvador

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How has the global financial and economic crisis affected your country?

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JAF: All the countries in the region are vulnerable to a general recession, including Guatemala; although certain specific features may include us among countries comparatively less afflicted. Our financial system, for instance, has a low degree of dollarization, little exposed to worldwide unrest, and solid international reserves.

Nevertheless, recent figures do show some cause for alarm. Economic conditions continue to deteriorate for Guatemala’s commercial partners; family remittances have decreased, as have revenues from tourism. Again as in the other countries in the region, taxation has not generated what we had estimated.

Guatemala is party to the international consensus on the need to implement effective and timely emergency plans. As of January, our government has introduced a Plan for Economic Emergency and Recovery with an integrated approach, supported by a wide range of social and economic sectors in the country.

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GH: Although El Salvador’s economic fundamentals are solid, as a result of a year of sound macroeconomic and structural reforms, the global financial crisis has tightened our financing conditions.

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