There will be no soft landing in the North. Despite difficult steps after the peso crisis of 1994 which helped Mexico bounce back, President Zedillo s government must now contend with external forces that are dragging the country down. The slowdown will make it harder for Zedillo to work out reforms with Mexico s first opposition-controlled Congress, especially with the approach of Mexico s Presidential elections in 2000. If Brazil is forced to devalue, the change will wreak havoc on Argentina. So we could see a clash between the policy of regional economic integration and the policy of currency stability through the dollar link.
Brazil is the world s ninth largest economy and has half of the continent s population.
The United States exports more to Latin America than it does to Asia, and U.S. banks are significant lenders in the region. Six, events in Russia have shown dramatically how the financial contagion will penetrate points of vulnerability, expanding the cracks until political and economic structures break. Although Russia pursued macroeconomic reforms to lower inflation and steady its currency, the country did not make sufficient headway on creating competition, effective property rights, or a fair system to generate revenue. Today, the average Russian associates markets and capitalism with monopolies and oligopolies, corruption, crime, the breakdown of society, and a vast gap between a few very rich and very many poor. Moreover, President Yeltsin, ruling by decree, never built a political base through a national party or by negotiating coalitions in the Duma.