Several Latin American countries appear to have waited too long to address such imbalances, and the market is now imposing severe adjustments. Forecasts for economic growth for the region have been slashed in recent weeks, with some analysts expecting flat growth next year. In addition, two weeks ago, Moody's credit rating service downgraded its outlooks for several Latin countries, most notably, Brazil. The prolonged decline in commodity prices has taken its toll on the region's economies. Declining prices for oil, copper, wood pulp, and other key commodities have contributed to rising current account deficits.
Many analysts believe that some Latin American currencies are overvalued.
In several countries, central banks have taken defensive measures to maintain the value of their currencies and to discourage capital flight. Widening fiscal deficits are also a concern to varying degrees across the region. Finally, a dependence on short-term debt is of special concern in Brazil and Venezuela. However, over the past decade, Latin America has undergone significant economic reforms, including price level stabilization, trade liberalization, and privatization of state-owned enterprises. In particular, the significant consolidation in the banking system, improved supervision and regulation, stronger capital requirements, and greater foreign ownership have strengthened many financial sectors in Latin America.