JP Morgan, Lehman see choppy 2009 for Latin America

SANTIAGO: Latin American growth will suffer in 2009 from a global slowdown, falling commodity prices and rate hikes aimed at curbing soaring inflation, investment banks JP Morgan and Lehman Brothers forecast on Monday.

Although Latin America is better prepared than in the past to face international financial crises, the banks said it will be an uphill battle and conditions will only start to improve in the second half of 2009.

"We should be prepared for a much tougher 2009 than this year for the region," Guillermo Mondino, head of emerging market research at Lehman Brothers, told Reuters.

"I think it will be a more complicated year than 2008, with growth for the year coming in at around 3.5 percent," he added.

The Economic Commission for Latin America and the Caribbean a regional U.N. economic body, last month forecast Latin America and the Caribbean would see regional growth of 4.7 percent in 2008 as the commodity powerhouse weathers global economic turbulence, down from a 5.7 percent expansion in 2007.

ECLAC also said it saw regional growth slowing to 4.0 percent in 2009.

Luis Oganes, head of Latin American economic research for JP Morgan, is also more pessimistic.

"Growth will fall even more," Oganes said. "This year we are expecting 4.0 percent and next year 3.4 percent."

"Next year we will not only have a global economic slowdown, but will also see much tighter monetary policy, because many central banks in Latin America continue to raise interest rates."

Chile, for example, this month raised its overnight lending rate by 50 basis points for a fourth month running to 8.25 percent, after rampant inflation, near its highest level in 14 years, moderated only slightly in August.

Chile's benchmark interest rate is now at its highest since late 1998, and the bank signaled further increases could follow.

"The only ones we don't think will further raise rates are Mexico and Colombia," Oganes said.