Monday, September 15, 2008

The current crises, commodity prices and Development

One of the results of today's events was a sharp drop in commodity prices. It is still unclear whether it will continue in the near future, although there is evidence to think that this will be the case. Both the increasing likelihood of a global recession and the lack of appetite for risky financial investment may contribute to further reductions in oil, gas and minerals (other than oil). This is great news for small countries in Central America and the Caribbean, but what will happen with Latin America? According to an excellent paper by Vernengo and Pérez, the region's recent growth is mainly a result of growing commodity prices. Will countries be now ready to respond to the shock? Will be see anti-cyclical policies for once in the region? This will be the real test for those that claim that things have changed in Latin America in recent times...

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