Latin American finances hit hard by global letdown

Stocks worldwide have plummeted for the second consecutive day as investors are increasingly anxious over a crisis in the U.S. mortgage market. European stocks hit their lowest point in 4 years while the Dow Jones Industrial Average has lost almost 1% today after falling nearly 400 points yesterday.

Latin American finances were certainly not exempt from the global stumble. Dollar bonds in Venezuela and Ecuador suffered notable losses in value while the cost of the Brazilian Real has sunk between 1-2% in trading today.

What does this all mean? This BBC News analysis could shed some light on the situation:

“There are fears that the worries about bad debts could turn into a financial panic.

Because no one knows which banks are sound, investors may rush to withdraw their money from a large number of institutions, which would otherwise be solvent.

This so-called liquidity crisis could destabilize the economy: forcing interest rates up sharply, causing some banks to collapse, and preventing lending to legitimate companies who want to invest.”

Last February Latin American stocks suffered heavy losses due to a global slump triggered by China.

Sources- BBC News, MSNBC, CNN Money, Bloomberg, The Latin Americanist

Image- BBC News