Latin American business environment

2008 LATIN AMERICAN BUSINESS ENVIRONMENT

REPORT

'no a

Terry L. McCoy

UNIVERSITY Of
UF I FLORIDA

October 2008

I

I

N:

a I

October 2008

Preface

This is the tenth edition of the Latin American Business Environment Report (LABER).
The goal of the report is the same today as it was at its inception in 1999 -- to present in a
single document a straightforward, balanced appraisal of the economic, social, and
political events in the past year that have shaped the business and investment climate in
Latin America as a region and in its most important economies. We delayed releasing the
2008 LABER in order to incorporate preliminary analysis of the regional impact of the
global financial crisis that erupted in September and October.*

The LABER is a publication of the Latin American Business Environment Program in the
Center for Latin American Studies at the University of Florida. The program draws on
the expertise and resources of the University to prepare students for careers related to
Latin American business with degree programs, courses and study abroad opportunities.
It also organizes conferences, promotes the publication of scholarly research and provides
professional consulting services for the business community and public. The program
will host the fourth University of Florida Latin American Business Symposium and
Career Workshop, November 7-8 on campus. This event is open to the public but
registration is required (at http://www.latam.ufl.edu/LABE/symposiumreg.html).

Additional support for the LABER and related activities is generously provided by the
Center for International Business Education and Research (CIBER) in the Warrington
College of Business Administration. Alison Boelter and Alan Watson helped me prepare
the 2008 report. Charles Wood edited the 2008 LABER. I alone am responsible for the
content and analysis.

Terry L. McCoy, Director
Latin American Business Environment Program
tlmccoy(@ilatam.ufl.edu
www.latam.ufl.edu/labep.html

* Electronic versions of all 10 reports can be accessed at http://www.latam.ufl.edu/labe/publications.stm.
The report may be cited without permission, but users are asked to acknowledge the source.

2

CONTENTS

Preface.................................................................................................

EXECUTIVE SUMMARY.......................................................................5

INTRODUCTION .......................................................................................7

I. REGIONAL OVERVIEW............................................................ 11

EXTERNAL ENVIRONMENT..................................................11

Global Developments
Regional Developments

DOMESTIC ENVIRONMENT.......................................................13

Economic and Financial Performance
Social Environment
Political Environment
Policy Environment
Legal Environment

II. COUNTRYPROFILES......................................................................20

NAFTA REGION...........................................................................20

Mexico

DR-CAFTA COUNTRIES...............................................................22

Dominican Republic
Costa Rica
El Salvador
Guatemala
Honduras
Nicaragua
Panama

ANDEAN SOUTH AMERICA...........................................................28

Bolivia
Colombia
Ecuador
Peru
Venezuela

MERCOSUR REGION......................................................................34

Brazil
Argentina
Chile
Paraguay
Uruguay

II. OUTLOOK...............................................................................41

OUTLOOK FOR THE REGION..................................................... 41

External Environment
Domestic Environment

COUNTRY OUTLOOKS..............................................................43

Attractive Environments
Problematic Environments
Mixed Environments

TABLES................................. ................ ....................................... 49

SELECTED SOURCES.....................................................................63

2008 LATIN AMERICAN BUSINESS ENVIRONMENT REPORT

Terry L. McCoy

EXECUTIVE SUMMARY

Up to mid-2008 the Latin American business environment was encouraging. It looked as
though the region would not be seriously affected by the credit crisis and economic
slowdown in the United States. But in September and October, when global financial
markets collapsed, it was clear that Latin America would not be spared, some countries
more than others. The outlook for 2009 turned decidedly negative as shown in the table
below.

Grouped into three broad categories "Attractive," "Problematic," and "Mixed" -
according the overall character of their environments, the arrows indicate improvement
(t) or weakening (4-). An "=" sign signifies lack of significant change, while "?" means
the trend is unclear. Since 2003 the number of attractive environments increased. In
2008 Brazil was upgraded, but the 2009 forecast is that the business environments in all
18 will weaken or not change significantly.

Latin American Business Environments
2007 Environment 2008 Environment
Attractive Problematic Mixed Attractive Problematic Mixed

2009
Outlook

Mexico =
Dom Rep =
Costa Rica = =
El Salvador -
Guatemala =
Honduras =
Nicaragua
Panama 4 -- t
Bolivia =
Colombia =
Ecuador =
Peru t
Venezuela 4 =4
Argentina ,
Brazil
Chile
Paraguay
Uruguay =
Totals 7 4 7 8 4 6

6

2008 LA TIN AMERICAN BUSINESS ENVIRONMENT REPORT

INTRODUCTION

In 2008 the environment for business and investment in Latin America, which had

grown increasingly attractive over the previous five years, external developments caused

a dramatic downturn at the beginning of the fourth quarter. At outset of the year a

moderate slowdown was expected because of the problems in the U.S. economy, but

there was a growing consensus that Latin America had become immune to the external

shocks that had historically triggered economic crises in the region. Analysts argued that

wise policies, stable politics and the changing nature of the global economy effectively

decoupledd" Latin America from negative external developments, which, in any case,

were not predicted to be serious. The optimistic scenario evaporated with the collapse of

global financial markets in September, which became a probable global recession in

October.

Figure 1
Components of the Latin American Business Environment

External Environment

Economic Domestic Environment
Global ----- ------
Financial
SPolicy
/ Political --------------
Legal

Regional Social

Whether Latin America or the individual economies of the region grow or enter

into a recessionary cycle is the result of a complex interplay of factors that operate at the

internal and external levels. The analysis here uses the conceptual framework shown in

Figure 1 to capture the most salient components of the Latin American business

environment.

Part I of the 2008 LABER summarizes major regional developments that took

place in the last quarter of 2007 and through mid-October 2008. Part II presents

thumbnail sketches of the 18 largest markets, grouped by geographic region and/or

trading blocs (see Map).1 Part III summarizes the outlook over the next 15 months for

the region and for the 18 countries. Following the text, we present tables that contain

country-level data, along with regional averages, for key economic, social, political and

legal indicators that were used in the analysis. At the end there a list of publicly available

sources monitored to compile the 2008 LABER.

1 Venezuela, a founding member of the Andean Community (CAP), has applied for full Mercosur
membership. Bolivia is a member of CAP and associate member of Mercosur. Chile rejoined CAP in
2007 and is an associate member of Mercosur.

NAFTA

Mexico

\

Dominican
Republic

/ Honduras

..... C Nicaragua
Salvador
Costa Rica %
Panama
TA Colombia

Ecuador

Peru
ANDEAN
COMMUNITY

MERCOSUR

El!

DR
CAF

C-. L.. ., .

10

I. REGIONAL OVERVIEW

EXTERNAL ENVIRONMENT

Three negative external developments affected the Latin American business

environment. First was the credit crisis, which began in the United States in 2007 as a

sub-prime credit crisis, and later spread to the rest of the world in the latter half of 2008.

Second was the economic slowdown that also had U.S. origins, but spread to the other

mature economies, most notably the EU and Japan. Third, rising energy and food prices

generated inflationary pressures around the globe. In the early stages of these

developments, the hope was that Latin America because of macro-economic policies

and diversification of trade and capital flows was more decoupledd" from the United

States, and therefore less susceptible to the externally induced shocks that had in the past

periodically crippled the region. When the global situation took a sharp turn for the

worse in September and October, it became clear that Latin America would indeed be

affected.

Global Developments t

Spreading globalfinancial crisis spilled into Latin America
While foreign direct investment flows (Figure 3), which surged in 2007, remained
strong into 2008 (with considerable country-to-country variation, Table 3),
portfolio investments dropped as a result of the global credit crisis. Equally
significant were declining commodity prices and overseas remittances due to the
economic slowdown in the United State and Spain as well as the U.S. crackdown
on illegal immigration. Following a decade that produced double digit growth,
the Inter-American Development Bank predicted that remittances would decline
in 2008.

Global commodity markets weakened
Commodity prices, which generated favorable terms of trade for the natural
resource exporting economies of Latin America (Figure 2, Table 2), began to
soften in the second half of 2008. This was not surprising given that, by late

2 Symbols capture overall trends over the past 12 months: t improving; J, declining; = no significant
change.

August, four of the world's largest economies were on the verge of recession. The
most dramatic reversal in commodity prices was oil, which fell from nearly $150
a barrel in July to under $70 in October. Prices of other primary products also fell
in the face of declining demand. Some commodity exporters (Chile) were better
equipped to handle it than others (Venezuela). By the same token, declining
commodity prices were good news for the countries of Central America and the
Caribbean, and they may reduce inflationary pressures for all.

Figure 2

Terms of Trade for Latin America, 1998-2007
(Source: ECLAC 2007)
140.0

120.0 115.1 117.9
109.0
103.9
100.0 91.3 94.5 100.0 96.3 96.6 98.6

80.0 -

1160.0

40.0

20.0 -
0.0

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Figure 3

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Net Foreign Direct Investment in Latin America, 1997-2007
(Source: ECLAC 2007)
90,000
79,923
80,000
70,308
70,000 -
60,999 63,659
60,999
_ 60,000 57599
S49,206
c 50,000 45,213 4 9

m 40,000 35,114

30,000

20,000

10,000

0

77,126

*World trade negotiations collapsed
In late July 2008, the Doha negotiations of the World Trade Organization reached
an impasse over agricultural tariffs, which effectively ended the seven-year round.
Barriers to Latin American agricultural exports continued, but existing protection
from manufactured imports remained in place. Failure of the Doha round casts a
shadow over both the future effectiveness of the WTO and world trade
liberalization.

Regional Developments =

Hemispheric trade liberalization even more uncertain
The U.S. strategy of signing bilateral trade agreements with Latin America was in
greater jeopardy. While Congress ratified the U.S.-Peru FTA in 2007, it refused
to act on the FTA with Colombia. The agreement with Panama was also in doubt.
For their part, the South American countries led by Brazil and Venezuela
continued to seek integration of their continent, but the two countries were not in
full agreement on the path. Venezuela continued to promote the Bolivarian
Alternative for the Americas as an anti-U.S bloc.

U.S.-Latin American relations on hold
While immigration was no longer the flashpoint it once was, the U.S. government
implemented measures to tighten its border, cutting down on the flow of migrants
from Latin America. Latin America received very little attention in the U.S.
presidential campaign, which signaled that the next administration, while
promising closer relations, would likely deliver few concrete improvements.

DOMESTIC ENVIRONMENT

The domestic components of the business environment in Latin America were

generally strong at the beginning of 2008, although there were country-to-country

variations. Economies continued to grow with moderate inflation. Thanks to economic

growth, the social environment also continued to strengthen. Politically it was a

reasonably quiet year, in part because there were few national elections to mobilize

politics. In the policy arena most but not all governments adhered to prescribed market-

friendly macro-economic orthodoxy, and dissident populist voices gained little ground.

The turmoil of September and October, however, suggested that by year's end the inter-

related domestic components of the Latin American business environment would be

significantly realigned.

Economic and Financial Performance

Economic growth slowed
GDP growth in 2007 was again strong (Figure 4), which meant that Latin
America had experienced five consecutive years of positive growth for the
strongest growth cycle in 25 years. Furthermore, in each of the 18 countries
except Ecuador growth exceeded 3.0%. The outlook for 2008 was for slower but
nonetheless acceptable increase. Exports continued to be an important component
of Latin American growth, but domestic consumption, fueled by easier access to
credit, exploded in importance. By the beginning of the fourth quarter, it was
clear that GDP growth was slowing throughout the region.

Inflation became a concern
By mid-year there was growing concern that inflation was the major threat to the
economy (Table 2). Countries committed to inflation-targeting like Brazil,
Mexico and Chile that were responded by raising key lending rates. On the other
hand, Venezuela and Argentina, where price rises were the most acute, opted for
heterodox measures such as price controls, subsidies and currency rationing. A
positive effect of the predicted slowdown may be reduced inflation.

Domestic capital markets deteriorated
While 2007 had been good year for Latin American equities, 2008 was a different
story: all of the major stock indices were down in terms of prices, volume and
listings. For the third quarter, the Dow Jones Global Indices reported the
following declines in U.S.-dollar and local-currencies: Peru, -6.2/-6.1; Colombia,
-10.9/2.0; Chile, -13.1/-9.1; Mexico, -18.7/-13.3; Argentina, -19.9/-17.1; and
Brazil, -38.1/-25.0. For the same quarter which did not include the late
September crisis the U.S. stock market index declined 9.1%.

Global crises threatened strong external performance
FDI nearly tripled from 2006 to 2007 (Figure 3) reaching levels achieved in the
1990s when investors were attracted by privatization of state owned enterprises as
opposed to the combination of natural-resource, market-seeking and efficiency-
seeking investments of the current period. Brazil received over a third of all FDI
in the region, followed by Mexico (Table 4). FDI also increased in Chile,
Colombia, Peru, Costa Rica, the Dominican Republic and El Salvador but
dropped in Argentina. Venezuela experienced a net outflow for a second year in a
row. These flows mirrored improving country risk ratings, topped off by
investment grade ratings for Brazil and Peru. Exports grew as did imports, and
the region had a current account surplus in 2007 (Table 5). Latin America's
external debt, and debt burden, measured in terms of exports-debt ratio declined
(Figure 8). The favorable external picture included strong currencies (Table 8), at

least until the events of September and October, when Latin American currencies
dramatically reversed course.

Figure 4

GDP Growth for Latin America, 1998-2008
(Sources: CEPAL 2007 and IMF 2008)

Figure 5

Average Annual Inflation Rate for Latin America. 1997-2007
(Sources: CEPAL 2006 and IMF Economic Outlook 2007)

7.4

6.1 6.1
5.2

4.87 18 1 2000 2001 2002 2003 2004 2005 2006 2007
1997 1998 1009 2000 2001 2002 2003 2004 2005 2006 2007

5.9
5.6 5.6

4.5
4.2
3.9

2.0

0.3

2000 2001 2003 2004 2005 2006 2007 2008
-0.8

6.0

4 .0

2.0

0.0

Figure 6

Exports and Imports of Goods and Services in Latin America,
2003-2007
900,000 (Source: ECLAC 2007) 843728

800,000 791,261

700,000 680,123674,521

600,000 560,629

S500,000 466,311 79,391
I 0 Exports
C0 405,998
S400,000 378,206 m Imports
S333,.513
. 300,000

200,000

100,000

0

2003

2004

2005

2006

2007

Figure 7

Gross Disbursed External Debt for Latin America, 1998-2007
(Source: ECLAC 2008)

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
S Debt (Billions of US Dollars) Debt (As a % of Eports)

Social Environment#

Economic prosperity gradually translated into improvements in social wellbeing.

In a region of persistent poverty and high inequality, an economic downturn could erase

these gains (Table 9). Crime remained a serious social problem throughout the region

(see Table 12 for country indices of crime victimization). Social developments with

more long-term effects included lower fertility rates, lower population growth rates and a

shift from rural-to-urban to urban-to-urban migration.

Sustained gains in per capital income reduced unemployment and poverty
The UN Economic Commission for Latin America and the Caribbean (ECLAC)
estimated that in 2006 for the first time since 1990 the number of Latin Americans
living in poverty dropped below 200 million (36.5% of the population of which
13.4% were indigent). A year later it was predicted to fall below 190 million.

Social expenditures exhibited pro-cyclical pattern
Government spending on social assistance, health and education rose with rising
growth and government revenues. This raised concerns about what would happen
when both declined, as was expected, on the heels of the global crisis.

Political Environment =

The economic gains of recent years also helped stabilize the political

environments in Latin America, dominated by pragmatic center-left governments. The

more radical populist-leftist alternative led by President Chavez in Venezuela did not

disappear, however, and its influence may actually grow if the region's economies sink

into serious crisis.

Elections confirmed center-left trend
There were four presidential elections during the last year. As expected,
Argentines elected Cristina Kirchner to succeed her husband, but she disappointed
expectations that she would take a more moderate path. In neighboring Paraguay,
voters ended six decades of one-party dominance by electing an independent left-
leaning candidate. Unlike Kirchner, the new Paraguayan chief executive steered a
centrist course. Guatemalans also moved to the center left in their presidential
choice. In the Dominican Republic the re-election of social democrat, Leonel
Fernandez, assured political stability.

Constitutional referenda produced mixed results
Venezuelans rejected the radical constitutional package proposed by President
Chavez, but voters in Ecuador approved a new constitution more moderate in
tone. In Bolivia, continuing disagreement between the government and the
opposition delayed the constitutional referendum.

Policy Environment=

In terms of policy, the business environments of Latin America fell into two camps.

In the first were the countries led by Chile, Mexico, Brazil, Colombia and Peru that

had adopted and continued to implement orthodox macro-economic policies that

prioritized fiscal austerity to produce fiscal surpluses (Figure 8) as well as inflation

targeting and floating exchange rates. To build up hard currency reserves and reduce

external debt burdens these four countries took advantage of terms of trade that favored

commodity exports and strong investor confidence. The Central American countries

were in this camp. Although not beneficiaries of the global commodity boom, these

smaller countries sought to attract increased foreign investment through the DR-CAFTA

trade agreement with the United States. In the other policy camp were the leftist populist

governments Venezuela, Bolivia and Ecuador that pursued heterodox fiscal and

monetary policies and expanded government participation in the economy, discouraging

foreign investment. Argentina pursued a mixed agenda, more in the later than the former

camp.

Financial markets meltdown replaced inflation-fight as priority
With the notable exceptions of Argentina and Venezuela, Latin American
governments relied on monetary instruments to combat rising inflation. In mid-
2008 Latin America was only region in the world where interest rates exceeded
inflation. With the growing likelihood of a major slowdown, they began to
implement counter-cyclical stimulus packages.

Slippage on structural reforms
In mid-October, President Kirchner announced that her government would
nationalize private pension funds, which if approved by congress, could set a
policy precedent for reversing the privatizations that swept through Latin America
in the 1990s. Venezuela, Bolivia and Ecuador continued to re-establish state
control of their energy sectors.

Figure 8

Central Government Balance for Latin America 2003-2007
(%of GDP. Source: ECLAC 2007)
3
2.4

1 0.6
-0.2 0.1 -0.1
0 -
2003 2004 2W05 2006 2007
-1-
-1.1

-3
-2 -2.9

-3 -2.9

-4
Primary Balance 0 Overall Balance

Legal Environment =

In recent years Latin America made slow incremental progress in strengthening

its legal environment, frequently through international commitments made in trade and

investment treaties. In terms of rule of law, incidence of corruption, economic freedom,

property rights and crime victimization, Table 12 again shows considerable difference

among the 18 largest economies. Chile, Uruguay and Costa Rica had relatively strong

legal environments, while Venezuela fell near the bottom on most indicators. The pattern

was somewhat different regarding the bureaucratic barriers to conducting business (Table

13), although Chile was again at the top and Venezuela at the bottom.

II. COUNTRY PROFILES

NAFTA REGION

When President Bush's took office in 2001, he pledged to give highest priority to

U.S.-Mexican relations. The expectation was that NAFTA would flourish and deepen

into a North American union. This did not happen. Trade and investment rose at slower

rates than under Clinton. More significantly, bilateral relations deteriorated after 9/11. In

the 2008 U.S. election, candidate Barak Obama proposed that NAFTA be renegotiated,

position that generated some uncertainty about the future of a North American

community. In addition, immigration continued to be a debated issue that the next U.S.

administration would have to face. The same was true of the war against drugs. In

regards to the latter, Mexico and the United States were able to reconcile their differences

on the Merida Initiative. The agreement committed Washington to provide Mexico

funding for a new era of joint law enforcement action. The objectives were to break the

power and impunity of criminal organizations; strengthen border, air, and maritime

controls; improve the capacity of justice system; curtail gang activity; and reduce the

demand for drugs throughout the region.

Even if the new U.S. administration does not renegotiate NAFTA, lingering

questions about the agreement on both sides of the border must be addressed as the two

nations re-engage. Why has it not reduced poverty, especially in Southern Mexico? On

January 1, 2008, as specified in the agreement, all barriers to imports of sugar, corn,

beans and milk from the United States were lifted, a step that promises to threaten the

continued viability of Mexico's small farmers. The U.S. presidential campaigned revived

the fear of "shipping jobs south," and the Democrats' demanded stronger environmental

and labor provisions. On a more positive note, rising transportation costs from China

refocused attention Mexico as a site for manufacturers exporting to the United States.

Mexico=3: Close U.S. ties transmitted global crisis into environment.

Slower growth
In August inflation reached its highest level (5.57%) in five years. As the year
progressed, declining growth became a bigger concern. Improvement in capital
markets performance was impressive on the debt side, but equities market
continued to be too thin. The limits of the latter became more evident with a
regulatory reform allowed pension funds to expand their holding in equities from
15% to 30%. In early October the local stock market was down 40% in dollar
terms from the beginning of the year.

Vulnerable to deteriorating external environment
FDI and exports experienced healthy growth in 2007, but they began to slow
down in 2008, a trend that was likely to accelerate in 2009. The same pattern was
forecast for remittances. Measures taken to reduce the dollar-denominated debt
burden and build reserves should cushion the impact of the credit meltdown.
After appreciating to a five-year high in early August, the peso sharply declined in
early October, falling to 13.0 to the USD.

Rising crime and violence undermined social environment
A wave of kidnapping and drug-related executions (in early September there
were already over 3,000 executions in 2008) triggered protests demanding that all
levels of governments act to improve security. A government official estimated
that crime reduces GDP by 1.0% and threatens to discourage international
tourism. President Calder6n committed federal forces and resource to combat
crime and improve security. The Merida Initiative provides U.S. assistance, but
these efforts have yet to deliver concrete improvements.

Stable political environment
Executive-legislative relations improved.

Progress on energy reform
In keeping with his commitment to expand private investment and address the
worrying decline in oil exploration and production, President Calder6n submitted
a bill to Congress that would allow private companies to participate in field
service contracts but not in the sale of the oil, which would remain a PEMEX
monopoly. The Senate passed the bill in October. Fiscal and monetary policy
shifted from keeping inflation under control and to stimulating growth. In mid-

3 The symbols for each country indicate the following trends: +t business environment improved, 4
business environment deteriorated, = no significant change since 2004 report.

October, the central bank sold dollars from its reserves to prop up the rapidly
depreciating peso

*Judicial reform strengthened legal environment
Reforms adopted in June were designed to make trials more transparent, improve
the rules of evidence and endorse the principle that the accused are presumed
innocent. Other features called for universalized counsel and better policing.
While these reforms were substantial, their success will depend on the extent to
which they are funded and implemented. Weak corporate governance and near-
monopoly domination of large closed firms, such as the telecomm giant Telmex,
discourage investors.

DR-CAFTA COUNTRIES

The six DR-CAFTA countries' had sustained growth and low inflation. Their

economic performance was encouraging, especially taking into consideration the fact that

they did not benefit from the global commodity boom, which favored the natural resource

exporters of South America. With the exception of Panama, FDI showed modest

increases from 2006 to 2007. Exports were also up, although current account deficits

increased due because import growth exceeded export growth. This imbalance could

very well be one of the consequences of DR-CAFTA, which reduced barriers to U.S.

imports and produced a U.S. trade surplus with all countries in the region. Remittances

are another crucial link to the United States, and the growing evidence that they were

declining was troublesome. Likewise the economic slowdown in the United States was

likely to hurt U.S. tourism to the Dominican Republic and Central America. Drug

trafficking and gang violence were an added dimension of U.S.-Central American

relationship. The homicide rates in El Salvador, Guatemala and Honduras are among the

highest in the world.

DR-CAFTA, still not full implemented in Costa Rica, has provided the promise of

deeper integration within Central America. Financial service providers and companies in

retail, real estate and tourism began to develop regional platforms, according to

LatinFinance (May 2008). Through the PetroCaribe arrangement to supply petroleum at

below-market rates, Venezuela continued to be active in the region. The government of

Honduras announced its intention to join Nicaragua as the second Central American, and

sixth member of President Chavez's Bolivarian Alternative for the Americas. Central

America reported progress in the negotiations with the EU for an FTA.

Dominican Republic=: Re-elected president faced softening environment

Growth slowed and inflationary pressures increased
GDP growth declined in each of the last two years. For 2008 growth was
projected to be half of what it was in 2006; 2009 will be lower still. Higher food
and energy prices mean higher inflation. A chronic power shortage and periodic
blackouts continued to be a drag on the economy and a source of social unrest.

External environment presented challenges
FDI reached record levels in 2007, but the U.S. slowdown of 2008 meant a drop
in Dominican exports, fewer U.S. tourists, and reduced remittances for the large
Dominican community in the United States. Although it no longer receives IMF
financial support, the Dominican Republic did maintain a monitoring agreement
with the Fund.

Fernandez won landslide victory and control of Congress
Now in his third term, Leonel Fernandez won a first round victory over weak and
divided opposition. His victory reflected the persistent importance of personality
over institutions in Dominican politics.

Belt tightening necessary
The Fernandez administration steered the economy through a fast recovery from
the bank-failure induced collapse early in this decade. He restored growth,
reduced inflation, balanced the budget, and strengthened the peso. He did not
succeed in reducing poverty, improving education and health or ending the
chronic power shortage and periodic blackouts. In August Fitch warned that the
electricity sector was "on the brink of financial distress." The economic
slowdown means it will be difficult for the government to maintain its macro-
economic policies much less deal with underlying structural problems.

Costa Rica=: Strong institutions and solid policies gave stability to environment.

Moderate growth and increased inflation
Even before September-October global financial crisis spilled over into Latin
American, slower GDP growth was expected following three years of strong
expansion. Inflation jumped in 2007 but was expected to moderate in 2008.
Estimates for the last quarter indicated that inflation would be even higher than
earlier forecasts had predicted.

External performance still strong
Although terms of trade were comparatively weak, exports increased (along with
imports and the current account deficit) from 2006 to 2007. FDI also experienced
healthy growth, reaching record levels. The economy, nonetheless, began to feel
the effects of the slowdown in the United States, which is Costa Rica's major
trading partner and source of investment. Costa Rica signed an FTA with the
Panama.

Arias promised attention to social policy
The president promised to give top priority to social policy in the remainder of his
term. This will be difficult to achieve given the failure of the long-promised
fiscal reforms that would have generated the additional revenue needed to win
approval from the National Assembly.
Voters narrowly approved DR-CAFTA
The October 2007 vote was a victory for the administration, but a year later the
agreement was still not fully implemented.

Policy focus shifted to containing inflation and stabilizing currency
After strengthening against the dollar under the exchange regime adopted in
October 2006, the colon began to depreciate in mid-2008. This led the Central
Bank to draw on its dollar reserves to prop up the local currency, and to increase
the benchmark interest rate in an attempt to curb inflation.

DR-CAFTA reforms delayed
The opposition in the National Assembly slowed adoption of the required
implementing legislation for DR-CAFTA. The delay required two extensions
from the other members. Full implementation would open the already
investment-friendly Costa Rican economy to U.S. investment, particularly in the
previously state-monopolized insurance and telecommunications sectors.

El Salvador: Presidential election and deteriorating external situation loomed over
improving environment.

Satisfactory economic performance
Growth (4.5%) in 2007 reached its highest level in over a decade, but it was
projected to decline in 2008 and 2009. In August 2008 inflation, which had been
effectively contained by dollarization, reached nearly 10%, the highest level in 12
years.

Increases in trade and FDI
DR-CAFTA membership promoted a big jump in trade (both exports and imports)
and record levels of FDI in 2007.

Crime and violence constituted serious social problem

Presidential election moved to center stage
Polls showed Mauricio Funes of the FMLN in the lead for the March 2009
election. Although Funes is from the moderate wing of the leftist party, his
victory would be a breakthrough for the former guerrillas, who have won
important municipal and congressional contests. It could also bring a policy
agenda addressing deep social issues that remained unresolved by the civil war of
the 1980s.

Guatemala: New administration inherited slowly improving mixed environment

Growth moderating and inflation rising
After two years of GPD strong growth, economic expansion was expected to slow
in 2008 and 2009. The rising cost of food and fuel prices pushed up the cost of
living.

Impact of DR-CAFTA was mixed
FDI and exports jumped in 2007, but imports, the current account deficit, and
external debt were also up. For the first time in recent history, Guatemala ran a
trade deficit with the United States and faced a decline in remittances.

Social environment featured high rates of violence and poverty
In 2007 gang and drug-related murders took the lives of 6,000 people.

New president lacked legislative majority
Although Alvaro Colom became Guatemala's first left-leaning chief executive in
50 years, he promised to pursue a pragmatic, moderate agenda giving priority to
social programs and fighting crime. The September discovery of secret
surveillance equipment in the president's office underlined the weakness of the
presidency and other government institutions.

*Policy initiatives required increased revenue
To implement his program, Colom inherited a weak fiscal system that chronically
under-funded the public sector.

Honduras: Another slowly improving environment geared up for presidential election.

Strong growth subsided
GDP growth, which reached 6.0% in both 2006 and 2007 for the best two-year
performance in a long time, was forecast to fall to 4.5% and 4.05 in 2008 and
2009. The rate of inflation nearly doubled from 2006 to 2007.

ALBA membership complicated external relations
In August the President Zelaya announced that Honduras would join ALBA, the
left-leaning trade bloc led by Venezuela. Already benefiting from subsidized
Venezuelan oil imports through Petrocaribe, it was not clear what additional
benefits would accrue from ALBA membership or if it might conflict with DR-
CAFTA membership should the legislature ratify the decision. FDI increased in
2007, but imports grew more than exports, increasing the current account deficit.

2009 presidential election dominatedpolitics

Land reform and crime fighting measures adopted
Honduran law permits the government to expropriate idle or underproductive
agricultural lands. In early 2008, the Honduran legislature approved the
expropriation of more than 2,000 hectares of land despite substantial private
sector opposition. The government also moved to increase law enforcement and
security by passing new laws in June of 2008 designed to strengthen the police
and fight corruption.

Nicaragua=: Environment continued to be unsettled.

Slower GDP growth
Tourism, agriculture and trade were leading growth sectors, but economic growth
was expected to drop below 3.0% in 2009. The rate of inflation increased in the
second half of 2008.

Confusing external agenda
The Ortega government continued to side with Venezuela while not provoking an
all-out confrontation with Washington. The government reached an agreement
with its international private creditors in December, which removed overhanging
debt and one of the obstacles to foreign investment. FDI increased in 2007. As a
sign of the impact of the global crisis on Nicaragua, Venezuela announced in
October that it would delay construction of a refinery in Nicaragua.

Polarized political environment
With collaboration of former president Aleman and his Liberal Constitutional
Party, President Ortega began instituting measures the most controversial being
creation of Citizens Power Councils that would establish a parallel government
and weaken the opposition.

Policy agenda lacked coherence

Weak legal environment
Status of property rights declined (Table 13) in 2007.

Panama#: Dynamic environment gearing upfor elections.

Signs of overheating
GDP grew at almost 10% in 2007 (and 9.5% in the first half of 2008), but
inflation reached the highest rate in three decades in August, and was forecast to
top 9.0% for the year. Construction, shipping and services were driving growth.

Strong inflow of investment funds
With a dollarized economy, established financial services and booming real estate
market, Panama was an attractive site for foreign investment. LatinFinance
(September 2008 issue) reported large increases in net bank deposits from
Venezuela, Ecuador and Colombia in recent years. The U.S. Congress had yet to
act on the FTA, and its fate was uncertain, even after the November election.

Presidential election began to shape political environment
Voters go to the polls in May to elect the successor to Martin Torrijos, who
presided over the launching of the Canal expansion project and the five-year
economic boom. The election underlines the personalistic nature of politics.

Strong policy rewarded
In February S&P, raised Panama's credit rating to one notch below investment
grade, citing the booming economy and improved fiscal indicators.

Controversy over security reforms
Civic groups and opposition politicians expressed concern over presidential
decrees that would create a national intelligence agency to enhance government
security powers. Although there was a consensus that something needed to be
done to confront rising crime and drug-trafficking, the fact that the measures took
the form of executive decrees without open debate harkened back to the military
dictatorship.

ANDEAN SOUTH AMERICA

Although the five republics that constitute the Andean Community (Chile recently

rejoined CAN) prospered from high commodity prices and very favorable terms of trade

(Table 2), the region had three of the four least attractive business environments in Latin

America. FDI flows (Table 3) indicate that investors were adverse to make long term

commitments to Venezuela, Ecuador and Bolivia. In contrast funds poured into

Colombia and Peru, both of which had become increasingly attractive to foreign investors

in recent years.

Disputes among the members of CAN undermined regional integration and

further weakened the Community. Most serious was the fallout from Colombia's cross-

broader attack in March on a FARC guerrilla camp in Ecuador. In retaliation, Ecuador

broke diplomatic relations with Colombia, and Venezuela moved troops to its border with

Colombia. Venezuela later backed down from the confrontation because of its heavy

dependence on imports from Colombia. In that same vein, President Chavez also put

distance between himself and the FARC, the armed guerrilla insurgency that the U.S and

Colombian governments charged was supported clandestinely by Venezuela.

U.S. relations with Venezuela, Bolivia and Ecuador deteriorated during the year.

In September Washington withdrew its ambassadors to La Paz and Caracas after Bolivia

- followed by Venezuela in an act of solidarity expelled to U.S. ambassador for

interfering in domestic affairs. To add fuel to the fire, the U.S. then declared Bolivia

uncooperative in the war against drugs and suspended Bolivia's preferential access to

U.S. markets. Until these relationships are mended which will not be easy the

business environment in the Andes remains problematic. The U.S. Congress did ratify

the free trade agreement with Peru, but the FTA with Colombia remained up in the air.

In late September, Congress extended Andean Trade Preference and Drug Eradication

Act for another year (with Bolivia suspended from participation).

Bolivia #. Environment became even more unsettled.

Growth persisted in midst of turmoil
GDP growth, averaged over 4.0% for four straight years and seemed likely to
exceed this rate in 2008 and 2009, at least until September when serious political
unrest threatened to disrupt gas exports, and the uncertainty surrounding
international financial markets deepened. Inflation, which more than doubled
from 2006 to 2007 declined, although it seems like to finish the year higher than
forecast earlier.

External position deteriorates
The decision to expel the U.S. ambassador (reciprocated by Washington) was a
negative signal to investors, while the suspension from the Andean Trade
Preference Act hurt export industries that employed thousands of Bolivians.
Potential gains from favorable terms of trade were offset by weak investment
flows, which were needed in the energy industry. On the positive side, Bolivia
continues to reduce its external debt burden.

Precarious social environment
Regional and ethnic cleavages were raw and deep. The government implemented
income transfer and social welfare measures that targeted the poorest segments in
South America's poorest (Table 10) country.

Struggle between president and governors dominated politics
Following a series of provincial votes in favor of autonomy, both President
Morales and most of the opposition governors survived the August recall
referendum but tension between the central government and eastern provinces
seeking greater autonomy remained unresolved and protests increased. The next
big test was to come in the December referendum on a new constitution. In early
September, the electoral court delayed the referendum. It remained to be seen if
the two sides could reach an understanding that would allow the constitutional
referendum to take place.

Nationalization of hydrocarbon sector completed
On May 1 the state oil company YPFB purchased majority ownership of
companies still in private hands. At that time President Morales promised to
bring all basic services energy, water, and communications under state
control. Uncertainty regarding rules of the game in the energy sector discouraged

the private investment needed to double natural gas reserves over the next four
years under Plan 100. On the macro-economic side, government policies had
produced both primary and overall fiscal surpluses and a strong currency, at least
until global financial markets collapsed.

*No changes in legal environment
By most indicators Bolivia continued to have one of the weakest legal
environments and one of the least open economies in Latin America.

Colombia#: On the way to investment grade?

Economic performance softened
The economy had made an impressive recovery with GDP growth increasing six
years in a row, to reach the highest level in three decades in 2007. Growth began
to slow in mid-2008 and was expected to continue dropping in 2009 as both
demand for Colombian exports and consumer spending softened. Inflation
accelerated in 2008.

External performance also softened
With the passage of new free trade zone legislation in late 2007 and the
subsequent creation of eight new free trade zones, Colombia accelerated already
healthy foreign investment inflows. FDI grew to 5.5% of GDP in 2007 up from
1.0% in 2002. In spite of efforts to stem appreciation of the peso, in April the
local currency reached its highest level in nine years. However, by early October
it had dropped against the dollar. The external debt increased, and the debt
burden was among the highest in Latin America. Although the U.S. Free Trade
Agreement was still sidetracked, extension the Andean Trade Promotion and
Drug Eradication Act maintained Colombia's preferential access to the U.S.
market on which it is heavily dependent.

Lower violence and higher security strengthened social environment
President Urine's effectively reduced violence and extended the government
control into the countryside which contributed to strengthening the business
environment. Although the guerrilla insurgencies on the left and self-defense
forces on the right (both fueled by the drug traffickers as coca and cocaine
production increased) remained serious threats, the Democratic Security Policy
produced notable results in 2008. In July government forces freed Ingrid
Betancourt and other long-time FARC hostages. Earlier in the year they captured
or killed key FARC commanders.

Uribe's popularity raised prospects of third term
Following the Betancourt rescue, the president's popularity surpassed 90%, and
79% of those polled said they supported a third term. It would take another
constitutional amendment to allow Uribe to run again.

Policy makers must cope with inflation and lower growth
The central bank had raised interest rates aggressively in order to contain
inflation, but prospects of slower growth may force shift to counter-cyclical
stimulus measures.

Legal reforms to protect investors
To improve protection of investors, the government implemented transparency
requirements for transactions between associated companies and electronic tax
declarations and simplified accounting rules and double taxation agreements.

Ecuador#: Constitutional referendum clarified the environment.

Weak economic growth
GDP growth the lowest in Latin America economy in 2007 was expected to
show little or no increase in 2008 and 2009. Dollarization had kept inflation low,
but it showed signs of increasing in 2008.

Flat external performance
In 2007 FDI was weak; exports did not grow and the external debt increased.
Uncertain rules of the game scared off foreign investment. The inefficient state
oil company, which was given greater control over the oil industry, could not
maintain production to take advantage of the high oil prices that lasted into mid-
2008. The oil price windfall did lead Fitch's and S&P to upgrade the country's
credit rating. In October, Ecuador's contract dispute with the Brazilian
construction firm Odebrecht over flaws in a hydroelectric project escalated into a
confrontation between the two countries.

Constitutional referendum gave Correa a big win
The majority vote in favor of the new constitution solidified President Correa
politically. Standing up to Colombia following the March cross-border raid of a
FARC camp earlier had increased his popularity. Unlike his predecessors, Correa
seemed likely to serve out his full term, giving Ecuador a degree of political
stability that it has not had for a long time.

High turn-over in key policy positions
Unexpected changes in key ministries, as well as the evolving nature of the new
constitution, shaped an uncertain policy agenda. The government resorted to
price controls and other unorthodox measures to try and contain inflation. It also
continued to expand the government's role in the economy.

Legal environment
In February the government announced its intention to withdraw from nine
bilateral investment accords (including with the United States) that allow
investors' recourse to the International Center for Settlement of Investment
Disputes. New labor laws were aimed at helping workers stuck in the vast

informal economy. It remained to be seen whether the rules yield substantial
benefits and whether they will increase or lower foreign investment in Ecuador.

Peru#: Contradictory trends hindered march to full investment-grade status

Another strong economic performance
GDP growth, which exceeded 8.0% in 2007, was declining but still expected to
reach 7.0% in 2008. Even as the global crisis spilled over into Latin America,
Peru was expected to outperform its neighbors on growth and inflation.

FTA and Rating Upgrade enhanced external profile
When the U.S. Congress ratified the FTA in December and Fitch's granted
investment-grade status in April, Peru strengthened its status as an attractive
emerging market. Over the past two years, FDI doubled, and exports more than
doubled in three years. These trends allowed Peru to build up its hard currency
reserves and dramatically reduce its debt burden. Ratification of the FTA
guaranteed permanent preferential trade relationship with the United State, an
arrangement enjoyed by no other Andean country. In mid-October, the
government announced that it would float a $600m international bond offering,
the first Latin American offering since the global credit crisis erupted.

Regional inequalities and unrest continued to undermine social environment
The economic boom had still not meaningfully trickled down to the very poor
southern highlands, although nationally the poverty rate has been cut in half in
less than a decade.

President governed from position of weakness
Much like his predecessor, President Garcia power and popularity (favorable poll
ratings around 20%) declined in spite of the economic good news. His
government again faced strikes and protests in those regions that had yet to
register perceptible benefits. In October, a corruption scandal led to the
resignation of the president's cabinet. In an attempt to broaden support, Garcia
named an independent leftist politician to be his new prime minister.

Proactive fiscal and monetary policies
In April the government increased interest rates and the bank reserve requirement
to counter rising food prices. It also raised the marginal reserve requirement on
short-term investment to slow appreciation of the sol, which reached a nine-year
high against the dollar.

Legal reforms for agriculture
Peru adopted a new legal framework to promote investment in the agro-export
sector. It included reorganization of the ministry of agriculture and measures to
attract private investment in the highlands and in the Amazon basin. The reform

also clarified land tenure issues that remained unresolved since the agrarian
reform carried out in the 1960s and 70s by the military government.

Venezuela=: Oil prices loomed over risky environment.

Deteriorating economic performance
By early October, GDP growth, which had slowed considerably from 2006 into
2008, was predicted to drop to below 2.0% in 2009, largely due to the world
financial crisis and recession. More bad news came in the form of accelerating
inflation, which reached 30% in October.

High oil prices fueled aggressive external posture
Again in 2007 the oil windfall generated large trade and current account surpluses
and hard currency reserves. These gains financed President Chavez's drive to
remake Venezuela, allowing Chavez to nationalize foreign firms with
compensation, sponsor generous social welfare programs, and pursue soft-power
foreign policy initiatives while eschewing private investment. In 2007 there was
a net outflow of FDI. Venezuelan flight capital ($19bn according to the central
bank) moved to Panama and South Florida, among other places. Before the drop
in oil prices, Moody's had indicated that it was considering upgrading
Venezuela's credit rating. The sharp drop in prices (combined with stagnant
production) would reduce the flow of resources if they persisted and necessitate
drawing on reserves.

Poverty down but crime and violence up

November elections next test for Chdvez
Voters gave the administration a serious political defeat when they rejected the
December referendum that called for deep constitutional reforms. The president,
now in his 10th year in office, puts his government on the line again in November
in state and local elections. The Supreme Court issued a ruling in August
removing some opposition candidates from the ballot because of pending
corruption charges. The government withdrew a proposal to strengthen the
intelligence services because of opposition from human rights groups and the
Catholic Church, but in September it expelled two human rights observers,
provoking international criticism.

State's role in the economy expanded
In spite of the referendum's defeat, the president resorted to executive degrees to
press ahead with his campaign to build 21st Century socialism. The August
announcement that the government would nationalize the Banco de Venezuela
owned by Santander of Spain meant that the state had taken control of oil,
telecommunications, electricity, steel, and cement. Price controls (on some 400
items) and exchange controls (setting the Bolivar-dollar rate at 2.5) implemented

to fight inflation and stabilize the currency produced shortages and black
marketeering.

MERCOSUR REGION

Steps to broaden South American integration overshadowed Mercosur

developments during the year. In December, seven South American countries formally

agreed to create the Bank of the South as a regional development bank. Proponents

advanced two reasons for the bank: first, as a way to break dependence on the

conditionality of the international lending institutions (especially the IMF) and, second,

to deepen South American integration. However, it was not clear whether the bank

would have the resources and the resolve to become a major player given the differences

between Venezuela and Brazil and their respective influence the bank's mandate and

operating structure.

A more promising breakthrough came in May when 12 South American countries

founded the South American Union of Nations, or Unasur. Its ambitious agenda called

for regional parliament, a common currency, and a South American defense council.

Under the Unasur banner, Bolivia's neighbors played a constructive role in defusing the

conflict in that country and bringing the government and separatist opposition to the table

for talks. The new bloc may also prove useful in coordinating South American

infrastructural development. Whether it can give the region a greater voice on the world

stage remains to be seen, especially given the underlying foreign policy differences

between Venezuela and Brazil. President Chavez's Bolivarian Alternative for the

Americas (ALBA) did not contribute to South American integration.

As for Mercosur, in September Argentina and Brazil agreed to use local

currencies instead of the dollar in bilateral trade. Chile and Bolivia made some headway

in resolving their longstanding border dispute, and opening Bolivian access to the Pacific.

Argentina : New administration presided over deteriorating environment

Growth slowing and inflation increasing
Argentina had enjoyed five years of impressive growth, but even before the global
turmoil of September-October, GPD was decelerating, while inflation was
accelerating. Independent analysts put inflation higher approaching 30% in
2008 than what is officially reported. Price controls further clouded the
inflation picture.

Government took steps to re-enter global credit markets
Favorable terms of trade persisted into the second half of 2008, sustaining balance
of trade and current account surpluses. But FDI dropped in 2007, and Argentina's
external position weakened. In late August the sovereign bond spread against
U.S. treasuries reached the widest mark since 2005 (and one of the highest in the
world). Doubts grew about longer term ability of the country to service its debt in
the face of softening commodity markets and unsettled fiscal policy. S&P
downgraded Argentina's credit ratings in August. Largely shut out of
international debt markets, Argentina had relied on Venezuela to finance its debt.
To reassure creditors, in early September the government announced it would
draw on its reserves to pay off the $6.7bn Paris Club debt. Later it revealed that
the government was seeking to reach agreement with private bondholders who
held out for better terms than were offered in the 2005 default settlement.

Economic recovery continued to reduce unemployment and poverty

President weakened by decline in public support and legislative defeat
Cristina Fernandez's first year in office was difficult. Following her losing
standoff with agricultural exporters and subsequent defeat in Congress (thanks to
the tie-breaking vote of her vice president) in July, the president's public opinion
ratings dropped to around 20%. No longer assured automatic support of her
Peronista movement, she had to find new ways of to move forward as a
consensus-builder.

Government made policy concessions then proposes take-over ofpensions
Giving in to the striking farmers, the government revoked the tax increase on
grain exports. It also lifted the freeze on residential electricity rates that were in
place since 2001. This action recognized the need to revive private investment in
the power sector and, second, cut costly utility subsidies to middle and upper class

consumers. In late October the president announced that she wanted to
nationalize the privatized pension system.

*Legal environment
The regulation in force since 2002 that required a double indemnity payment for
dismissal of workers was eliminated in a step to free up labor markets.

Brazil: Investment grade rating conferred full BRIC status.

Ratings upgrade strengthened external profile
GDP growth, which in 2007 was the highest in more than a decade, began to slow
in 2008, even before the October crisis. Inflation grew during the course of 2008
prompting the central bank to progressively raise the benchmark SELIC interest
rate. Inflation then it showed signs of diminishing in August and September.
Through most of the year higher interest rates did not weaken the consumer boom
that had been fueled by expanding credit. The stock market boomed in 2007, but
it declined during most of 2008, down 28% in dollar terms in mid-September. By
early October the market was off over 50% for the year.

Rating agencies rewarded
Throughout 2007 and into 2008, Brazil's external performance was very
impressive. Thanks to favorable terms of trade, exports boomed, yielding a
healthy current account surplus. FDI returned to high levels, the real appreciated,
and the debt load declined. For the first time in its history in January the country
became a net foreign creditor when its cash reserves exceeded the foreign debt.
At mid-year S&P and Fitch's rewarded this performance with investment grade
ratings, lowering the cost of credit, and further enhancing investor confidence in
Brazil.

Improved social environment
A recent household survey documented small but encouraging social
improvements: growing per capital income; declining inequality; lower illiteracy
and declining fertility. According to the Getulio Vargas Foundation, 52% of the
population was middle class (versus 44% in 2002 as defined in terms of formal
sectorjobs, access to credit and ownership of a car or motorbike). August
unemployment (7.6%) was near historic lows. Strong regional variations persisted
in all measures of social welfare.

Local elections dominated politics
The outcome of the October elections was indecisive. Earlier in 2008 Congress
did vote down the bill to renew the financial transactions tax (CPMF) forcing the
government to find new revenue streams.

Policy shiftsfromfighting inflation to stimulating the economy

Up to the September-October financial markets crisis, fiscal and monetary policy
had focused, respectively, on building a budget surplus and holding down
inflation by raising interest rates. With the crisis, the Central Bank moved
quickly to protect liquidity in the local market, and opened new credit facilities
for key sectors in the economy. It also sold dollars to stem depreciation of the
real, which lost 30% of its value in two months. Following the discoveries of
large offshore oil deposits, the government announced that it was considering
creating a new state-owned enterprise to manage oil resources. This would allow
Brazil to capture the promised revenue windfall for social spending. But it would
also undermine Petrobras, and fundamentally alter Brazil's mixed public-private
energy model. The government also proposed to set aside 15% of international
reserves in a sovereign wealth fund that would invest in higher-yielding (and
higher risk) securities.

Measures strengthened legal environment
Brazil strengthened its corporate governance, which enhanced its attractiveness
for both portfolio and direct foreign investment. The Brazilian Securities
Commission (CVM) issued new accounting and auditing rules based on
International Accounting Standards Board standards. The use of market price in
valuations, and new requirements in the reporting of capital, tangible and
intangible accounts were among the most significant changes. The new rules
applied initially directly to all Sociedade Anonimas and larger consortium, but
were expected to expand to cover most Sociedade Limitadas.

Chile=: Strong environment prepared for political transition and economic downturn.

Inflation jumped and growth moderated
Early in 2008 rising food and energy costs pushed inflation to its highest rate in
over a decade. GDP growth was projected to drop under 4.0% in 2008 and 2009

Falling copper prices threatened to weaken external performance
Strong export growth and record FDI flows in 2007 produced a balance of
payments surplus and record levels foreign reserves. The result was as
appreciation of the peso against the dollar. Falling copper prices and global
financial turmoil triggered rapid depreciation of the peso and fall in the dollar
value of Chilean equities.

Increased spending on education and healthcare

Municipal elections were a prelude to 2009 presidential contest
Observers looked to the October elections for a clearer sense if divisions within
the center-left Concertaci6n coalition that governed since the return to democracy
in 1990 would open the door for victory by the candidate of the center-right
opposition in the presidential election. The Bachelet presidency, never as strong
as its predecessors, was further weakened when her education minister was forced

to resign for financial mismanagement, and the opposition parties won control of
both house of Congress following desertions from the Concertacion.
Policies addressed rising inflation and slowing growth
In August the government announced a $1 billion package of tax cuts and
spending to reign in inflation and stimulate growth (with an emphasis on
encouraging alternative energy development). In September the Central Bank
raised the benchmark interest rate to 8.25%, the highest in this decade. The rate
was expected to finish the year at 9.5%, as bank authorities sought to bring
inflation back under 3.0% in 2009. Earlier in the year, Congress approved
significant reforms of the path-breaking privatized pension system and of the
education system.

Changes in capital market regulations proposed
In August the government announced that it would liberalize rules on both equity
and fixed-income trading in order to boost trading volumes and make local capital
markets more attractive to foreign investors,

Paraguay#: New administration confronted high expectations and fluid politics

Positive economic performance
Although GDP growth slowed in 2008 from the big jump in 2007, it was still well
above the ten-year average. Inflation was projected to be lower than 2007,
although it could spike up depending food and energy prices.

Improved external profile
Exports showed strong growth in 2007. Even though imports also increased, the
country achieved a current account surplus. Soy exports jumped from $1.9bn in
2006 to $2.7 in 2007 when cultivation expanded to profit from booming global
demand. Increasing FDI and international reserves complemented the export
boom. These developments, plus the prospect of political stability, made it
possible for Paraguay to consider a return to the sovereign bond market. President
Lugo worked to balance Paraguay's relations with the United States and
Venezuela, and to renegotiate the bilateral energy agreement with Brazil as a
means to increase Paraguay's share of profits.

Danger of rural violence
Landless peasants threatened to escalate farm seizures if the new government did
not carry through on its promise to institute agrarian reform. Much of the
contested land is occupied by large soy farms owned by Brazilian immigrants.
The new government announced that it would restrict soy cultivation in certain
regions.

April election ended six decades of Colorado rule
Although the victory ofFernando Lugo was clearly a call for change, it did not
give the leftist former priest a majority in congress. Instead he must govern

through the multiparty Patriotic Alliance for Change and the opposition parties,
which negotiated leadership positions in Congress in return for their support. In
early September rumors of coups shook the political environment.

Lugo lays out pragmatic policy agenda
In naming a U.S-trained and widely respected economist as finance minister (a
post he held for two years under the previous government), the president signaled
early on that he would adhere to orthodox monetary and fiscal policies. He also
promised to seek more private investment in order to reach a targeted GDP
growth of 5-6.0% over the next five years. But he was also committed to
implementing agrarian reform and other measures to narrow the gap between rich
and poor, and to reduce poverty.

Commitment to combat corruption promising for legal environment
Like all Presidents, Lugo promised to reduce his country's notorious corruption,
but as a political outsider he was more credible than his Colorado predecessors.
In June 2008, the government implemented substantial tax reforms in the energy
sector to reduce dependence on oil in favor ofbio-fuels. Duties were removed on
the importation of used flex-fuel vehicles. In 2009 consumer taxes on ethanol and
bio-diesel will be slashed from 10% to just 2%.

Uruguay#: Attractive environment preparedfor national elections.

Fifth consecutive year of strong growth
The controversial pulp plant that began production in November 2007 helped
boost industrial growth by 20.5%, and overall GDP growth by 13.1% in the first
half of 2008. Internal demand was strong, but inflationary pressures were rising.
In July the government announced that the discovery of a large offshore natural
gas deposit. If confirmed, the resource would help reduce the country's heavy
dependence on imported energy, generate new exports earnings (to Argentina),
and attract major new foreign investments.

Positive external profile
Both exports and FDI continued strong growth, which led to significant
appreciation of the peso. Major new foreign investment projects were announced
for the pulp industry. In its July upgrade of the sovereign debt rating, S&P
expressed concern about the country's high debt burden and the need for fiscal
consolidation. Also in July, Moody's reported that the banking system had made
a full recovery from the 2002 crisis that wiped out several big banks.

October 2009 elections to select successor to popular president
During his term, Tabare Vazquez, a left-leaning politician, succeeded in holding a
diverse governing party together and guiding it along a moderate path that made
the business environment quite attractive. Therefore, there was much interest in
who would succeed him.

* Solid macro fundamentals and heavy infrastructure investment
The Central Bank gradually shifted from an exchange rate anchor to an inflation-
targeting regime.

* Banking sector reforms
The regulatory environment in banking was strengthened by legislation passed in
2008 that enhances the autonomy and powers of the central bank.

III. OUTLOOK

OUTLOOK FOR THE REGION

Throughout much of 2008 it appeared that Latin America would survive the

turmoil in global credit markets and the slowdown in the U.S. and European economies.

Many observers pointed out that the region was reconfiguring decouplingng") its

articulation with the global economy; others that Latin America had put into place

economic policies that would protect it from the external shocks of previous decades.

With the September-October collapse of credit markets, and the increased probability of

that a global recession would affect emerging markets, the outlook for Latin America

over the next 15 months became more problematic. Before assessing prospects for the 18

countries in the next section, we examine the outlook for each component of the regional

business environment. For each component and each country, we indicate whether it is

likely to get better (,), get worse (+), or stay the same (=) through 2008. We use "?" to

indicate an uncertain outlook. We further identify key variables to monitor in the coming

12-15 months.

External Environment

SGlobal
When the U.S. sub prime exploded into a full blown global financial meltdown, it
became clear that Latin America would not escape unscathed in spite of taking
the prescribed and applauded precautionary measures to make its economies less
vulnerable to external shocks (building current account surpluses and hard
currency reserves, pursuing trade diversification, reducing foreign debt and
adopting flexible exchange rates) As the world economy sank into recession in
the last quarter of 2008, the commodity bull markets of the last seven years came
to at least a temporary end. By mid-October, oil had dropped 44%; corn and
wheat more than 40%; and metals more than 33%. These were the very
commodities that sustained the economic boom of the South American economies
and Mexico. The disappearance of credit also had negative consequences for
Latin American equity markets, debt financing, and FDI.
Keys: Global recovery; stabilization of commodity and credit markets.

*Regional#
The new U.S. administration will take office with U.S.-Latin American relations
at their lowest level in decades. Added to anger over post-9/11 neglect and
unilateralism, Latin Americans blame the 2008 global meltdown on the United
States. Although both of the presidential candidates promised to improve
relations with the south, their commitments were vague and resources will be
increasingly scarce. Regardless of which candidate wins, it will be difficult to
revive the free trade agenda, which anchored hemispheric relations through the
1990s and into this decade. Immigration reform that is appealing to Latin
America will prove difficult, especially during an economic downturn. Hugo
Chavez shows not sign of backing away from his campaign to fashion a new
world order that envisions diminished role for the United States. Declining oil
prices may reduce the resources available to him, but a serious economic crisis
could just as easily help bring to power governments aligned with his cause. It is
important that Brazil continue to quietly counter balance Venezuela in South
American regional politics. Recognizing that the global financial crisis posed a
serious threat, the regional lending agencies led by the Inter-American
Development Bank set up emergency lines of credit for countries in the region.
Keys: New U.S. administration; South American power politics

Domestic Environment

Economic and Financial Performance #
Instead of expanding at around 4.0% as forecast earlier in the year, Latin
American growth in 2009 is now expected to fall below 2.0% with only Peru of
the major economies to exceed 2.0% while Mexico may not grow at all.
Countries such as Argentina and Ecuador that need to secure debt funding on
international markets could be especially hurt by the credit crisis. The predicted
slowdown may lessen inflationary pressures.
Keys: Commodity prices; fiscal and monetary policy adjustments

Social Environment 0
The predicted economic downturn could stop if not reverse the social gains
achieved in recent years unless governments are able to act in a counter-cyclical
fashion and invest in resources special aid programs.
Key: Length and depth of economic downturn; programs to fight
unemployment and poverty

Political Environment?
Latin America's growing economic problems will likely have political
consequences. This could mean that voters will be cautious and choose the
candidates that promise to stay the course. It is equally possible especially in
light of the post-1990s evolution of politics voters would opt for candidates who
promise to break with the policies responsible for current problems. The latter
course favors the leftist-populist parties and candidates.

Keys: Elections in El Salvador, Honduras, Panama, and Uruguay;
constitutional referendums in Bolivia and Ecuador

Policy Environment?
Countries that adhere to prudent macro-economic policies, and limited but
effective state intervention in their economies, are better positioned to cope with
the deteriorating external environment through the implementing counter-cyclical
measures. They are likely to fare better compared to countries that did not set
aside some of the commodity windfall in a rainy day fund. In is possible that a
prolonged economic downturn will drive countries further from the policy
prescriptions of the New Economic Model in favor populist, statist solutions. On
two previous occasions, external shocks culminated in major paradigm shifts: the
first, in the 1930s and 1940s, led to a shift from an export-led growth model to
inward-looking development with import substitution. The second, in the 1980s,
promoted the New Economic Model currently in vogue.
Keys: Orthodox counter-cyclical measures vs. radical policy options

Legal Environment=
The financial crisis may convince Latin American governments to tighten
regulation of financial markets.
Key: Financial market reforms

COUNTRY OUTLOOKS

This section divides the 18 countries into three categories according to the overall

character of their business environments attractive, problematic or mixed in 2008, and

then assesses the outlook for each through 2009. As 2008 winds down, the outlook for

next year for all 18 countries is not encouraging, but some are better equipped than others

to manage the deterioration that is certain to occur.

Attractive Environments

The number of countries with attractive business environments has increased

during the economic cycle that may be ending. With the addition of Brazil there are now

eight countries in this category. All eight have achieved high, sustained growth while

bringing inflation down and keeping it there. They have adhered to the recommended

macro-economic policies, and their external performance has allowed them to build up

reserves that will help them defend themselves against the external shocks. Although

Costa Rica and Uruguay have a less orthodox policy environment, they share with Chile

stable politics, strong institutions, and adherence to rule of law, assets that enhance

investor confidence. In contrast, both Panama and Peru have produced high rates of

growth but their institutions are not as stable and transparent. Mexico, the Dominican

Republic and Brazil fall between the two extremes.

Mexico #
For this open economy which is tightly linked to the United States, 2009 will be a
difficult year. Thanks to measures adopted since 1994, the result will not be a
balance of payments crisis leading to the collapse of the peso. Rather the U.S.
recession will translate into declining exports, reduced tourism, reduced
investment, and a drop in remittances. Revised forecasts in October predicted no
GDP growth in 2009.
Keys: U.S. recovery

Dominican Republic 4
President Fernandez guided the Dominican Republic through a successful
recovery during his just completed second term for which he was rewarded with a
re-election. But during his third term, it will be difficult for the Dominican
Republic to remain as one of Latin America's most dynamic economies. In
addition to copying with an unfavorable external environment, the DR must show
progress on the perennial problems, such as unreliable electricity and high
poverty.
Key: U.S. recovery

Costa Rica #
Costa Rica's conservative monetary policy helped avoid direct damage from the
September financial markets crisis, but it cannot escape the secondary effects of
the crisis because of its heavy dependence on the U.S. for exports, investment and
tourism.
Key: U.S. recovery

Panama #?
The environment will become more unsettled as the presidential campaign heats
up. Much will depend on who wins. The nominee of the governing
Revolutionary Democratic Party, Balbina Herrera, is running as a populist with
ties to the business community. The influential business community may throw it
support behind one of two other major candidates. Should Herrera prevail her
support of Manuel Noreiga at the time of the 1989 U.S. invasion may become an
issue in congressional ratification of the FTA.

Key: May election

* Peru #
Even before the global financial crisis began, the two other rating agencies had
failed to follow Fitch's lead in granting Peru investment-grade rating. Social
unrest and the declining popularity of the president persisted. With solid macro-
economic policies and strong currency reserves, Peru was better positioned to
cope with the crisis, but it will be affected in a way the will further delay full
investment-grade standing. Growth is unlikely to surpass 4.0% in 2009, and
presidential elections are coming up in 2010.
Keys; Commodity prices; domestic politics

* Brazil=
Because of effective macro-economic policies, diversified trading partners, strong
FDI flows, and lower debt ratios, Brazil seemed better positioned to avoid or cope
with an external shock of the type that threw its economy into crisis in the past,
but it became increasingly apparent that as the international credit crisis evolved
into a global economic slowdown Brazil would not escape serious consequences.
Slower growth is inevitable. The questions are how slow, for how long and at
what political cost?
Keys: Globalfinance and economics

* Chile=
While it is undeniable that no economy except Venezuela has benefited more
from soaring commodity prices, it is also true that Chile has managed the copper
windfall better than the other commodity exporters. Because of strong surpluses,
a large rainy day fund, and a strong, proactive central bank, the slowdown will be
moderate. Likewise, although the 2009 political environment may become more
unsettled because of the presidential election, strong institutions and moderate
politics assure that policy will hold steady, even if the conservative opposition
win the presidency.
Keys: Price of copper; inflation; divisions in governing coalition

* Uruguay=
As the ruling Frente Amplio and the two traditional parties maneuver to select
their presidential nominees, the environment will become more uncertain.
President Tabare Vazquez supports his economic minister as the Frente standard
bearer who would continue with his program, but neither his nomination nor
election is a sure thing. Should neighboring Argentina default and/or enter into
recession, the consequences would again be costly for Uruguay.
Keys: October 2009 elections; developments in Argentina

Problematic Environments

The four countries that have the least business-friendly environments in Latin

America share several key characteristics. First, they have opted to pursue populist

policy agendas that feature heterodox macro-economic policies and an expanded role for

government in the economy. Second, their politics are unsettled but tend toward

concentrating power in the hands of the president at the expense of the other branches of

government and the political opposition. Third, the rule of law is weak, especially in

regarding property rights and protection of foreign investment. Fourth, with the

exception of Nicaragua, they are all energy exporters. Once a source of strength, the last

is quickly becoming a weakness as energy prices plummet.

Nicaragua=
Like the other Central American economies, Nicaragua is likely to be
disproportionately hurt by the global financial crisis and slowdown. Polarized
politics makes the Nicaraguan environment more problematic than in neighboring
countries. The Ortega government seems determined to consolidate power by
creating a hybrid "Citizens Power" version of the 1980s Sandinista and
Venezuelan Bolivarian models. While declining global energy prices may reduce
inflationary pressures, they may also force Venezuela to reduce its subsidies to
Nicaragua
Keys: U.S. recovery; domestic politics

Venezuela 0
High oil prices have funded President Chavez's activist agendas. Domestically
the windfall meant that there were revenues to expand state participation in the
economy and finance social projects. On the foreign side, it allowed him to
challenge U.S. hegemony in the hemisphere and in world using subsidized oil to
recruit allies to his Bolivarian and ALBA causes. What is the future on these
projects without the oil windfall? One estimate fixes $95 a barrel as the price
necessary for Venezuela to balance its budget. In 2000 it was only $34. In
October, oil prices were under $70 per barrel, down 50% from their peak earlier
in the year. What will be the political impact of a deteriorating current and fiscal
accounts and a stagnant economy? The November elections will give some idea
of prospects for the Chavez paradigm in austere times.
Keys: Oil prices; November elections

Bolivia=
The environment in Bolivia deteriorated in the last half of 2008, and it is
difficulty to see an easy way out of the current political stalemate. Should the
government and opposition find common ground and should the December
constitutional referendum take place, we would at least have a more stable
environment. U.S.-Bolivian relations also have to be repaired before the outlook
can become more promising.
Key: Discussions with opposition; constitutional referendum; U.S. relations

Ecuador
With approval of the new constitution, Ecuador took a step toward bringing order
to its volatile politics. It has had eight presidents in the last decade. Correa, who
is very popular, could serve two more four-year terms until 2017. Although the
new constitution strengthens the executive branch and broadens the economic and
social powers of the government, it is less radical than those proposed in
Venezuelan and Bolivia. Until elections are held for all levels of government,
uncertainty about the rules of game will persist. Continuing decline in oil prices
will create serious balance of payments and fiscal problems for Ecuador. Failure
to resolve its differences with Brazil over Oderbrecht will increase the investment
risk.
Keys: Oil prices; Elections mandated by new constitution; relations with Brazil.

Mixed Environments

The mixed environments have all strengthened in recent years. The improvement

in several was so significant that they were upgraded to attractive. However, 2009 will

bring an end to the upward trend, both because of external events beyond their control

and domestic factors that have left them vulnerable to external shocks. The deterioration

of Argentina, which has taken place throughout 2008, could lead its environment

becoming seriously problematic in 2009.

*El Salvador #
In September S&P downgraded the sovereign credit outlook for El Salvador
because of political uncertainty and persistent social problems, especially high
crime rates. Until a new president is elected, uncertainty will remain. If the
candidate of the leftist FMLN prevails and if he pursues the pragmatic leftist
agenda, the environment will improve.
Keys: March elections and composition of new government; U.S. recovery

* Guatemala=
Alvaro Colom's election represents progress for a weak environment that has
been making marginal improvements in recent years. However, in governing the
new president faces the triple reality of the rapidly deteriorating external
environment to which is his economy is closely tied by trade and financial flows,
daunting social problems, and the need to govern in the context of shifting
legislative coalitions.
Keys: U.S. recovery; domestic politics

* Honduras #
One of the poorest countries in the region, Honduras has experienced modest
improvements in recent years. Now the weak external environment and the
uncertainty of national elections threaten the business environment.
Keys: National election; U.S. recovery

* Colombia
Under the presidency of Alvaro Uribe, Colombia has made impressive strides on
both the security and economic front under the presidency of Alvaro Uribe.
However, declining oil prices and the global credit meltdown will have significant
negative consequences by lowering fiscal revenues and forcing budget cuts and
by drying up the international liquidity that funded economic expansion. Reduced
domestic demand and lower growth are inevitable. A growing balance of
payments deficit will postpone investment grade rating.
Keys: Global growth and recovery offinancial markets; U.S. FTA

* Argentina #
Even before the financial market turmoil of September and October, there were
doubts about Argentina's ability to avoid another default. As the global crisis
deepened, it assumed the proportions of a classic external shock. First, declining
commodity prices and world demand will mean declining exports resulting in
current account and fiscal deficits. Second, highly risk adverse credit markets are
unlikely, given its past history, to provide Argentina either the investment funds
or debt financing it will need to stay out of the red and avoid a serious economic
downturn. The October proposal to nationalize the private social security system
caused great consternation at home and abroad.
Keys: Global growth and recovery offinancial markets; nationalization of
social security funds

* Paraguay
With the election of Fernando Lugo, Paraguay entered a new political era, but the
president must now push his ambitious agenda, which includes agrarian reform
and negotiating new energy agreements with Brazil, through the tenuous Patriotic
Alliance for Change in Congress and a bureaucracy staffed with Colorado party
faithful.
Keys: Commodity prices; unity of congressional coalition; relations with Brazi

TABLES

Table 1 GDP GROWTH, 1997-2008

Table 2 ANNUAL INFLATION, 1997-2008

Table 3 TERMS OF TRADE, 1998-2007

Table 4 NET FOREIGN DIRECT INVESTMENT, 1998-2007

Table 5 EXPORTS, IMPORTS AND CURRENT ACCOUNT BALANCE, 2004-
2007

Table 6 GROSS DISBURSED EXTERNAL DEBT, 1998-2007

Table 7 DEBT/EXPORT RATIO, 1998-2007

Table 8 EXCHANGE RATES AND IMF AGREEMENTS, 2008

Table 9 SOCIAL ENVIRONMENT, 2008

Table 10 POLITICAL ENVIRONMENT, 2008

Table 11 CENTRAL GOVERNMENT BALANCE, 2003-2007

Table 12 LEGAL ENVIRONMENT, 2008

Table 13 LEGAL ENVIRONMENT, 2008

Table 1
GDP GROWTH, 1998-2008
(Percentage Change)

1998 1999 2000 2001 2002 2003 2004 2005 2006

20071

Average
1998-2007 20082

NAFTA REGION

Mexico

5.0 3.8 6.6 0.0 0.8

DR-CAFTA COUNTRIES
Dominican Republic
Cosia Pica
El Salvador
Gualemala
Honduras
Nicaragua
Panama

ANDEAN SOUTH AMERICA
Bolivia
Colombia
Ecuador
Per Li
Venezuela

MERCOSUR REGION
Argentina
Brazil
Chile
Paraguav
Uruguay

LATIN AMERICA AND
CARIBBEAN

8.3 6.1
84 82
3.7 3.4
5 0 3
2.9 -1.9
3.7 7.0
7.4 4.0

5.0 0.4
0I 6 -4 2
2.1 -6.3

0.3 -6.0

3.9 -3.4
0 1 0: 8
3.2 -0.8
406 -15
4.5 -2.8

7.9 2.3 5.0
18 11 29
2.2 1.7 2.3
6 23 22
5.7 2.6 2.7
4.1 3.0 0.8
2.7 0.6 2.2

2.5 1.7 2.5
29 15 19
2.8 5.3 4.2
3 0 02 52
3.7 3.4 -8.9

-0.8 -4.4 -10.9
44 13 1 9
4.5 3.4 2.2
-33 21 0 0
-1.4 -3.4 -11.0

2.5 0.2 3.9 0.3 -0.5

1.4 4.2 3.0

-0.4 2.7 9.2
64 4 1 59
2.3 1.8 2.8
21 27 32
3.5 5.0 4.1
2.5 5.1 4.0
4.2 7.5 6.9

2.9 3.9 4.1
39 49 52
3.6 7.9 4.7
3 52 64
-7.7 17.9 9.3

8.8 9.0 9.2
0 5 4 23
3.9 6.2 6.3
38 41 29
2.2 11.8 6.6

2.1 6.2 4.6

SOURCE: ECLAC Preliminary Overview of the Economies of Latin America and the Caribbean, 2007
1 Preliminary estimates for Year 2007 from ECLAC
2 Preliminary estimates for Year 2008 from IMF Economic Outlook 2008
3 Includes Antigua and Barbuda, Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, Saint Kitts and Nevis,
Saint Lucia, Saint Vincent and the Grenadines, Suriname and Trinidad and Tobago

3.3 2.0

3.1 4.43

Table 2
ANNUAL INFLATION, 1998-2008
(Percentage variation in CPI, December through December)

1998 1999 2000 2001 2002 2003 2004 2005 2006

20071 20082

NAFTA REGION

Mexico

DR-CAFTA COUNTRIES
Dominican Republic
Costa Pica
El Salvador
G.ualemala
Honduras
licaragLua
Panama

ANDEAN SOUTH AMERICA
Bolivia
Colombal
Ecuador

Venezuela

MERCOSUR REGION
Argentina
Brazil
Chile
Paraguay
Uruguay

18.6 12.3 9.0 4.4 5.7 4.0 5.2 3.3 4.1

7.8 5.1 9.0 4.4 10.5 42.7 28.7 7.4 5.0
124 1"0 1 102 11 0 9 7 99 131 14 1 94
4.2 -1.0 4.3 1.4 2.8 2.5 5.4 4.3 4.9
;5 49 51 89 63 59 92 86 58
15.7 10.9 10.1 8.8 8.1 6.8 9.2 7.7 5.3
185 ;2 99 4 ; 40 66 89 96 102
1.4 1.5 0.7 0.0 1.9 1.5 1.5 3.4 2.2

4.4 3.1 3.4 0.9 2.4 3.9 4.6 4.9 4.7
167 92 88 76 7 65 55 49 45
43.4 60.7 91.0 22.4 9.3 6.1 1.9 3.1 3.1
60 3; 3; -0 1 15 25 35 15 1 1
29.9 20.0 13.4 12.3 31.2 27.1 19.2 14.4 17.0

0.7 -1.8 -0.7 -1.5 41.0 3.7 6.1 12.3 0.0
17 89 60 77 125 93 6 57 31
4.7 2.3 4.5 2.6 2.8 1.1 2.4 3.7 2.6
146 54 86 84 146 93 28 99 125
8.6 4.2 5.1 3.6 25.9 10.2 7.6 4.9 6.4

LATIN AMERICA AND
CARIBBEAN 10.0 9.7 9.0 6.1 12.2 8.5 7.4 6.1 5.0 6.1 6.64
SOURCE: ECLAC, Preliminary Overview of the Economies of Latin America and the Caribbean, 2007
1 Preliminary estimates for Year 2007 from ECLAC
2 Preliminary estimates for Year 2008 from IMF Economic Outlook 2008
3 Twelve-month variation up to October 2007
4 Includes Antigua and Barbuda, Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, Saint Kitts and Nevis,
Saint Lucia, Saint Vincent and the Grenadines, Suriname and Trinidad and Tobago

3.9 3.5

3.5
1L] 1
2.7
9 1
9.6
128
5.53

11.9
54
2.7
72
20.7

Table 3
TERMS OF TRADE, 1998-2007
(2000=100)

1998 1999 2000 2001 2002 2003

2004 2005 2006 20071

NAFTA REGION

Mexico

DR-CAFTA COUNTRIES
Dominican Republic
Cosia Rica
El Salvador
Guatemala
Honduras
I icaragIua
Panama

ANDEAN SOUTH AMERICA
Bolivia
Colombia
Ecuador
Peru
Venezuela

MERCOUSUR REGION
Argentina
Brazil
Chile
Paraguay
Uruguay

LATIN AMERICA AND
CARIBBEAN

90.6 99.3 100.0 97.4 97.9 98.8

108.0 105.7 100.0 100.9 101.5 97.9
117 5 106 9 100 0 98 J 969 95 5
95.8 99.6 100.0 102.5 101.6 97.7
115 3 11:119 1001 0I 96 7 95 8 93 0
108.9 107.5 100.0 94.8 92.0 88.0
796 953 1000 884 870 841
104.7 104.6 100.0 102.7 101.6 97.2

102.0 97.1 100.0 95.8 96.2 98.5
81 2 87 2 10 0 94 2 925 95 2
75.8 89.1 100.0 84.6 86.8 89.8
103 4 100 8 100 0 5 6 98 J .102 2
51.2 66.1 100.0 82.2 87.6 98.7

96.6 90.9 100.0 99.3 98.7 107.2
1119 970 1000 996 98 4 97i
91.0 94.2 100.0 93.3 97.2 102.8
108 0 101 7 10 0 1. 2 96 7 101 4
104.4 95.9 100.0 104.0 102.6 103.5

91.3 94.5 100.0 96.3 96.6 98.6

101.6 103.6 104.1 104.6

104.1
108 5a
91.5
1113
118.1

109.2
97 9
124.9
104 3
99.9

111.8
117 7
102.4
119 J
154.4

106.9
99 2
139.8
974
90.7

134.6
1152
109.9
151 1
184.4

113.0
103 8
183.7
95 5
88.7

137.2
121 3
114.1
161 8
200.4

116.2
107 8
194.3
99 2
88.7

103.9 109.0 115.1 117.9

SOURCE: ECLAC, Preliminary Overview of the Economies of Latin America and the Caribbean, 2007
1 Preliminary estimates for Year 2007 from ECLAC

Table 4
NET FOREIGN DIRECT INVESTMENT, 1997-2007
(Millions of US dollars)

1997 1998 1999 2000 2001 2002 2003

Mexico

12,831 12,409 13,631 17,588 21,800 18,154 14,003 14,509 12,460

DR-CAFTA COUNTRIES
Dominican Republic
Cosia Rica
El Salvador
Gualemala
Honduras
licaragua
Panama

ANDEAN SOUTH AMERICA
Bolivia
Colombia
Ecuador
Peru
Venezuela

421
404
59
84
122
203
1,299

728
4 753
724
2 054
5,645

5,507
18608:
3,809
2301
113

MERCOSUR REGION
Argentina
Brazil
Chile
Faraguav
Uruguay

LATIN AMERICA AND
CARIBBEAN

700
608
1,103
673
99
218
1,203

947
2 033
870
1 582
3,942

4,965
26 0:102
3,144
336
155

1,338
614
162
155
237
33;
864

1,008
1 392
648
1 812
2,018

22,257
26 888
6,203
89
238

734
2 069
720
81'0:
4,180

9,517
30,i 498
873
98
274

1,079
451
289
456
193
150:
467

703
2 509
1,330
1 070':
3,479

2,005
24715
2,590
78
291

674
1 283
1,275
2 156
-244

2,776
14 108
2,207
12
180

195
820:
1,555
1 275
722

878
9 894
2,701
22
401

57.599 60.999 79.923 70.308 63.659 45.213 35.114

909

430
155
325
250:1
1,004

63
2975
1,160
1 599
864

3,832
8 339
5,646

315

1,023
904
300
2,1,8
272
241
1,027

-280
5, 51
1,646
2 579
1,400

3,579
12 550'
4,764
58
715

13,453

1,183
1 371
254
354
489
282
2,574

237
5365
271
3 467
-2,632

2,721
-9 4201
5,076
166,322
1,322

43.149 49.206 28.657

SOURCE ECLAC, Preliminary Overview of the Economies of Latin America and the Caribbean, 2007
1 Preliminary estimates for Year 2007 from ECLAC

NAFTA REGION

2004

2005

2006

20071

16,900

1,393
1 657
1,070
536
494
293
1,000

240
6 739
400

-3,200

1,863
32 000
8,411
181
1,000

77.126

Table 5
EXPORTS, IMPORTS AND CURRENT ACCOUNT BALANCE, 2004-2007

NAFTA REGION
Mexico

DR-CAFTA COUNTRIES
Dominican Republic
Costa Rica
El Salvador
Guatemala
Honduras
Nicaragua
Panama

ANDEAN SOUTH AMERICA
Bolivia
Colombia
- Ecuador
Peru
Venezuela

MERCOSUR REGION
Argentina
Brazil
Chile
Paraguay
Uruguay

LATIN AMERICAN AND
CARIBBEAN

2004

(Millions of US dollars)
2005

2006

20071

Exports Imports C/Account I Exports Imports C/Account I Exports Imports C/Account I Exports Imports C/Account

187,999 196,810

5,936
6,370
3,337
3,368
2,393
1,365
6,078

2,146
17,224
7,968
12,809
39,668

34,576
96,475
32,215
2,863
3,145

7,888
7,791
5,999
7,189
3,677
2,440
7,617

1,725
15,878
7,684
9,805
17,021

21,311
62,835
23,020
3,108
2,992

466.311 405.998

SOURCE: ECLAC, Preliminary
Overview of the Economies of
Latin America and the Caribbean,
2007
1 Preliminary estimates for 2007 from ECLAC

-6,682 214,233 221,820

1,047
-796
-632
-1,211
-404
-696
-1,061

337
-938
-564
19
15,519

3,446
11,679
1,586
138
43

6,146
7,100
3,432
3,701
2,648
1,552
7,591

2,791
21,729
10,427
17,336
55,473

40,106
118,308
40,574
3,266
3,758

9,876
9,230
6,440
8,070
4,188
2,865
8,907

2,341
20,134
9,698
12,076
23,693

27,302
73,560
30,394
3,758
3,730

20.775 1 560.629 479.391

-5,039 226,218 278,087

-500
-964
-786
-1,387
-67
-800
-782

619
-1,981
204
1,105
25,534

5,789
14,193
703
-22
1

10,664 12,748
11,023 12,427
3,594 8,741
5,070 12,750
3,753 6,206
1,925 3,905
12,416 11,927

4,297 3,436
28,554 30,352
14,204 13,764
26,251 18,266
66,669 37,944

54,150 41,138
157,269 120,466
65,620 44,329
5,646 6,167
5,515 5,708

35.873 1 680.123 674.521

-1,994 287,354 305,676

-786
-1,122
-700
-1,592
-355
-855
-552

1,319
-3,057
1,540
2,589
27,167

8,097
13,621
5,256
-110
-436

11,328 12,533
12,515 13,518
5,410 9,650
8,561 14,425
4,087 7,424
2,567 3,735
14,847 14,686

4,684 3,809
32,503 37,443
14,975 14,912
31,057 24,124
70,003 48,641

63,971 51,973
184,979 156,394
77,263 53,133
7,417 7,384
6,297 1,627

47.515 1 843.728 791.261

-6,975

-1,703
-1,346
-926
-1,678
-727
-914
-743

1,471
-6,703
1,468
1,524
22,611

6,500
4,624
7,985
422
-579

23.844

Table 6
GROSS DISBURSED EXTERNAL DEBT, 1998-2007
(Millions of US dollars)

1999

2000

2001

2002

2003

2004

Mexico

160,258 166,381 148,652 144,526

DR-CAFTA COUNTRIES
Dominican Republic
Cosla Pica
El Salvador
Guatemala
Honduras
licaragua
Panama

ANDEAN SOUTH AMERICA
Bolivia
Colomibia
Ecuador
Peru
Venezuela

MERCOSUR REGION
Argentina
Brazil
Chile
Paraguay
Uruguay

3,546
3 4102
2,646
2 368
4,369
5,349
5,349

3,661
3641
2,789
2 631
4,691
6 568
5,568

3,679
3748
2,831
2644
4,711
6 6604
5,604

4,176

3,148
2 925
4,757
6 374
6,263

4,659 4,573 4,460 4,497
36 681 36 733 36 130 39 09
16,221 15,902 13,216 14,376
30 142 28 586 27 981 27 195
35,087 37,016 36,437 35,398

147,634 152,563 155,015 166,272
223 792 225 610 216 921 2019 935
32,591 34,758 37,177 38,527
2 368 2 996 3275 30:74
5,467 8,261 8,895 8,937

134,980 132,273 130,925 128,255 116,653 122,938

4,536 5,987 6,380 6,813 7,226 7,242
4 118 4621 4979 4979 4995 IJ/A
3,987 4,917 8,211 8,642 9,305 9,300
3119 3467 3 844 3 23 3 58 4 353
4,922 5,242 5,912 5,103 3,889 2,799
S363 6 596 5391 5348 4 527 3381
6,349 6,504 7,219 7,580 7,788 8,269

4,400 5,142 5,045 4,942 3,248 2,056
37 325 38 :8 39 441 38456 40 162 4304 3
16,236 16,756 17,211 17,237 17,099 17,508
27 872 29 587 31 224 28 657 28 3100 29 637
35.460 40.456 43.679 46.427 44.952 47.256

156,748
210 711
40,504

10,548
10,548

164,645
214 930:
43,067
11,013
11,013

171,205
201 373
43,515

11,593
11,593

113,804
169 450
44,934
31156
11,418

107,886
172 589
47,590
30:28
10,560

116,188
191 358
49,458
11/A
11,910

LATIN AMERICA AND
CARIBBEAN 743,457 763,170 738,273 745,702
SOURCE: ECLAC Preliminary Overview of the Economies of Latin America and the Caribbean, 2007
1 Preliminary estimates for Year 2007 are from ECLAC

734,445 763,186 765,825 662,341 647,831 647,696

NAFTA REGION

1998

2006 20071

Table 7
DEBT'IEXPORT RATIO, 1998-2007
(as a percentage of exports of goods and services)
1998 1999 2000 2001 2002 2003 2004 2005 2006 20072
NAFTA REGION
Mexico 124 112 83 84 78 81 70 60 52 43

DR-CAFTA COUNTRIES
Dominican Republic 47 46 41 50 55 67 68 67 67 64
C.sla Rica 42 3; 41 46 46 46 45 37 32
El Salvador 87 88 77 88 105 115 108 109 112 171
Gualemala 68 76 69 75 79 84 85 75 74 51
Honduras 180 210 189 196 196 195 190 148 131 68
Jicaragua 666 680 604 570 557 505 327 287 235 132
Panama 65 78 72 78 84 86 82 71 64 56

ANDEAN SOUTH AMERICA
Bolivia 344 349 303 296 283 262 197 151 107 44
,olontmbia 273 263 229 260", 263 242 21:3 157 137 133
Ecuador 324 298 221 253 264 229 192 150 123 118
PerL 4:00 372 3310 321 3:02 274 210:' 146 1108 95
Venezuela 183 166 105 126 128 141 109 83 61 68

MERCOSUR REGION
Argentina 473 546 496 533 538 479 431 245 197 182
Brazil 381 49 336 311 301 257 185 126 99 103
Chile 161 165 160 172 179 162 114 94 70 64
Paraguav 54 95 98 109 121: 1108 83 70 54
Uruguay 132 238 243 274 392 357 270 225 196 189

LATIN AMERICA AND
CARIBBEAN 216 211 172 181 178 168 138 101 83 77
SOURCE: ECLAC, Preliminary Overview of the Economies of Latin America and the Caribbean, 2006
1 Gross disbursed external debt includes the public-and-private sector external debt Also includes International Monetary Fund loans
2 Preliminary estimates for Year 2007 from ECLAC

Table 8

EXCHANGE RATES AND IMF AGREEMENTS, 2008
US Dollar Exchange Rate

Auaust 29. 2008

% change Exchanae Rate Reaime

IMF Aareements (Dates)

peso

peso
colon
colon/U.S. dollar
queLal
lempira
cordoba oro
balboa/U.S. dollar

ANDEAN SOUTH AMERICA
Bolivia boliviano
Colombia peso
Ecuador sucre/U.S. dollar
Peru nuevo sol
Venezuela bolivar

MERCOSUR REGION

10.78

32.73
527 8
8.91
7 80
19.22
1873
1.02

8.08
1954 2
1.00
3. 21
2149.0

10.28

34.80
554 95
8.74
7 43
18.90
19 52

6.98
1938 ,00
1.00
2 95
2144.60

4.64% Independent Float

-6.32%
-5 140o
1.91%
3 70''.:.'
1.66%
-4 2200

13.61%
0 83'',:
0.00%

80.20%
0.20%

managedd Floal
Dollarized
Ilanaged Floal
Managed Float
Ilanaged Floal
Dollarized

Managed Float
Independent Float
Dollarized
Independent Float
Managed and Licensed

Stand-bv C 11C-7-2ICci)i

Argentina peso 3.08 3.03 1.62% Independent Float
Brazil real 1 91 1 6J 1J 13'": Independent Float
Chile peso 526.1 512.80 2.53% Independent Float
Paraguay guarani 5185 7 39J5 00 23 c93":', Independent Float Stand-bv (5/06-8/08)
Uruguay peso 24.16 19.10 22.76% Managed Float
SOURCES: New York Times Markets Section , IMF Homepage
Key for IMF Agreements
Stand-by is the most common type of credit arrangement designed to provide short-term financial assistance

Currency

June 19, 2007

NAFTA REGION
Mexico

DR-CAFTA COUNTRIES
Dominican Republic
Costa Rica
El Salvador
Gualemala
Honduras
Ilicaragua
Panama

" "

Table 9
SOCIAL ENVIRONMENT, 2008

INCOME
GROWTH INEQUALITY
% GINI index 2

HDI
(World rank) 3
2007/2008

POPULATION IN
POVERTY

2006
2006

URBAN
UNEMPLOYMENT
RATE

2006
2006

104.3

NAFTA REGION
Mexico

DR-CAFTA REGION
Dominican Republic
Cosla Pica
El Salvador
GLualemala
Honduras
I hiCaragLua
Panama

ANDEAN SOUTH AMERICA
Bolivia
C) Ccolombia
Ecuador
Peru
Venezuela

MERCOSUR REGION
Argentina
Brazil
Chile
Paraguay

Uruguay 3.3 0.3 3.2
SOURCES: UNDP, Human Development Report2007/2008, CEPAL, Panorama Socialde America Latina 2007

$10,751

$8,217
10 180
$5,255
-4 568
$3,430
I.3674
$7,605

$2,819
1.7 304
$4,341
$6 39
$6,632

44.5
19 0
(2005) 47.5
(2002) 60 2
71.5
(2002) 69 4
30.8

(2005) 63.9
(2005) 46 8
39.9 4
14 5
30.2

21.04

13.7
(2005 60 5
18.54

$14,820
.8 -1402
$12,027
14 642
$9,962

1 GDP per capital (Purchasing Power Parity in $U S ) 1 PPP dollar has the same purchasing power in the domestic economy as 1 U S dollar has in the U S economy
2The Gini index measures inequality over the entire distribution of income or consumption A value of 0 represents perfect equality, and a value of 100 perfect inequality
3 The Human Development Index (HDI) measures a country's achievements in three aspects of human development longevity (life expectancy at birth), knowledge (combination of literacy rate and enrollment ratio),
living (GDP per capital PPP in $U S )
4 Percent of urban population in poverty
5 Data refer to national illiteracy estimates from censuses or surveys conducted between 1995 and 2005, unless otherwise specified

and a decent standard of

POPULATION
(Millions)
2005

AVG. POP.
GROWTH

2005-15
2005-15

ILLITERATE
POP.
(%age 15+) 5
1995-2005

GDP PER
CAPITAL
(PPP $U.S.)1

2007/2008 1990-2005

(

(

Table 10
POLITICAL ENVIRONMENT, 2008
Level of Democratic Consolidation

Election Inaugurating
Democracy

Unscheduled
Head-of-State Changes

Political Civil
Rights' Liberties2

Current Government

President / PM

Term

NAFTA REGION
Mexico
DR-CAFTA COUNTRIES
Dominican Republic
Costa Pica
El Salvador
Gualemala
Honduras
I licaragua
Panama
ANDEAN SOUTH AMERICA
Bolivia
Colombia
Ecuador
Peru
Venezuela

2000

1963
1949
1984
1985
1982
1984
1994

19803
1958
1978
1980
1958

Calderon

Fernandez
Arias
Saca
Colon
Zelaya
Ortega
Torrijos

Morales
Uribe
Correa
CGarcia
Chavez

2006-2012

2008-2012
2006-2010
2004-2009
2008-12012
2005-2009
200 -2011
2004-2009

2006-2010
2006-20'10
2007-2010
2006-2010
2007-2013

Government

Government
Opposhon
Govt. Coalition
Opposlon
Opposition
Opposition
Government

Govt. Coalition
Government
Govt. Coalition
Opposition
Government

MERCOSUR REGION
Argentina 19833 4 2 2 C. Kirchner 2007-2011 Government
Brazil 1989 2 2 Lula da Silva 2006-2010 Govt Coalition
Chile 1989 1 1 Bachelet 2006-2010 Opposition
Paraguay 1993 3 3 Lugo 2008-2013 Govt Coallion
Uruguay 1985 1 1 Vazquez 2005-2010 Government
SOURCE Freedom in the World 2007: Civic Power and Electoral Politics.
SFreedom House definition Those rights that enable people to participate freely in the political process On this scale 1 represents the most free and 7 the least free
2 Freedom House definition Freedoms to develop views, institutions and personal autonomy apart from the state On this scale 1 represents the most free and 7 the least free
3 Interrupted democracies

Control of Legislature

Table 11
CENTRAL GOVERNMENT BALANCE 2003-2007
(Percentages of GDP)

Primary balance

2003 2004 2005 2006

2007
1

Overall balance
2007
2003 2004 2005 2006

NAFTA REGION

Mexico

DR-CAFTA COUNTRIES
Dominican Republic
Costa Rica
El Salvador
Gualemala
Honduras
Nicaragua
Panama

ANDEAN SOUTH AMERICA
Bolivia
C olombia
Ecuador
Peru
Venezuela

MERCOSUR REGION
Argentina
Brazil
Chile
Paraguav
Uruguay

LATIN AMERICA AND
CARIBBEAN

2.1 2.5 2.4 2.9 2.6

-0.6 -0.2 -0.1 0.1 0.0

-3.4 -0.6 -1.0 1.0
-27 .2 1 11 1 3
-1.1 -1.0 -0.4 1.0
-1 1 -17 1 9 -2 3
-3.1 -2.6 -1.3 -1.6
-2.2 -1.8 0.0 -0.9
-5.4 -3.9 0.2 -0.5

-5.7 -2.3 3.6 2.1
-54 J J8 1 -3 3
-1.0 -0.5 -0.2 -0.5
-1 3 -07 15 1 8
-1.9 1.6 0.0 0.5

2.0 0.4 1.0 0.7
-12 -32 -3 1 -2 8
2.1 4.5 7.7 8.0
16 01: 0 5 0 0
-2.5 -1.6 -1.0 -1.5

-0.2 0.6 1.5 2.4 2.2

-2.9 -1.9 -1.1 0.1 -0.1

Source Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of official figures
1 Preliminary estimates for the year 2007 from ECLAC

Table 12
LEGAL ENVIRONMENT, 2008

NAFTA REGION
Mexico

DR-CAFTA COUNTRIES
Dominican Republic
Cosla Pica
El Salvador
Gualemala
Honduras
Iilcaragua
Panama

ANDEAN SOUTH AMERICA
Bolivia
Colombia
Ecuador
Peru
Venezuela

MERCOSUR REGION
Argentina
Brazil
Chile
Paraguay
Uruguay

Rule of Law1
SPercentile Rank

Corruption Perception2
i Index Rank |

34.3

37.1
61.9
28.6
11.4
20.5
22.4
50.0

17.6
35.7
14.8
26.7
3.3

39.0
43.3
88.1
16.2
63.3

Economic Freedom3
SScore Rank

66.4

58.5
64.8
79.2
60.5
60.2
60.0
64.7

53.2
61.9
55.4
63.5
45.0

55.1
55.9
79.8
60.5
68.1

Proerty Rights4
Percentile Rank

50

Crime Victimization5
% Yes

75.7

**
35.7
34.2
41.5
34.2
34.6
28.7

33.8
37.4
40.4
37.8
44.2

47.1
35.6
36
46
27.7

1 As measured by the World Bank's Governance Indicators 1996-2007
the effectiveness and predictability of the judiciary, and the enforceability of contracts

The percentages measure the extent to which agents have confidence in and abide by the rules of society, including perceptions of the incidence of crime,

2 As measured by Transparency International, Corruption Perceptions Index 2007 Focuses on corruption in the public sector and defines corruption as the abuse of public office for private gain The scores used in the index
range from 10 (country perceived as virtually corruption-free) to almost 0 (country perceived as almost totally corrupt) The country ranks measure the corruption level in 159 countries as perceived by business people, risk analysts, investigative
journalists and the general public
3 As measured by the Heritage Foundation's 20081 ndex of Economic Freedom Scores are based on a 1 to 100 scale, 1 being an economic environment tha is least conducive to economic freedom, 100 being the most conducive Countries are also
ranked in order of economic freedom, 1 being the most free
4 As measured by the Heritage Foundation's 20081 ndex of Economic Freedom The percentages measure the degree to which a country's laws protect private property rights and the degree to which its government enforces those laws 100%
indicates that private property is guaranteed by the government, 0% indicates that private property is outlawed
5: As measured by Latinobarometro 2002 "Have you, or someone in your family, been assaulted, attacked, or been the victim of a crime in the past 12 months?" Those who response "Don't know" or did not provide an answer were excluded from the
results

Table 13
LEGAL ENVIRONMENT, 2008

Days Required to'
Start a Register Enforce Trade Across
Business Propertyb Contractsc Bordersd

Paying taxes2
Number of Hours Tax Rate
Payments, Requiredb (% Profit),

Intellectual Property
Estimated Trade Losses due to
copyright Piracy in millions USD

NAFTA REGION
Mexico 27 74 415 17 27 552 51.2 1266

CAFTA-DR
Dominican Republic 22 60 460 12 74 286 40.2 12
Cosla Pica ;; 21 877 18 413 402 55 ; 31 5
El Salvador 26 31 786 21 66 224 33.8 17.8 (2001)
Gualemala 26 30 1 4539 19 39 344 375 23 8 2002)
Honduras 21 24 480 20 47 424 51.4
Nicaragtua 39 124 540 36 64 240 632 "
Panama 19 44 686 9 59 482 50.8

ANDEAN SOUTH AMERICA
Bolivia 50 92 591 24 41 1,080 78.1 21.8 (2005)
Colombia 42 23 1 346 24 69 268 82 4 1165
Ecuador 65 17 498 22 8 600 35.3 51
N) Peru 33 468 24 9 424 415
Venezuela 141 47 510 45 70 864 53.3 174.6

BRAZIL AND SOUTHERN CONE
Argentina 31 65 590 16 19 615 112.9 310.7
Brail 152 45 616 18 11 2 600 69 8596
Chile 27 31 480 21 10 316 25.9 127.6
Paraguay 35 46 591 35 35 328 35 3 134
Uruguay 44 66 720 24 53 304 40.7 10.1 (2002)

1 As measured by the World Bank Group's report "Doing Business in 2008 Removing Obstacles to Growth" a) Average time in calendar days spent registering a firm b) Average time in calendar days spent completing the procedures to register property c)
Average time in calendar days from the moment a plaintiff files a lawsuit in court until the moment of payment d) Average time in calendar days necessary to comply wth all procedures required to export goods,
2 As measured by the World Bank Group's report "Doing Business in 2008 Removing Obstacles to Growth" a) total number of tax payments per year b) time it takes to prepare, file and pay (or wthhold) the corporate income tax, the value added tax and social
security contributions c) total amount of taxes and mandatory contributions payable by the business
3 As measured by the International Intellectual Property Alliance 2008 Country Reports Estimates are based on 2007 losses due to copynght piracy in millions of USD unless year is otherwise noted Industries included in estimates include, sound recordings
and musical compositions, business software, entertainment software, motion pictures and books

SELECTED SOURCES MONITORED FOR 2008 LABER

Print
The Economist
Latin America Monitor
LatinFinance
Wall Street Journal

On-line
BBC Mundo. com
http://news.bbc.co.uk/hi/spanish/news/
Brazil Focus: Weekly Report
Subscriptions available at fleischer(,aol.com.br
Council on Hemispheric Affairs Report
http://www.coha.org/
Latin American Newspapers accessible through Latin American Network Information
Center at http://wwwl.lanic.utexas.edu/la/region/news/
Latin America Advisor: The Interactive Forum for the Region's Leaders
Subscriptions available to mailto:freetrial@,thedialogue.org
Manchester Trade Export Performance & Trade Relations
www.ManchesterTrade.com
Miami Herald
www.herald.com
New York Times
www.nvtimes.com
RGE Monitor
www.rgemonitor.com

Primary Data Sources
International Monetary Fund
http://www.imf.org/
Organization of American States Foreign Trade Information System
http://www.sice.oas.org/
U.N. Economic Commission for Latin America and the Caribbean
http://www.cepal.org/default.asp?idioma=IN
World Bank: Global Development Finance 2008
http://siteresources.worldbank.org/INTGDF2008/Resources/gdf complete web-appended.pdf

Latin American Business Environment Program
Center for Latin American Studies
University of Florida
PO Box 115530
University of Florida
Gainesville, FL 32611-5530 USA

Tel: (352) 392-0375
Fax: (352) 392-7682
www.latam.ufl.edu/labe.html

	Front Cover
	Preface
	Table of Contents
	Executive summary
	Introduction
	Regional overview
	Country profiles
	Outlook
	Tables
	Selected sources
	Back Cover

MILLISECOND	CLASS.METHOD	MESSAGE
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0	sobekcm_page_globals.constructor	Application State validated or built
0	sobekcm_database.verify_item_lookup_object
0	sobekcm_page_globals.constructor	Navigation Object created from URI query string
0	sobekcm_database.verify_item_lookup_object
0	sobekcm_page_globals.display_item	Retrieving item or group information
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0	sobekcm_assistant.get_entire_collection_hierarchy
0	cached_data_manager.retrieve_item_aggregation
0	cached_data_manager.retrieve_item_aggregation	Found item aggregation on local cache
0	item_aggregation_builder.get_item_aggregation	Found 'all' item aggregation in cache
0	system.web.ui.page.page_load (ufdc.page_load)
0	sobekcm_page_globals.constructor.on_page_load
0	html_echo_mainwriter.add_style_references	Adding style references to HTML
0	html_echo_mainwriter.add_text_to_page	Reading the text from the file and echoing back to the output stream
40	html_echo_mainwriter.add_text_to_page	Finished reading and writing the file