Latin America may recover sooner than expected

(Photo: Victor R. Caivano – AP)

Here’s some good news from Latin America: Much of the region’s economy may recover sooner than expected.

Indeed, less than a month after the International Monetary Fund and other international financial institutions predicted that the region’s economy will contract for the second year in a row in 2016, and that it may remain in recession for the next two or three years, there are signs that the region may soon see the light at the end of the tunnel.

The main reason for some guarded optimism is that U.S. interest rates will not rise significantly, and most Latin American currencies will continue appreciating in relation to the dollar.

It sounds complicated, but it really isn’t. What’s happening is that the U.S. economy is growing at a slower pace than economists had predicted. This is likely to cause the U.S. Federal Reserve to maintain U.S. interest rates relatively low. When the U.S. economy slows down, the Fed usually tries to maintain interest rates low in order to allow firms to borrow money relatively cheaply and keep the economy going.

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