This document discusses the state of Latin America's economy from 2009-2010. It notes that while Latin America accounts for a significant portion of the world's population and GDP, it lags in areas like physical and human capital. The region has experienced high levels of financial crises and volatility. However, recent years saw improvements like stronger macroeconomic policies and more resilient financial systems that helped Latin American countries better withstand the global financial crisis. If external conditions improve, the region may see renewed economic growth, led by countries like Brazil, Mexico, and Chile. The biggest risk is frustrating the hopes of a growing Latin American middle class.

1. Latin America 2009-2010: No Paradise without Banks José Juan Ruiz Chief Economist División América Banco Santander May- June 2009

4. 1 In spite of that…Latam a real convergence failed story See annex for sources and definitions

5. 1 Why? : Volatility and Institutional fragility From 1980 onwards, 22 countries in LA have suffered either a financial sector crisis or financial system distress and averted crises. In total: 46 episodes of financial distress in 29 years: 1.6 crisis per year. Source : Agustin Carstens, 2004. http://www.iadb.org/res/publications/pubfiles/pubS-192.pdf

7. 1 The impact of Banking Crisis on “economic values” tends to be lasting… “ The banking system will never take you to paradise, but it can bury you in hell in an afternoon.” Julio Maria Sanguinetti Uruguay President

9. 1 Going South…but alive and ready to fight The global crisis that began in advanced economies has sent severe shocks around the world, posing a test to the economies of Latin America and the Caribbean. The good news is that during this decade the region has made itself more resilient to external shocks, by strengthening policy frameworks and reducing vulnerabilities in its public finances and financial systems. These preparations mean that countries are now more able to respond to the external crisis, many for the first time, with active policies to boost output and employment and protect the most vulnerable groups. This will help contain the damage from the global crisis and speed up the region’s recovery. World Economic and Financial Surveys Regional Economic Outlook: Western Hemisphere Stronger Fundamentals Pay Off May 2009 http://www.imf.org/external/pubs/ft/reo/2009/WHD/eng/wreo0509.htm

10. 1 With a pretty sound financial system .. both in absolute and in relative terms

11. 1 With Central Banks which deliver credibility and low inflation

12. 1 Basically sustainaible savings/investment patterns and high levels external assets

13. 1 Reasonable Public Sector Accounts after strong Public Debt Deleveraging in 2005/2008

14. Our latest beliefs: Good macro and sounds banks pay dividends Latin America's middle class Adiós to poverty, hola to consumption Aug 16th 2007 | SÃO BERNARDO DO CAMPO From The Economist Faster growth, low inflation, expanding credit and liberal trade are helping to create a new middle class

16. 1 Fuente: Pär Österholm and Jeromin Zettelmeyer. “The Efects of External Conditions on Growth in Latin America”. IMF Working Paper, 2007. Fuente: División America. Ver texto para detalles Let’s imaging the external shock is partially reversed

17. Fuente: División America Step 1: USA Recovery. Real GDP 1980=100

18. Fuente: División America y JP Morgan Step 3: Country Risk adjustment

19. Fuente: División America There is Growth in Latam !!

20. Fuente: División America In fact, a growing Latam is the central scenario for investors..

21. Fuente: División America This is also our view..

22. Fuente: División America With Brazil, Mexico and Chile playing a critical role in the next stage

24. Fuente: División America No always the worst happens: “No siempre lo peor es cierto” A quien ya le ha persuadido la apariencia de un engaño tarde o nunca el desengaño pondrá su queja en olvido y más cuando el de su parte tan poco hace por creer que pudo o no pudo ser… No siempre lo peor es cierto, 1649 Pedro Calderón de la Barca

25. Fuente: División America Low External Financicng Risk: We are not anymore in Kansas!!!

26. Fuente: División America Low External Financing Risk: We are not in Kansas anymore !!!

28. We do not see a Liquidity Crisis

29. We do not see a Solvency Crisis

30. We do not see a Credit Crunch.

31. We do not see a Profitability Crisis

33. The Biggest Risk? To Frustate hopes of the New Emerging Middel Class 'Latinoamérica perderá entre 1,5 y 2,4 millones de empleos durante el 2009': OIT En el 2008 número de desempleados en Latinoamérica fue de 15,7 millones de personas. ''Si estas proyecciones de CEPAL y del FMI se mantienen, entre 1,5 y 2,4 millones de desempleados se incorporaran'' a las filas de desocupación en Latinoamérica, Jean Maninat, director regional de la OIT. Latin America's middle class Adiós to poverty, hola to consumption Aug 16th 2007 | SÃO BERNARDO DO CAMPO From The Economist Faster growth, low inflation, expanding credit and liberal trade are helping to create a new middle class

34. No Paradise without Banks and … without Good Central Bankers.. Prudent Fiscal managers… Experienced societies used to the hardship of adjustments

36. We have learnt… Now it is your turn.