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Financial crisis swept into Argentina late last year like a flu and it has recently been caught by Brazil and Uruguay.
Now it is a matter of concern whether the virus will spread northward to reach Mexico, one of the major economies in Latin America.
Mexican Treasury Secretary Francisco Gil Diaz was pessimistic about his country's economy.
An Argentina-style crisis seemed to be probable unless Mexico carried out tax reform and improved its public revenue situation, he said recently.
The government, which faces a serious shortage of public revenue, has to sell public assets to meet budget needs.
According to the foreign relations department and the Navy, several Mexican consulates have been closed and some warships and planes taken out of action.
In fact, Mexico's economy has not been in good shape for the past two years.
According to a report released recently by the Latin American Economic System, Mexico's economy was dealt a heavy blow by the US economic downturn.
Mexico's exports to the US dropped from US$147.7 billion in 2000 to US$140.3 billion last year.
Latest data from the National Statistics Bureau shows that Mexico's exports in the first six months of this year dropped 2.8 compared with the same period last year.
In June, the total exports of Mexico's manufacturing industry to the United States fell by 2.9.
The government has already revised down this year's growth forecast several times.
Judging by the amount and the speed of departing capital, there is no clear indication that the financial turmoil in South America is further spreading.
However, investors' confidence in Latin America has undoubtedly been shaken by the financial flu.
According to a report released by the Santiago-based UN Economic Commission for Latin America and the Caribbean (ECLAC), Argentina's economic crisis has already affected foreign direct investment (FDI) in the region.
FDI in Latin America dropped from US$105 billion in 1999 to US$80 billion in 2001. And ECLAC predicted it would stand at only US$56 billion this year.
According to the report, the economic growth of the region shrank 3 during the first half of the year while employment dropped 9.
And the region's growth rate this year is predicted to be minus 0.8.
The Central Bank of Mexico admitted that the country's FDI declined in the first half of the year because foreign investors were taking a wait-and-see attitude, expecting reforms in tax, energy and labor.
Although the government said Mexico would not ask for emergency loans from the International Monetary Fund, economic analysts point out that unfavorable financial prospects for Argentina, Uruguay and notably Brazil would impact negatively on Mexico.
(China Daily August 9, 2002)
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