Talking Ourselves Into Recession.(The Last Word)(Luis Alberto Moreno)(Interview)

Byline: Adam B. Kushner

Market turmoil has already spread like a cancer from New York to Berlin. All over the world, the zeitgeist is turning against the markets, prefiguring a cyclical return to regulation. Luis Alberto Moreno, the Colombian president of the Inter-American Development Bank, has seen this before. He has been an asset manager, an ambassador to Washington, and a minister of Finance. Moreno chatted with NEWSWEEK's Adam B. Kushner about what comes next, and which kinds of countries are most and least exposed. Excerpts:

KUSHNER: Fed chairman Ben Bernanke says "a recession is possible." How would it spread across the world, and would it touch Latin America?

MORENO: First, let's just recognize a fact of life: if you have a recession in the biggest economy in the world, the likelihood of spreading elsewhere is high. People used to say when the U.S. sneezed, the world caught a cold. Certainly Latin American economies today are better prepared than in the past to deal with this. First of all, this is a Latin America with inflation rates that are averaging close to 6 percent with average growth of 5 percent. They have positive current account balances, and their countries are receiving foreign direct investment in record numbers atop the remittances coming from Latin Americans living abroad, who have become very important. We estimate they bring in $62 billion per year. All of that together puts Latin America on a footing that can face up to the situation differently than in the past. But a short recession is one thing. If it's a long recession, that's something else.

Some countries will weather the storm better than others.

What I would say of Latin America today is that it's a very heterogeneous region. There are countries like Brazil that have a much better chance than a small country that imports food and oil. We used to talk about Asian tigers, and you could say that for Latin America, too--Chile, Peru, Colombia. Panama is growing at 11 percent! There are countries in Latin America that are achieving higher growth rates partly because they are producers of energy (or at least they're self-sustainable) but also because they're good producers of food. Bernanke said we're entering a recession yesterday?

He said it was "possible."