Alvaro Vargas Llosa in The New Republic:
A lot of what has helped Latin America's economies in recent years — access to capital markets, foreign investments, remittances from emigrants, the price of natural resources — depends on the health of the global marketplace. Anytime the U.S. stock markets lose $30 trillion in a few months — 10 times Latin America's gross domestic product — the ripple effects will be felt south of the Rio Grande.
Rather than engage in reform, slash spending and put away some rainy-day money, Latin American governments preserved the status quo and boosted public expenditures by 10 percent annually in matters mostly unrelated to infrastructure, creating alarming new commitments. Except for Chile, which managed the revenue from its copper sales prudently, many of the nations that produce oil (Mexico, Venezuela, Ecuador), minerals (Brazil, Peru) or agricultural commodities (Argentina, Brazil, Uruguay) went on a binge. They will now find themselves starved for cash at a time when they are pledging new forms of government profligacy in the face of the global recession. The temptation to fund it via inflation will be irresistible.
More here.