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[Political crap]

Illustration for article titled [Political crap]

There’s another sovereign debt crisis coming. Which is really frightening for Latin America and other developing economies. Not everyone can afford the luxury of Keynesian thinking because some governments just don’t know how to spend money or don’t have the infrastructure to spend it.

Yet, every country in Latin America, even those who are heavily indebted, have gotten into the mindset that there has to be a gigantic stimulus, worth some important part of their GDP. While debt has gotten cheaper as of late, the problem really isn’t the debt now; but in the future if they don’t implement the programs as efficiently as a developed government would.

However, Mexico decided to do nothing. Our foreign debt has risen because the Mexican Peso lost value, but other than that, the government was even trying to get a surplus this year, obviously they won’t.... But we’re just not promising any big stimulus packs nor do we have automatic countercyclical measures like unemployment benefits in the US. However, our economy might collapse from COVID-19 or it might not!

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We don’t know yet, maybe we’re saving ourselves from a debt crisis, but if our GDP contracts, the government’s ability to pay also goes down. In the end, some of the Latin American nations might thread the needle and cross to the other side unscathed. Maybe fears of conflict with China and disrupted chains of production will scare companies back to North America (just to Mexico, tho.), maybe Bolsanaro is gonna hit his head with a tube and start thinking... Maybe nothing goes wrong. But if it does... I see Brazil and Argentina’s debt rising....

Also, you might notice that the most indebted nation in America is the US, but debt doesn’t really matter if you’ve got two million soldiers so don’t worry about that :)

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