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Article from CNN Money and Markets Crisis, "as it was and what could happen?

Perhaps one of the biggest concerns for the investor and in general for the city in general is the current financial crisis. Much has been made of their impact and implications, but in the intricate sea of \u200b\u200binformation and opinions is hard to know the impact will affect us much or little in Latin America.

The real estate market

If the crisis begins with the boom in the U.S. housing market, analysts knew this would happen because in other markets such as Japan, England and Mexico, large increases property prices ended in great crisis because the buyers could not bear the costs of financing and prices were increasing so rapidly that they were withdrawing buyers opt for these goods and simply looked for other options, leaving the property "cold."

But unlike the past where banks simply collected their networks and credit, generating a credit drought that would heal in the short term, leaving little consequence, the financial system take advantage of low interest rates set by the U.S. government to offer more credit. is logical if interest rates fall, consumers will want to borrow more to spend more.

The financial market

First, the financial sector used the low rates to lend to high risk customers (ie most likely not have to pay with credit), which improved its expectation results since the higher risk higher return, but before any sneeze of the economy goodbye possibility to recover borrowed money. Additionally

financial sector investment instruments used debt secured by mortgage, it's as if they had made a kind of invoice discounting you sell on credit and the bank will now get a percentage (usually 80%) of the total bill to be charged in the future. If customers are good no problems if not, imagine what can happen.

This was what happened the high-risk customers could not pay their debts (as expected) and therefore securities secured by these properties could not not pay the promised interest and financial institutions that issued these securities lost money and therefore collapsed.

The enterprise market

How companies suffer from this situation? It is very simple, not having money in the banks can not borrow, so you can not grow and meet consumer demand, generating companies to cut costs to keep profits. Usual and often cheaper to fire people, leading to fewer households have money to buy and thus lose more business.

employers also try to cut expenditures or involving strong long-term returns, such as foreign investments, etc. To try to keep profitability in the short term.

The Latin American market

gift to Latin America are major branches, the first is that is heavily affected by the decline in foreign direct investment (as mentioned above) and the redirection of capital markets or instruments risk insurance markets or instruments (so-called fly to quality and is just rather have my money put into a safe place to win and I know less than I might pose a risk).

The second aspect is that eyes rolling to the most stabilized and have done things However, taking advantage of less expensive and can generate higher profits.

Either way, there is still much to expect from this crisis, perhaps it is best not to despair and try to stay informed.

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