Mexico's Argentine-related damage is more limited.
Mexico traded US$449 million of goods with Argentina in the first nine months of last year. That's tiny compared with the US$192 billion in trade with the US.
Since Mexico's financial crisis in 1994, the government has kept deficit spending to 1.2 percent of GDP or less. In 1999, domestic consumption took over as the economy's engine, thereby limiting the impact of a decline in industrial production.
Confidence in fiscal discipline and a democratic electoral process led Moody's Investors Service to raise Mexico's sovereign debt rating to investment grade in 2000 and to boost the rating another notch in February 2002.
Fitch Investors Service assigned Mexico its investment- grade rating in January 2001. Standard & Poor's followed suit on Feb. 7.
Mexico's 4.4 percent inflation rate is a record low.
Rates on the benchmark 28-day Treasury bill tumbled to 7.99 percent on Feb. 19 from as high as 18.4 percent a year earlier. The lower rates have prompted banks and retailers to offer unprecedented credit terms at fixed interest rates, spurring consumer spending.
Grupo Financiero BBVA Bancomer SA, Mexico's largest bank, reported a 23 percent increase in consumer loans in the fourth quarter. Auto sales rose 5.3 percent to 917,442 vehicles last year. Such luxury car brands as Jaguar, Porsche, Mercedes, BMW, Audi and Volvo had the highest percentage gains.
Mexican companies are adjusting to Argentina's collapse. Corporacion Interamericana de Entretenimiento SA, Mexico's top entertainment company, slashed costs in Argentina by 40 percent by firing workers and using fewer buildings. CIE boosted demand by cutting the entrance fee at the Buenos Aires zoo to 4 pesos from 6 pesos and charging less for concerts.
"We won't hesitate in taking the necessary measures to continue adjusting the size of our business in Argentina to the new reality," says Investor Relations Director Jaime Zevada.
With the US forecast to pull out of recession this year and Fox's government pledging to further open the energy industry to private investment and to improve tax collection, Mexico is a bright spot, says Michael Hughes, director of emerging-markets equity investment at J.P.
Morgan Chase in London, which invests US$1 billion in Latin American stocks.
`Good Reasons to Remain'
"There are plenty of good reasons to remain in Mexico," he says.
Even so, Latin America may feel Argentina's fallout over time. Portfolio managers may lose their appetites for Latin American assets, thereby closing off financing for government and private investment. US and European companies forced to write down hundreds of millions of dollars may scrap investment plans.
Citigroup Inc, the largest financial services firm, says the dual collapses of Argentina and Enron Corp reduced its fourth-quarter earnings by US$698 million.
"There may be a cut in investments or change in strategies for companies because of losses in Argentina," says ABN Amro's Janada. "That may affect foreign direct investment over time."
For now, more Latin American countries are testing global markets. Peru sold US$500 million in 10-year bonds -- its first borrowing in international capital markets in more than seven decades. It also exchanged US$1.2 billion in 20- and 30-year Brady bonds for US$930 million in 10-year bonds, thereby reducing the country's US$19.4 billion in foreign borrowings.
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