MercoPress. South Atlantic News Agency

“Best news of the year”

After “the seven plagues” of 2000, the US Federal Reserve unexpected decision to lower basic interest rates 0,5%, to 6% before the formal Open Market Meeting of mid January, has come as a blessing and was described as “the best news of the year” by officials from Mercosur members.

Trying to avoid what originally seemed as a soft landing of the US booming economy from turning into a recession, Fed President Alan Greenspan not only surprised markets, but anticipated further decisions in the same direction, (lower interest rates) if they are considered necessary to keep the US economy steady.

Lower interest rates mean an immediate reduction of 300 and 25 million US dollars for Argentina and Uruguay in their foreign debt payments, and furthermore will make access to new credit more accessible and cheaper. The news coincided with an improved risk assessment for Brazilian bonds.

Greenspan's decision followed a greater than expected drop in US consumer sales and confidence, anticipated lower company earnings, plus fears that the slowing down could rapidly turn into a recession for the incoming Bush administration weakened after a long political litigation over presidential electoral results.

Spiralling international oil prices, a extremely strong dollar, the foot and mouth crisis, increasing interest rates, unemployment, and a depressive mood among economic agents made 2000 a year to forget for most of Mercosur.

Stabilised oil markets, lower interest rates, a strong Euro (almost 15% against the US dollar in two months), an end to the foot and mouth outbreak, plus the strong financial international backing for Argentina should help Mercosur consumers recover confidence and the area begin growing again at a quick step.