All signs are it will get a lot worse. The NY Times ran the following today:
Argentina May Be Neighbor to Suffer Most From Brazil's Woes
By Sam Dillon
Mexico City -- As shock waves from Brazil's devaluation of its currency reverberated across Latin America on Wednesday, analysts said Argentina was likely to be rattled the most severely and that other countries bordering Brazil would be shaken more than Mexico, where ties to the U.S. economy would cushion the shock....
Argentina can expect to see its interest rates soar, exports drop and unemployment rise, analysts said. They said that Argentina, which is Brazil's closest trading partner, was likely to slide into recession....
About one-third of Argentina's exports go to its huge northern neighbor, and given the revised economic forecasts, they are likely to drop sharply.
That could lead to social unrest during a presidential election year. During the regional crisis that followed Mexico's 1994 devaluation, Argentine unemployment rose to 18 percent from 12 percent, but it has since returned to 12 percent, said Luis Secco, an economist at Estudio Broda Consultores in Buenos Aires. Now as the Argentine economy shrinks, unemployment could easily surge to 18 percent again, he said....
International lending to Latin America has all but stopped since Russia's default last fall started a stampede from emerging markets, and a crucial factor for Argentina will be how long it is until foreign credits begin to flow again, Secco said. Argentina has a current account deficit of 4.5 percent of its gross domestic product, and needs to borrow some $7.8 billion this year, about half of that from overseas, he said.
"Whether international credit will flow to Argentina is going to be a crucial question," Secco said.
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Carl Remick