The economic crisis that has crippled countries in East Asia will not prevent Latin American economies from posting largely positive results in the first half of 1998, according to the pundits on Wall Street.

The economic picture for Latin America does remain mixed – investers are bullish on Argentina and Mexico while being wary of Brazil, Venezuela, Ecuador and Peru, brokers say. But, generally the feeling in Wall Street is that the East Asian crisis has done little damage to Latin America.

Unlike the ‘tequila’ effect which dampened investor enthusiasm for Argentina, Brazil and other Latin markets following the 1994- 95 collapse of the Mexican peso, the decline of Asian currencies and stock markets had only brief effects on Latin economies.

Brokers warn, however, that some countries – notably Argentina and Brazil – may still be vulnerable if the Asian crisis lingers and scares investors away from emerging markets in the Third World.

Still, as Gustavo Canonero, vice president of Latin American economic research for the Salomon Brothers brokerage, puts it, “Latin America really is de-coupled from the Southeast Asia situation.”

Since Brazil accepted a new fiscal package, including a steep rise in personal income taxes, on Nov. 10, the Brazilian economy – and its effects on its Latin neighbours – has become less dependent on the fluctuation of investor confidence in East Asia, he says.

Also, Canonero argues, investors expect that the currency crisis has reached its nadir, and can only rebound upward now. “Given that, the prospects for Latin America are more or less positive.”

Santander Investment, another New York-based firm, argues in its new forecast for Latin markets that the turmoil caused by the East Asia collapse actually resulted in a “good November” for Brazil because it created a “sense of urgency – in the executive branch and legislature – to proceed with reform.”

The Brazilian fiscal package, approved by both the Senate and Lower House last month, raises the income tax from 25 percent to 27.5 percent on individuals earning more than 1,800 reales a month.

Wall Street firms, including Santander and the Salomon Smith Barney family, are also confident that the East Asian turmoil will prompt the Brazil legislature to approve new regulations that would put salary caps on public-sector employees and would allow the government to fire civil servants when the payroll exceeds 60 percent of revenue.

U.S. firms are similarly cheered by Mexico’s economic prospects, even though the Mexican peso depreciated by almost seven percent from its value at the end of September, again because of the investor uncertainty about emerging markets.

Despite that depreciation, Canonero says, Mexico’s gross domestic product (GDP) is expected to grow by seven percent for 1997 on the whole, while the inflation rate by the year’s end is expected to decline to about 16.7 percent (compared to 27.7 percent at the end of 1996).

Other Latin economies are also expected to weather the Asian crisis, although some, like Argentina, could face significant ripple effects. “The confidence crisis currently unfolding in emerging markets will have a negative impact on economic growth in the months ahead, given Argentina’s currency board system and its heavy reliance on external financing,” Canonero warns.

Any slowdown in Brazil, which remains fragile, could also hurt more than 30 percent of Argentina’s exports, he adds – a worry which has already revised Salomon Smith Barney’s projections of Argentina’s 1998 GDP growth to 4.1 percent.

Other countries also will still suffer from some ripple effects from Asia, although firms are largely upbeat that they will pull through. Santander’s recent report notes that Chile’s copper price, affected in part by the East Asia crisis, has declined steadily in recent weeks – causing the Chilean peso to lose six percent of its value against the U.S. dollar in November.

Canonero believes Venezuela, Ecuador and Peru also have potentially weak economies. A number of firms, including Goldman Sachs, Salomon Smith Barney and Santander, agree that Venezuela’s election-year politics in 1998 will likely complicate the economic picture regardless of the East Asia prospects.

“Next year will be dominated by the uncertainty that typically surrounds an election year, characterised by weak political parties and two or three independent candidates with a chance to win the elections,” Santander says.

Still, following nearly two months of crisis that have hit hard at currencies and stock markets in Thailand, Malaysia, Indonesia, Hong Kong and South Korea – and, through them, battered nearly every other East Asian economy – the Latin picture is relatively stable.

By contrast, Razali Ismail, Malaysia’s U.N. ambassador, says that his country’s per capita GDP declined from more than 5,000 dollars in June to about 3,000 dollars now – wiping out, at least on paper, two decade’s worth of development.

The Mexico crisis threatened to do the same to Latin economies a few years ago, and even today, real wages in Mexico are about 25 percent lower than they were in 1995. But Latin governments have learned how to bolster their economies since then, Canonero contends, and are less likely to be snared by a lack of confidence in emerging markets in the future.