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Incan Mythology speaks of the Lady of the Moon, a person of royal blood who had been transported into the Heavens and given a bottle filled with water that she was to pour upon the earth when it was needed to ward off drought. She had a brother who, when angry, created thunder and lightning. During one such tantrum he broke the jar of water and there was a flood. This mythological metaphor comes to mind when forecasting the country's economy. Peru is blessed with mineral resources, but cursed by el Niño every 8 years, and has been led by some of the world's most colorful political characters. 2001 capped the end of a "thunderous" two-year period in Peruvian politics and four years of economic "drought". Peruvians have waited fifty months for some sign of recuperation. 2002 will bring the growth that the economy so desperately needs, marking Peru one of the more promising markets in the region next year.

In spite of Chile's proud track record of sound fiscal management, it remains heavily exposed to external shocks. About 40% of the country's export revenues come from copper, which today stands at less than US$ 0.70 per pound, its lowest price in 25 years. Portfolio investment, less regulated than it was in the past, has pulled out of Chile, frightened by Argentina's precarious condition and Chile's weak copper exports. With copper prices 18% lower than forecast this time last year, the Chilean government over-estimated the revenue that state-owned Cedelco could contribute to government coffers and will run a US$ 700 million deficit.

From a trade perspective, Mexico is an industrial powerhouse with a slim appetite for consumer goods. This year, $200 billion worth of goods will enter Mexico, of which nearly 78% by value will consist of industrial inputs, most of which will be re-exported after assembly. Another 12.5% will be capital goods such as machinery, heavy transport, and office level IT equipment. Even after two record years of personal spending growth, only $20 billion in consumer goods, such as packaged food, clothing and cars, will be imported. The news about Mexico since the advent of the NAFTA has focused on its industrial economy - especially growth in exports, the loss of US assembly jobs, the pressures on the borderlands, and direct investment from abroad.

The Argentine domestic economy continues to shrink in spite of a strong boost from the external sector. Since June 1999, the construction industry has declined by more than 15%, as federal and state budgets were slashed and private investment slowed. Supermarket sales have dropped by 3% over the last year. Business and consumer confidence is at its lowest since 1995. Interest rates are hovering at 8% above inflation, discouraging investment even further. Rising international interest rates are increasing the burden of Argentina's heavy foreign debt load, putting added pressure on the fiscal balance. The country is already saddled with one of the highest debt/GDP ratios in the region.