Latin America urged against protectionism

Brazilian President Luiz Inacio Lula da Silva, hosting the Latin America World Economic Forum in Rio de Janeiro, said protectionist moves by some countries would only deliver short-term relief from the economic downturn.

"Protectionism is like a drug, which offers immediate relief but then puts its victim in a prolonged depression," Lula, a strong proponent of renewing world trade talks, said in a speech opening the two-day meeting of business leaders.

The global financial crisis has slammed the brakes on five years of buoyant economic growth in the region, knocking demand for commodities from oil to copper, pushing economies into recession, and driving millions of people into poverty.

In a region with a long history of populism, leaders are feeling pressure to shield their economies as trade flows plunge and jobs are lost. Ecuador has sharply increased tariffs on imports, Mexico has raised duties on a long list of American imports, and Argentina tested Brazil's patience by imposing extra import restrictions.

Mexico expects its economy to contract 2.8 percent this year, while fellow regional giant Brazil last month slashed its 2009 growth forecast to 1.2 percent from 3.2 percent.

U.S bank Morgan Stanley said in a report last month that the region would contract at least 4.3 percent this year, its worst showing since 1983.

But unlike in previous crises that have hit the region, stronger government finances have enabled governments to respond with "counter-cyclical" policies such as lower interest rates and fiscal stimulus packages.

"Independently of ideology, every single government should focus on counter-cyclical measures," said Ricardo Villela Marino, chief executive of Brazilian bank Itau.

CHANCE FOR REFORMS