Buenos Aires - Latin America watches intently as the current US mortgage and credit crisis continues to unfold: Mexico is bracing itself for a rough ride, while Brazil hopes to emerge unscathed from the upheaval, which has triggered global share market turmoil.

Mexico is the 14th-largest economy in the world, but it remains heavily dependent on the United States. In 2006, close to 85 per cent of Mexico's exports went to the country's northern neighbour, which was also the origin of 51 per cent of Mexican imports.

The case of Brazil - the 10th-largest economy in the world - and other South American countries is less dramatic, since their trade is considerably more diverse. Brazil sends only around 18 per cent of its exports to the US.

Despite these differences, both Mexican President Felipe Calderon and Brazilian President Luiz Inacio Lula da Silva - surely conscious of the role of expectations in helping keep the crisis under check - have gone out of their way to stress that they are in a position to face the international crisis.

"You may rest assured that we will not stand around doing nothing in the face of the reality that the economy of our main trade partner in the world is starting to slow down, even with talk of a possible recession," Calderon said earlier this year.

His answer to the challenge has been described as "a textbook approach to recession." The Mexican president has promised to boost housing and infrastructure projects.

Experts, however, note that this is unlikely to help much and may in fact worsen some problems that are specifically Mexican.

"Should Mexico expand its economy through public expenditure, it can put more pressure on its current account balance, which is already very negative, and it could jeopardize exchange rate stability. I think they are going to choose to bear the recession," Mexican economist Jose Romero told Deutsche Presse-Agentur dpa.

The US crisis is already having an effect on remittances sent home by some 11-20 million Mexicans living in the US, many of them working in the hard-hit construction branch.

The Inter-American Development Bank (IDB) estimated recently that some 600,000 Mexican families ceased getting money from abroad in 2007.

The IDB however did not see a similar trend in other countries. While there are similar numbers of Central Americans working in construction in the world's largest economy, the bank did not see a reduction in remittances sent home.

Looking forward, Romero sees "a positive outlook" for Mexico in particular, but also for the crisis in general.

The depreciation of the dollar may boost manufacturing in the US and therefore Mexico's complementary manufacturing industry, which assembles US components into products for the US market, the expert said.

Further away from the US, the crisis and its effects are less clear-cut.

"The crisis has not reached Brazil, and we are working on the basis of the hypothesis that the crisis will not reach Brazil," Lula stressed last month.

The Brazilian economy is "solid, sustained by its domestic growth and by a very strong export policy," Lula noted, adding that Brazil does "not depend on one country or another."

"That diversity gives Brazil a certain guarantee that we will not have problems," Lula said.

Former Brazilian Central Bank director Alkimar Moura told dpa he believed the situation was good.

"At this juncture, I think (South America) is a little bit more protected from the fallout from the subprime crisis, because of the external situation, in terms of external finances, in terms of balance of payments, debt," he said.

South America, like the rest of the world, is waiting to see whether the US slump will be a slowdown or an all-out recession, and just how long the crisis will be. A slowdown is likely to pass by the region, experts note.

According to Osvaldo Kacef, director of the Economic Development Division of the Economic Commission for Latin America and the Caribbean (ECLAC), another key factor will be "whether the current liquidity complications derive into a general solvency crisis or not."

A recession may have further indirect effects on Latin America, particularly if it should push down commodity prices or the price of oil, or significantly affect US imports from other key world players.

"If there is a hard landing in the United States, the Chinese economy will suffer, and Brazil will suffer. Brazilian exports to China will suffer from this impact on the Chinese economy," Moura stressed. Some 6 per cent of Brazil's imports went to China in 2006.

Whatever the magnitude of the crisis, some effects will be inevitable, even from the distance.

"We cannot escape from the financial effects. What I mean is, stock market prices, interest rates, etc. This will happen anyway," Moura noted.

In the current scenario, Latin America as a whole - a region with some 190 million poor - is set to grow by just 4.5 per cent in 2008, the lowest rate since the 2.1 per cent of 2003. (dpa)