Rio de Janeiro, 16 Oct - The end of a long global commodities boom threatens to hit Latin America harder than any other region, putting a sharp brake on its economies and pressuring government spending plans.
From bulging foreign reserves and the emergence of corporate giants to the destruction of vast areas of the Amazon rain forest, booming commodity prices have reshaped Latin America as supplier of the world's raw materials and underpinned its resurgent economies.
The region is now better prepared to weather this shock than past crises because it has stronger budgets, bulked-up dollar reserves and lower levels of foreign debt.
But with prices of everything from Chilean copper and Brazilian beef to Argentine soybean all sliding on expectations that the financial crisis will force a global slowdown, economists are sharply cutting growth forecasts and farmers are preparing for harder times.
"It's unbelievable that in four or five months we've gone from healthy margins to where we are today. It's a disaster," said Ruben Berardo, a farmer in Argentina's central Entre Rios province.
The Reuters-Jefferies CRB index of commodities prices fell to a year low of 289.89 last week, down from a high of nearly 474 July 3. Although the dollar's rise gives some relief, the price falls will squeeze governments that have used the boom of recent years to go on spending sprees.
Venezuela President Hugo Chavez has used high oil prices to fund socialist spending policies, and some analysts predict a prolonged price fall could force him to tighten belts.
President Luiz Inacio Lula da Silva has ridden Brazil's commodities-driven boom to 80 percent popularity ratings, helped by social programs that lifted millions out of poverty.
While Lula at first mocked the United States over the crisis and said Brazil was not in danger, the country's policy makers have in recent days had to rush to provide liquidity to banks and local financial markets.
For Argentina, one of the world's biggest producers of soybeans, corn and wheat, falling grains prices could sharpen tensions between farmers and President Cristina Fernandez.
With soy products alone accounting for a quarter of export revenues, Fernandez has been forced to cut government spending, vow to chop energy subsidies by over $1 billion and make conciliatory steps toward foreign creditors and bondholders.
Months of protests by farmers and their supporters cooled when Fernandez revoked a tax hike on soy exports in July, but tumbling prices for key exports have fueled their calls for an overhaul of government policies.
BUDGET, POLITICAL STRAINS
In Brazil, where some 60 percent of exports are commodities related, heavy stock market falls since May have partly reflected the decline in global prices for oil, metals and agricultural goods. Brazil's two biggest firms -- miner Vale and oil giant Petrobras -- have seen their shares slump.
Lula has pledged to use the revenues from massive untapped oil reserves off Brazil's coast to jump-start a new era of development. But the near halving of oil prices in recent months and more expensive credit has made the exploration of the deep-sea fields less economical.
Morgan Stanley sees growth in Latin America's largest economy falling to 2 percent in 2009, sharply below the government forecast of 4.5 percent, largely reflecting lower prices for its exports.
"In our case, the commodity has collapsed, so obviously our margins have decreased tremendously," said Laurence Pih, chief executive of Moinho Pacifico, Brazil's biggest wheat processor.
The price for the wheat that Pih's firm processes had last week fallen 59 percent from $13.5 per bushel in February.
Surging demand from China and India has in recent years led farmers in Brazil, Paraguay and Argentina to expand land for soybeans and other crops from the Pampas to the Amazon, where it has fueled deforestation.
Now, farmers face falling prices and a drying up of credit just as the grain planting season starts. The cost of renting Argentina's farmland is falling for the first time since 2002.
"It could be the worst of all worlds -- plant an expensive crop, without credit, and harvest it at low prices," Roberto Rodrigues, a former Brazilian agriculture minister, wrote in the Valor business newspaper last week.
The decline in coffee prices to their lowest levels in well over a year is also hitting the impoverished countries of Central America, where coffee is the top agricultural export.
"If the trend continues, producers will definitely have to be more frugal in their investments," said Honduras' trade minister, Fredys Cerrato.
Falling oil prices are squeezing Mexico's federal budget -- a third of which is funded by the energy industry -- even as President Felipe Calderon seeks to loosen spending rules to allow the government to run a small deficit.
Chile, for long Latin America's economic poster boy, has been stashing billions of dollars in windfall copper earnings. That has cushioned the blow from the metal's price fall by about a third from its peak, and analysts say prices would have to fall much further before any impact is felt on government spending or planned job creation.
Fellow metals exporter Peru is also seen on firm ground due to its varied mix of minerals, including gold, which has been rising.
But leftist governments that have sheltered their poor supporters through social welfare, fuel subsidies and price controls are likely to face growing economic strains.
Venezuela's Chavez, who leads an anti-American group of leaders in South America, may have to halt new infrastructure projects and slow social spending due to the falling price of oil, which provides half his government's budget.
While billions of dollars in cash reserves will help Chavez ride out the storm, the oil slide has sparked a rare call from the government for "austerity" in the 2009 budget.
Bolivian President Evo Morales, a fellow socialist who has been locked in an internal power struggle with opposition governors, partly over control of its natural gas reserves, also appears vulnerable to weaker energy demand.
"It's a market that's going to be much harder than they were expecting," said Francois Moreau, head of the Estrategia e Valor consultancy in Rio de Janeiro. "The political problem is going to be compounded by the economic burden."