Itau responds. According to them, Mexico and Argentina will be toast. Here is an excerpt of their analysis “What happens to LatAm if Greece leaves the euro zone?”:

“First of all, the impact depends on the ability of the euro zone’s stability mechanisms to avoid contagion to other countries. If only Greece leaves the euro, we can expect some financial turbulence, but not a major problem. In a deeper break-up, with more countries leaving the euro area, the consequences are more severe, with a large devaluation of peripheral currencies, arising currency mismatches and a widespread default of private and sovereign debt.

In either scenario, Brazil, Chile, Colombia and Peru would fare better than Mexico and Argentina. In Brazil, the good shape of fiscal accounts and $350 billion in international reserves would act as important buffers. The Selic would likely reach new historical levels. Colombia and Peru boast solid macro fundamentals and would avoid a contraction in 2012 and 2013. Chile, in contrast to the Lehman crisis, would also steer clear of a recession: this time, inflation is under control and the policy rate stands near its neutral level.

Mexico and Argentina would suffer more, because of different reasons. Argentina’s macro fundamentals are weak, so policy makers would be unable to deliver enough stimulus. Mexico has solid fundamentals, but relies too much on manufacturing exports, namely consumer durables. The dwindling demand from advanced economies would hit strongly Mexico’s economy, just like in the Lehman crisis.”

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