Data for 1999:IQ reveal a continued drop in the exposure of U.S. banks to key developing economies. Exposure to Brazil has continued its sharp decline, consistent with concerns about the impact of Brazilian fiscal policy on the value of the country’s currency. However, despite concerns about contagion effects within Latin America, exposure to Mexico has increased. This may be related to Mexican policy changes, such as the decision to facilitate foreign ownership of Mexican banks. On the other hand, developments in the U.S. economy might have affected the foreign-lending exposure of our banks. In particular, the strong U.S. stock market has made foreign lending relatively less attractive and might explain why, contrary to speculation, flows do not appear to have been diverted from Latin America to Asia.
Suggested citation: "International Developments," Federal Reserve Bank of Cleveland, Economic Trends, no. 99-08, pp. 18-19, 08.01.1999.