Financial Crisis & Nicaragua

If you're following the world financial markets, you're already aware that the contagion is spreading. Iceland, one of the hardest hit with bank problems scores of times greater than its GDP, is arranging a shotgun wedding with Russia, while in the UK and Germany people are queuing up to buy gold. Today an article appeared in The Guardian which indicates that the problem will eventually be felt even in developing countries:

Dominique Strauss-Kahn, the Fund's managing director, said it could make "hundreds of billions of dollars" available to either rich countries in the west, or to developing nations. Amid fears that the extreme turbulence of the past month will push governments to the brink of financial collapse, Strauss-Kahn said he had asked the Fund's board to activate its fast-track loan procedure. Strauss-Kahn said, "we are ready to answer any demand from a country facing problems." He added that the Fund had not lent during the past five years, and therefore had a sizeable war chest available. Any country seeking financial assistance will face less stringent conditions than normally apply to governments in trouble. "We are not going to take weeks and months to design a programme; it will take two weeks at most," Strauss-Kahn said.

Defensive positioning in the case of such problems would include having a month's worth of cash on hand and perhaps dividing money among several different banks. While I have no specific information on what's happening with the Nicaraguan banking system, the extent and depth of these problems are severe. So one should not expect one's favorite country to be exempt from problems just because it's not known for being a big player in the markets, or any other reason. The problem right now is interbank and commercial credit, and this will eventually cause problems for Nicaragua as confidence seems to be continuing to wane in the system.