Nov. 7 (Bloomberg) -- The home of samba and salsa offers an encouraging example as Americans and Europeans try to dance through tough economic times. U.S. President-elect Barack Obama and other world leaders would be wise to seek help with their footwork.

Not long ago, Latin America's major economies faced financial and economic conditions that make today's worldwide credit crunch look like a piece of cake.

Take Brazil. From 1986 to 1994, Brazilians had to deal with six radical economic stabilization plans, five different currencies, at least six price and wage freezes, two different exchange-rate systems, annual inflation rates that topped 1,000 percent, 11 finance ministers and even the impeachment of the first democratically elected president after 21 years of military regime.

On March 16, 1990, Brazilians woke up to news that the government had confiscated all their bank and investment-fund assets. Without any notice or request for consent, customers were informed they could withdraw only up to 50,000 cruzeiros (about $1,300) from checking and savings accounts or investment funds.

In a desperate attempt to control inflation that reached almost 7,000 percent, the Brazilian government had constrained liquidity abruptly and severely, freezing up as much as 80 percent of all the financial assets in the country.

Overnight, the elderly couldn't withdraw their retirement savings, students couldn't pay their college tuitions and corporations couldn't pay workers or suppliers. Everybody was surprised, many got scared, a few committed suicide. Now that's a credit crunch.

Bitter Sweetener

In a failed attempt to sweeten the pill, the government informed the public that the remaining amounts in the banks should be left untouched for 18 months and would be indexed to account for inflation plus 6 percent annual interest -- as if anyone might trust a government that had just confiscated everybody's money.

If that example doesn't put today's crisis in perspective, try the so-called Latin American debt crisis.

In March 1980, the U.S. Federal Reserve Board, grappling with double-digit inflation, decided to increase its funds target rate to an unprecedented 20 percent. All of a sudden, highly indebted Latin American nations, notably Brazil, Mexico and Argentina, faced soaring external debt obligations. Who was the chairman of the Fed at the time? Paul Volcker, today a senior adviser to President-elect Obama.

`Lost Decade'

A couple years later, in August 1982, Mexico announced it would no longer be able to service its foreign debt. Fearing a similar action by other borrowers in the region, most commercial banks in the developed world either halted or cut back significantly any new lending to Latin America.

Since much of the region's debt was short-term, the banks' refusal to refinance made payment obligations due immediately. And since most countries couldn't afford those payments, a profound economic crisis ensued, leading to what became known as Latin America's ``lost decade.''

There is no doubt that Brazil, Mexico and other countries in Latin America will be affected by today's global financial crisis. Yet, as history shows, many of them have survived tremendously difficult times. Not long ago, Brazil and Mexico were facing seemingly insurmountable credit crunches. Today, both are investment-grade-rated countries, and neither is at risk of imminent financial insolvency.

Over the past few decades, Latin Americans have accumulated large amounts of international reserves. They have accumulated expertise on how to deal with troublesome financial and economic constraints.

Preemptive Inaction

Unlike North Americans and Europeans, Latin Americans aren't particularly keen on the idea of acting in haste, planning ahead or worrying too much about the future. They have grown accustomed to dealing with the unlikely, the implausible, the unpredictable and uncontrollable, such as the exact timing of a real-estate bubble bursting, the overnight collapse of financial institutions considered too big to fail or the defeat of a financial rescue package.

Like doctors in the Amazon -- who don't have all the tools, never know what the ambulance will bring and treat the patient anyway -- Latin Americans have learned to react fast to unimaginable, unforeseen occurrences.

So what were the lessons of their response to financial crisis? Don't let any relevant financial institution go down. Look strong, sound credible and be in charge at all times to maintain public confidence. Never propose any legislative fix without being sure it will pass. If blunders or crimes were involved, prosecute those responsible and sack them from the government.

Voice of Experience

The chief Latin America analyst for a top credit-rating company recently told me his superiors are seeking his opinion more than ever, not because any country in the region risks defaulting on its debt payments, but because he has accumulated enough experience to lecture his colleagues in the developed world about crisis management.

Likewise, Obama would profit if he backs and carries on President George W. Bush's initiative to invite Brazilian President Luiz Inacio Lula da Silva and other leaders of emerging-market economies to join the Group of Seven nations to discuss measures to weather the global financial storm.

After his decisive victory on Nov. 4, Obama now has to learn to dance through crisis. Latin Americans can give him useful insights about this new rhythm. It will require creativity, flexibility and spontaneity. The quicker he learns the samba and salsa, the sooner we will all go back to listening to some soothing bossa nova.

(Alexandre Marinis, political economist and founding partner of Mosaico Economia Politica, is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: Alexandre Marinis in Sao Paulo at amarinis1@bloomberg.net

Last Updated: November 7, 2008 00:04 EST