Too big to fail or too bloated to survive?

Check out this video when you have a chance: http://www.ft.com/cms/s/0/e03c20ba-e197-11dd-afa0-0000779fd2ac.html?nclick_check=1

This is the exact opposite of what Citi was trying to do 3 months ago. Previously, they were attempting to acquire other banks to become "too big to fail." Now, however, I think their "political capital" has run dry and they're trying to do anything to survive.

This is a big deal because in my mind, it means the bailout has failed. Not just the bailout for Citi, but for all involved.

Financial stocks are down big today because traders fear that "breaking up" Citi is a last ditch effort, and an effort that may be attempted by other floundering banks.

Who could be next? Bank of America?

How does this affect Peru?

The Peruvian economy has been growing like crazy over the last 5-6 years. In fact, they were the fastest growing economy in S. America in 2008 (more than 4x as fast as the US)! On top of that, inflation was held to more than half of what the US experienced.

The issue, however, is that Peru has benefited from a lot of foreign investment (ie. see financial institutions issues above), which will shrink dramatically in 2009. Luckily, unlike the Marxist countries of Venezula, or undisciplined countries like Argentina, the Peruvian government has learned from the mistakes of the past. They have not bloated their budget with transfer payments, or over-extended themselves on expensive programs. Instead, they have tucked away a nice sum of money in their treasury. Peru will be one of the few Latin American countries able to provide a stimulous without pumping inflation up or running a large deficit.

There's little doubt in my mind that the country will get hit by this economic crisis, maybe as soon as 6 months from now, but it seems as though they will be a model for other developing countries to follow.