Latin America’s markets are undergoing shifts due to a mix of economic volatility, supply chain disruptions, and political changes.
Luca Moneta, a senior economist at Allianz Trade, points out to Bloomberg Linea that these factors contribute to an average risk rating of B3 across the region.
Economic growth, inflation, and currency fluctuations influence this rating.
Asia deems itself safer, while Latin America confronts higher uncertainties, recognizing Uruguay as a low-risk country akin to the U.S. and Canada.
Other major economies, like Brazil and Mexico, are categorized as medium-risk.
Guyana faces particular challenges due to a territorial dispute with Venezuela over the Essequibo region, marking it as a sensitive risk.
In contrast, Argentina, Bolivia, and Ecuador face high-risk assessments due to fiscal and liquidity issues.
These ratings help gauge the likelihood of companies in these countries fulfilling their contractual obligations.
Globally, the energy and raw materials sectors are experiencing downturns due to falling commodity prices, impacting profits.
In the US, finance, consumer discretionary, and tech sectors excel due to positive forecasts and reshoring trends.
Brazil’s Economic Outlook
Brazil’s risk rating has improved following positive economic reforms and a stable political climate.
Analysts expect the 2023 tax reform and the upcoming digital real initiative in 2025 to bolster Brazil’s economic prospects.
Additionally, green incentives are attracting significant foreign investment in Brazil’s automotive sector.
Mexico’s prominence in nearshoring and friend-shoring has surged, making it the largest supplier to the U.S., especially in automotive industry.
Still, political unrest and governmental approaches to critical sectors could affect its competitive edge.
In Colombia, despite facing inflation above targets and a forecasted fiscal deficit in 2024, the country is seeing a reduction in insolvencies.
Additionally, there has been a significant decrease in external debt compared to 2019.
Latin America’s dynamics showcase a mix of opportunities and challenges, emphasizing its crucial role in the global economic framework.