Moody’s recent report casts a spotlight on the business climate in Latin America, revealing significant challenges for 2024.
Political risks and government interventions are major concerns for companies in the region.
These issues and likely higher interest rates and structural changes contribute to a bleak outlook.
The report notes that abrupt policy shifts and increased government control are deteriorating the operational environment.
Furthermore, unpredictable regulations pose a threat to investment and business performance.
Rising social demands and economic slowdowns are expected to continue fueling these challenges. Consequently, governments are likely to increase spending.
Moody’s identifies four key themes impacting credit quality for non-financial companies:
- prolonged higher interest rates,
- adapting to structural shifts,
- undergoing reforms and regulations, and
- dealing with polarization.
Despite some improvements in credit conditions, high interest rates are expected to continue impacting businesses.
Argentina faces a high risk of sovereign credit default between 2024 and 2025.
President Javier Milei must address severe macroeconomic imbalances, including foreign exchange shortages, high inflation, and price distortions.
Brazil’s new government’s fiscal policy revisions and green energy initiatives are highlighted.
A tax reform proposal, set to take effect in 2026, is expected to influence Brazil’s credit quality positively.
Mexico’s focus is on the 2024 national elections and the end of President Andrés Manuel López Obrador’s term.
The country anticipates regulatory changes in certain sectors during this political transition.
Chile directs its attention towards its constitutional process and the upcoming referendum.
Meanwhile, political developments and key government reforms shape Colombia’s business environment.
In Peru, social and political risks are exacerbating institutional instability.
Moody’s analysis underscores the intricate political and economic landscape in Latin America.
It highlights the diverse challenges and risks facing businesses across the region in the face of political dynamics and economic uncertainties.