Lessons from tequila
Latin America may have side-stepped the global financial crisis but the region is set for challenging times as QE tapering threatens to trigger a rise in interest rates that will put pressure on local borrowers.
The good, the bad and the downright ugly: The People’s Republic of China may be more than 10,000 miles away from Latin America, but given the influence it has been having on the region, you could be forgiven for thinking it occupies the same barrio. There’s been no bigger influence on the region’s economy over the past few years than the PRC. With China’s growth slowing to about 7.5% from the runaway double-digit peak it reached in 2010–11, it’s not surprising that LatAm has suffered similarly.
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Latin America may have side-stepped the global financial crisis but the region is set for challenging times as QE tapering threatens to trigger a rise in interest rates that will put pressure on local borrowers.
Last year’s sweeping primary reforms may well transform Mexico from a labouring mid-table emerging economy into a star of the future.
Brazil has lost its lustre among global investors as they fret about deteriorating fundamentals and a heavy-handed government.
A species of accurate data once feared extinct has returned to Argentina, generating hopes that pragmatic policies will follow in its wake.
Pressure on President Nicolas Maduro continues, but Venezuela’s oil wealth will continue to support his regime – at least in the short term.
Latin America’s equity markets have long been something of a crap shoot for investors, with IPOs regularly pricing well towards the very bottom of the range. Banks, issuers and investors are, however, learning to see eye-to-eye.
Many astute moneymakers invested heavily in OGX, a testament to greed or the desperate and never-ending hunt for yield – and to the efficacy of Eike Batista’s sales patter.
Argentina’s inability to access the international capital market leaves it with few options for feeding its sacred cow, the giant shale gas field Vaca Muerta. Unless the financial pariah can find more than US$30bn, the reserve’s potential, like the gas itself, will remain nothing but hot air.
Latin America’s banks are already miles ahead on the road to Basel III compliancy, but some banks face regulatory roadblocks that threaten to hinder their ability to issue Basel III-compliant securities.
A recent uptick in lending may be the start of a more positive trend with the economic recovery in Latin America gathering pace and interest rates set to rise.
The pressure of its debt means that Brazilian oil giant Petrobras needs to think outside the traditional dollar market.