Another Look at Latin American Economies

After five years of strong growth Latin American economies were severely impacted by the current credit crunch. However the region holds plenty of potential for the future growth. The following are some key points from a “Regional Overview: Latin America” report by Institute of International Finance (IIF).

• “Most countries are better prepared to confront the global crisis having implemented structural reforms and enhanced the quality of their economic policies over the past decade.
• Bank regulatory frameworks have been made more effective and in many countries banking systems have become much stronger.
• There is increased recognition that stronger public finances will lower interest rates and enhance economic growth.
• Most sovereign borrowers in the region that have been pursuing sound policies have manageable external debt servicing prospects for 2009; however,
  a number of corporate borrowers have large syndicated loans and bond maturities falling due and face significant rollover risk.
• A few countries with substantial foreign exchange reserves, such as Brazil, are offering foreign exchange loans to domestic corporates to help them remain current in their external debt service payments.”

Select Country Stock Market Indices

click to enlarge

Despite the selloffs shown in the above chart, the markets of Latin America are easily ahead of other emerging markets. The graph below shows that the European emerging markets are performing worse than the Asian and Latin American emerging markets.

LatinAmerican Stocks Performance Comparison

Comments

[tc1:]

I, too, own some EWZ and have been impressed with its big rebound up from $32/share in early March.

What's also rather impressive here is the relatively low losses for Venezuela and Chile in 2008, outperforming almost all sectors save for bear funds and conservative allotments like cash and treasuries --and now showing quite positive returns for 2009.

Worth keeping an eye on these last two and doing further due diligence as to the political situation, growth prospects, etc....

May 04 11:07 AM

[jarco:]

Heavy China investments especially in Brazil bode well for EWZ. I'd continue to avoid EWW on fundamentals sands the flu

May 04 11:13 AM

[tc1:]

P.S.--On second glance, i notice that the figures in the first chart ("Table 3") are dated only through Feb. 18 of this year. Readily at hand is a Morningstar set of figures from this past weekend (published Sunday May 3 in the L.A. Times) showing mutual fund rankings, and Latin America leads the list of sectors with a +24.1% return for the YTD, surpassing technology (+19.3%) and communications (+17.1%).

May 04 11:26 AM