Growth prospects in Latin America are continuing to weaken as policy uncertainty in the region’s largest countries increases, according to Standard & Poor’s Global Ratings report.
Slower growth for the largest economies in Latin America in 2019 and 2020 is now expected. External conditions are also challenging, with rising trade tensions and geopolitical risks which could undermine 2020 growth prospects.
The report further states that investment continues to slump in the largest economies in the region as policy uncertainty prevails. Upcoming elections in Argentina, delays in key reforms in Brazil, and lack of clarity and polemic decisions in Mexico drag on already fragile investor confidence. Weak global economic prospects and increasing trade frictions also weigh on other economies in the region.
Risks continue rising in Latin America and will probably mix with soft external conditions over the coming months, as trade tensions between US and China remain unresolve, and frictions in the Middle East escalate. Domestic political challenges continue intensifying and are the main drag on investor confidence and economic growth in the region.
According to the report, the Federal Reserve’s monetary easing gave room for the region’s economies to lower their reference rates. The latter have improved financing conditions in Latin American economies, but not for all, because the appetite for lower-rated issuers remains limited.
Standard & Poor’s Global Ratings have lowered their growth outlook for most of the major economies in Latin America for the remainder of 2019 and for 2020. This is due to ongoing weakness in domestic demand, adverse domestic political dynamics, and volatile external conditions. Weaker growth will probably dent corporations’ profits and banks’ asset quality.
— Alexis Monteith
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