What’s in store for the rest of 2024?

Challenges and opportunities for Latin American investors in 2024. 

In a tumultuous Latin American landscape, 2024 emerges as a decisive year for investors, navigating through myriad political, economic and global challenges. With President Javier Milei’s bold promise to slash the size of the Argentine state, the country embarks on an experimental journey into libertarian governance. Meanwhile, Ecuador grapples with escalating gang violence under the leadership of President Daniel Noboa, adding another layer of uncertainty to the region’s political landscape. 

In Mexico, anticipation swirls around the upcoming presidential elections, with Claudia Sheinbaum poised to become the country’s first female president. However, questions linger regarding her autonomy from her mentor, AMLO, injecting a dose of uncertainty and scepticism into the race. Against this backdrop, authoritarian regimes in Nicaragua, Cuba and Venezuela loom large, casting shadows of instability and repression across the region.  

For several years now the big businessmen in Peru, Colombia and Chile and the big families have decided to invest abroad, especially in the USA,” stated the CEO of a regional asset management firm. However for Peru, foreign investors, as evidenced by recent events concerning political issues, do not tremble as long as the rules of the game are respected, asserted an executive at Peruvian pension fund.

“For several years now the big businessmen in Peru, Colombia and Chile and the big families have decided to invest abroad, especially in the USA.”

CEO of a regional asset management firm, LatAm

On the macroeconomic front, Latin America finds itself at a pivotal juncture, with monetary policy easing in most countries, except for Argentina. Brazil, a key player in the region’s economic dynamics, sets its sights on achieving a zero fiscal deficit in 2024. President Lula’s proposed fiscal rules aim to balance spending growth, prioritising social programmes and public investment.

Yet, concerns persist over mounting public debt servicing costs and sluggish internal demand, tempering investor confidence. “The USA has become a focus of investment attraction because things work there.” The CEO continued, “there may be chaos and disorder among different states, but the law is respected whereas in this region all trust in institutions has been lost.”

The global landscape adds another layer of complexity for Latin American investors. China’s economic slowdown threatens to impact local exporters, while the stalled Mercosur-European Union trade agreement pushes the Southern Cone towards forging stronger trade ties with China and India. “Those who have appeared to fill the gap are the Chinese and they buy at any price,” commented both executives. The conflict in Ukraine disrupts fertiliser imports, crucial for the region’s agricultural sector, while the Gaza conflict fuels political debates with uncertain implications for investment. 

Amidst these challenges, drug-related organised crime emerges as a pressing concern across Latin America, posing significant risks for corporations and investors. In response, countries like Argentina, Uruguay and Chile have prioritised combating organised crime in their National Security Strategies, recognising its destabilising effects on society and the economy. “The more conservative investor who already saw us as a more developed market will be scared.” The pension fund executive expanded, “A clear example is Chile, which has always been considered the Switzerland of Latin America and now is just one of the bunch in terms of behaving like the rest of the region.”  

The few remaining strategic investors are becoming more selective, further impacting the investment landscape. “2026 is a key year and they are waiting to see what is going to happen with the political pendulum; there is no stable middle ground.” The executive continued, “It seems to be swinging back the other way as LatAm’s ‘turn to the left approach’ has not favoured those it should have favoured. 

“2026 is a key year and they are waiting to see what is going to happen with the political pendulum; there is no stable middle ground.”

Executive at a pension fund, Peru

Navigating these multifaceted challenges requires a cautious approach and has resulted in a short-term mindset, with a keen focus on monitoring inflation, fiscal policy changes and political developments. “The investment horizons have shortened because nobody can guarantee that the next government will not be against foreign investment or business in general.” The CEO expanded, “For example, if Milei manages to reduce inflation and attract foreign investment and generate growth, that will be terrible news for the left in Latin America because Milei will be able to show them that the left’s model is broken.” 

In essence, 2024 presents Latin American investors with a formidable array of hurdles to overcome. Yet, “this region is one of the few regions that has organic population growth, a steep population pyramid, most of the countries in the region have controlled inflation, have reserves, have low to medium debt over GDP and still have growth,” informed the CEO.

Amidst the uncertainty and volatility, opportunities for strategic investment and long-term growth persist, this region still has a lot to offer for those with a high-risk appetite,” concluded the CEO asset manager. The pension fund executive agreed, “The opportunities are in Peru, Argentina and Chile, where things are cheap. Rates are historically high and there is a brutal investment opportunity.” Who is ready for a gamble? 

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