As the US Dollar seemingly weakens and the Federal Reserves puts interest rates on hold for the rest of 2019 and possibly throughout 2020, analysts agree that Latin American emerging markets are the best investments for investors. As the Reserve takes a sideline with interest rates on hold, Latin American banks revel in more time to adjust monetary policy. Despite ongoing turmoil, such as sanctions on Venezuelan oil imports, Barclays Capital predicts substantial growth in Latin American economies in the coming years.
Even with US sanctions, Barclay’s expects Venezuela’s GDP to experience growth next year by as much as 6 percent. Throughout Latin America, markets are predicted to experience steady growth. However, the decline in oil production and the countries financial support for Cuba is reaching critical levels that exceed the portion of financial resources available to pay for things at home, the Venezuelan crisis must be handled appropriately, or the country’s ability for the economy to recover will be compromised.
Brazil is also forecasted to experience growth, from 2.2 percent growth this year to 2.6 percent growth in 2020. Columbia is another country expected to see an increase in GDP growth, from 3.5 percent to 4 percent in 2020. Coming out of recession, Argentina is likewise likely to see a 2.2 percent growth, while Mexico is expected to see a GDP growth of 2% in 2020 after its general slowdown the previous year.
Although inflation rates reached over 35% a year, Barclays anticipates a possible rebound as higher interest rates keep growth in check and increased consumption and harvest levels help get the country back into its groove. Mexico is also predicted to make a possible rebound in the first quarter due to improving employment growth, wage increases, and consumption rates. As Barclay analyst, Marco Oviedo in New York, recently shared in a report, “[Mexico has the right conditions]…for a rebound in the first quarter amid lower levels of uncertainty about the economy.”
Even with Latin American markets dipping into the red, Brazil and Colombia exceeded expectations over the last 12 months. The two countries beat the benchmark, as measured by the MSCI Colombia Index. However, investors remain cautious due to risks revolving around the country’s pension reforms. James Barrineau, a bond fund manager at Schroders in New York, said about pension reform, “If it is passed, it will tilt the odds towards a rate cut by solidifying sentiment around Brazil.”
All in all, Latin America GDP will improve in 2020. In fact, the GDP growth of these countries may exceed the growth rates of Asia-Pacific region (5.3%) in the coming years.