Cyclical Feet-On LatAm

Cyclical Feet-On Latin America
2018: A decisive year

Latin America looks to be well-positioned for growth, set against a backdrop of higher global growth and favorable domestic factors. We are in the midst of global synchronized growth, with global GDP poised to grow at 3% for the second consecutive year. More importantly, the region has corrected dynamics that have inhibited its growth in the past. Government administrations continue to shift away from populist reform and toward economic pragmatism, allowing companies to move on from the uncertainty of the past and focus on delivering sustainable results. LatAm corporates have also played their part in creating a viable growth path by enforcing disciplined liability management and strengthening balance sheets.

As a result, regional asset classes performed remarkably in 2016 and 2017, with Latin American equities gaining 28% and 21% respectively, while corporate bonds rose 19% and 13%. Such strong gains inevitably raise the question: how much upside is there left to gain? While some investors may be tempted to collect profits on the region, we see this as only the beginning of a new cycle in the region, with potential through 2018 and beyond. Longterm fundamentals influenced by demographic, social, production, and investment drivers are providing lasting value in the region, creating new opportunities in what feels like a new Latin America.