Lead Portfolio Manager
Latin America is a diverse and dynamic region, with a population of over 600m people where 50% are under 30. Increasing consumption and urbanisation will continue apace, whatever happens across the global economy or in the US. What, however, are the key cyclical trends that investors need to be aware of?
From Argentina to Brazil, to Chile and Peru, we are seeing political change, or the prospects for change, leading to market-friendly and growth orientated policies.
2017 sees elections in Chile where the incumbent President Batchelet is likely to be replaced and we hope to see reforms leading to a market rally. We already have over 20% allocated to Chile, which is well ahead of our peers.
2One of the key constraints on growth and productivity in Latin America is infrastructure and this is increasingly recognised by governments across the region.
For example, we are seeing large infrastructure investments being initiated, such as the $5bn Metro 2 train line in Lima, Peru.
Investments are also well underway in Brazil, where a return of business confidence and reducing interest rates are boosting infrastructure projects, leading to an early cycle recovery amongst industrial companies. Through stocks like Mills, engineering products and services, we are well positioned to capture this once is a decade growth opportunity.
Countries embarking on interest rate cutting cycles will encourage business investment and hence improved growth prospects.
Uniquely for the region, Brazil, Argentina, Peru, Chile and Colombia are all cutting or intending to cut interest rates, which will feed through into investment and growth. Mexico is the only economy where interest rates are increasing and hence our low allocation.