Investment to Latin America continues to flow despite the leftist wave

It is unlikely that the wave of victories of the left in the largest countries Latin America hurt investment in the region given divided parliaments and strong stock markets, fund managers told the Reuters Global Markets Forum.

Latin American Stocks are up more than 8% this yearsignificantly outperforming a broader index of emerging-market stocks, which is down 29 percent.

“The investment has not suffered especially compared to other emerging market regions and LatAm feels like a more traditional emerging market investment right now,” said Daniel Wood, portfolio manager of emerging market debt at William Blair Investment Management.

Among Latin American currencies, the Brazilian real is the best performer this year, up nearly 9%, with another 3% gain following the election of Luiz Inácio Lula da Silva, as investors seemed relieved. for the end of uncertainty.

“We should expect a pragmatic fiscal policy with a moderate expansion of public spending,” said Silvio Cascione, Brazil director at Eurasia Group, adding that Lula is likely to include market-friendly measures in his government to boost credibility with investors.

Lula’s victory over Jair Bolsonaro in the Brazilian presidential elections consolidates a new “red tide” in Latin America, with the left ruling the main economies of the region, from Mexico to Argentina.

However, the political divide has maintained a “balance” in Latin American decisions and has prevented the reversal of economic reforms, Wood said.

Alejo Czerwonko, chief investment officer for emerging markets Americas at UBS Global Wealth Management, said he expects Brazilian equity markets, which are up 11% this year, to outperform other emerging markets due to factors such as high prices. commodity prices, attractive valuations and relatively low vulnerability to global liquidity squeezes.

Even with rising valuations, Brazilian stocks remain cheap: investors in the MSCI Brazil Index pay about $6 for every dollar of earnings, compared with nearly $18 at the 2020 high.

Czerwonko said he favors global-scale commodity and petrochemical producers, national oil companies and low-cost mining companies that benefit from cleaner hydropower as a source of energy.

Wood said he liked Brazilian local-currency bonds for their attractive yields, and that the Brazilian central bank’s decision to start raising interest rates earlier to fight inflation has put the economy in a relatively strong position.