Populist policies and the poor performance of dollar-denominated bonds are reportedly driving US investors out of Latin America.
Brazil, Mexico, and Argentina alone lost US$33 billion in investments this year, reported Merco Press, citing a recent report from the US Department of Treasury.
Rising poverty, inflation, and uncertain policy decisions seem to be other factors causing anxiety among foreign money managers.
Considering the report, the US investors are fleeing bonds, equities as well as the region’s currency markets.
A recent survey of money managers by HSBC confirms this growing anxiety. “Of the 164 surveyed, just 43% said they had overweight positions in Latin America, down from 70% in January,” reported Bloomberg citing the report.
Surprisingly, even Chile and Colombia are also on the list of countries likely to plunge into an economic crisis. “…..Few analysts see the region’s top economies — Brazil, Mexico, Chile, Colombia, Peru — sinking into financial crisis any time soon,” Bloomberg added.
Brazil and Mexico are struggling to put their economies back on the path of growth. According to the Bloomberg report, both countries are finding the US dollar extremely expensive.
Latin America’s economy contracted more than all its peers last year. It was not in good shape even before the outbreak, and the pandemic only worsened the situation, say analysts.