Latin American government sovereign debt offers some resilience against external pressures expected over the next year, even as the global economy slows, ratings agency Fitch Ratings said on Tuesday.
In a note, Fitch noted that aggressive rate hikes by the Federal Reserve, followed by many Latin American central banks, should help to contain high inflation in the region.
“Better-than-expected fiscal performance in 2022 will help Latin American sovereigns navigate increasingly adverse international conditions in the coming year,” Fitch wrote in its note.
One of the big three credit rating agencies, Fitch has argued that the possibility of a “mild” recession in the United States will negatively impact Mexico, as well as some countries in Central America and the Caribbean. The expected impact is due to the deep commercial and financial ties with the US economy, in addition to the heavy remittances sent by immigrants to their countries.
The slowdown of the Chinese economy should weigh on the countries of South America, according to Fitch, as they depend heavily on exports of commodities to the Asian giant, especially grains and metals.
Fitch also highlighted the risk of what it described as “microeconomic intervention” by some of the region’s center-left and left-wing political parties, which have gone on a winning streak in recent years, pointing to Mexico as an example.
The agency added that economic and other spending policies in Chile and Colombia, where the left came to power in elections earlier this year, also fuel uncertainty, similar to Argentina, where doubts prevail ahead of next year’s elections.
Source: CNN Brasil
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