A report from the risk rating agency Moody’s by 2024 he assured that Latin America it’s found “stable between lower debt affordability and political risks”although there will be high debt costs, moderate growth rates and a weakening external environment.
In this regard, it was emphasized that “interest rates are fallingbut sovereign financing costs will remain high, which will affect debt affordability and exacerbate fiscal constraints“.
It was also explained that “Regional growth will be pressured by the economic slowdown in the United States and China, and by the adjustment of global financial conditions. “There are still political pressures, but they will ease a little relative to 2023.”
Moody’s also anticipated a slowdown in growth in some Latin American economies in 2024 due to the previous monetary adjustment and the fall in global demand, although some economies will experience an acceleration.
“Average gross domestic product (GDP) growth in the region will change by about 2.5% in 2024. Stable economic growth will limit the increase in income and fiscal policy options,” they highlighted.
Regarding monetary policies, they explained that central banks in the region began to cut interest ratesbut borrowing costs will remain high in 2024, preventing improvements in debt affordability.
“The lack of fiscal reforms, the rigidity of spending and the modest growth of income will limit the prospects for improvement of public accounts. “A large portion of public revenue will go toward mandatory spending, and we do not anticipate a repeat of the strong revenue performance of 2021 and 2022,” they described.
Regarding the region, they asserted that although political tensions decreased, underlying polarization persists. “Relatively smooth power transitions following polarized or close elections have helped ease tensions,” they said.
And finally they stated: “Political outbursts causing social unrest could lead to a negative outlook. “Instead, the outlook could be revised to positive if growth results improve more than expected and lead to improved fiscal performance and debt indicators.”
The strengths and weaknesses of Argentina
According to the rating agency, Argentina With Bolivia and Ecuadorpresent sovereign bonds that are at the lower end of the rating scale because they are highly exposed to external vulnerability risks due to its large financing needs in foreign currency.
They also maintain that there are some sectors to explore. “Argentina, Brazil, Bolivia, Chile and Peru are important producers of key minerals such as copper, nickel, lithium and rare earths: the commodities necessary for the production of batteries and solar panels,” they said.
Regarding debt levels, they explained that they “improved” in Argentina, Belize and Ecuador after debt restructurings. However, “sovereigns with higher liquidity risks, particularly those related to foreign currency debt, continue to have a very high borrowing cost,” they anticipated.
Regarding crops, they highlighted that El Niño will benefit crops in Argentina.
Source: Ambito
