The International Economic Forum for Latin America and the Caribbean met in Paris this past week, resulting in a Memorandum of Understanding (MoU) meant to spur collaboration to boost growth in the region.
The (MoU) outlines a set of best practices and policies that the members aspire to. However, despite this promise of collaboration, performances of markets across the region remain disparate and diverse. Successes in 2009 were largely due to Brazil's performance which masked the struggles of neighbouring countries.
Brazil vs region, 2009
Source: Financial Express Analytics
Table of IMA sectorised LatAm funds 1-yr
| Fund | % return |
| Invesco Perp Latin America TR in GB | 75.49 |
| Neptune Latin America TR in GB | 71.24 |
| Scot Wid Latin American TR in GB | 74.99 |
| Threadneedle Latin American TR in GB | 69.14 |
Source: Financial Express Analytics
Data to 27 January 2010
The story so far has been somewhat reversed. Since the beginning of the year, the MSCI EM Latin America index has fallen by -7.35 per cent, largely as a result of the MSCI Brazil index falling by over 9 per cent in the same period.
Conversely, Chile, one of the countries that lagged far behind Brazil in 2009, has returned over 5 per cent already this year. The Central Bank of Chile is optimistic, stating that "available information suggests that output and demand are expanding. The unemployment rate has continued to decline. Lending conditions have become less stringent."
The fall in fortunes for Brazil this month is expected to be short-lived. After near stagnation in 2009, its central bank predicts the country's GDP will grow by over 5 per cent in 2010. Its Ministry of Finance predicts domestic demand will grow by over 7 per cent, but that this will be counterbalanced by lower foreign trade.
Predictions for Mexico are similarly positive. Unlike Brazil, it fared particularly badly in 2009 but it is set to benefit from improved economic conditions in the US.
In a report published this month BNP Paribas analysts said: "The Mexican outlook is much more positive, and in our view the peso is likely to outperform the entire Latin American spectrum of currencies in 2010".
MSCI Brazil, Mexico, Chile, 6-mth
Source: Financial Express Analytics
The news coming out of Venezuela is far less encouraging. In an effort to prevent dollar outflows and close a growing budget deficit President Hugo Chavez has devalued the bolivar by as much as 50 per cent and implemented a multi-tiered exchange system.
Essential goods now have an exchange rate of 2.6 bolivars to the dollar whereas nonessential goods receive 4.3 per dollar. The new system has proved hugely unpopular and protests and riots are becoming increasingly commonplace in this already troubled country.
Despite this, the there is an air of positivity in Latin America for what 2010 might bring. In many countries, unemployment is falling and it is hoped that the improved economic situation in the West will filter through to the region.