Economic cooling slows projects in the biggest Latin American economies
The cooling of the Latin American economies and fiscal constraints in Mexico will hamper the government's infrastructure agenda to boost employment and economic growth, according to international rating agency Moody's Investors Service.
In a new report, it analyzes business risks for emerging markets in Latin America in various corporate sectors and points out that emerging markets in 2019 face lower global growth, changes in trade policies and geopolitical risks.
The development of infrastructure projects in Latin America will generally slow down during the 2019-2020 and will be slow. The stress of business from macroeconomic risks will vary according to each region, country, and industry.
In Mexico, the energy sector is at risk due to its low production and insufficient investment. The fundamentals of the Mexican energy industry are negative since oil and gas production has been falling since 2004, due to insufficient investments and a heavy tax burden.
Legislation and mandates will make it difficult to develop projects in the oil and gas sector in Argentina and Mexico, but they have become a bit more flexible in Brazil, where the fundamentals of the oil and gas sector are more positive in 2019-2020.
In terms of infrastructure, Brazil's infrastructure fundamentals will remain stable until the middle or end of 2020, as the economy gradually recovers. The Brazilian steel sector and the mining industry in Mexico appear to present stable business conditions in 2019-2020. Meanwhile, the weak growth of the Gross Domestic Product (GDP) and the lower economic activity in Argentina will have an impact on its demand for electricity and public spending.
In Latin America, consumer trends will reflect the economic conditions of each country, the development of infrastructure projects will be slow and the demand for real estate will largely reflect the local economic health in 2019 and 2020. Industrial production will have a slight recovery in Brazil and will continue to grow in Mexico.
The consumer market in Brazil is still recovering for the period 2019-2020 and the fundamentals of consumption in Mexico will remain stable but will grow more slowly until the middle or end of 2020.
In Argentina, private consumption will continue to fall in line with a contraction of 1.5% in the economy and a persistently high level of inflation.