Fitch Risk Radar: LATAM Risks Persist Amid the 'New Normal'

NEW YORK--(BUSINESS WIRE)-- Latin America has entered a period of subdued growth due to weaker global trade, a deceleration in China, lower commodity prices, and weaker levels of investment. These dynamics are unlikely to change and are creating a 'New Normal' for the region, according to Fitch Ratings' latest Risk Radar publication.

"Despite a modest commodity price recovery in recent months, Latin American growth remains subdued and the balance of risks to the regions remain skewed to the downside," said Rui J. Pereira, Regional Credit Officer for the Americas. "However, the transition has been orderly with governments taking steps to stem fiscal deterioration."

Brazil continues to suffer its deepest recession in decades, facing serious macro and fiscal challenges. Venezuela, Ecuador and Argentina are also expected to contract in 2016, although Argentina's new government moved quickly to reduce economic distortion, boost investor confidence and restore growth. Mexico, Central America and the Caribbean remain on firmer footing, benefiting from economic links with the U.S. Fitch has revised its regional growth forecast down, with average GDP expected to contract 1.2% in 2016, and grow 1.8% in 2017.

Latin America remains vulnerable to a sharper deceleration in the Chinese economy and its knock-on effects on commodity prices. Likewise, further deterioration in Brazil could begin to weigh on its neighbors. Potential risks to the region from the 'Brexit' decision include renewed pressure on financial markets and commodity prices. Longer-term implications are less clear and will depend on its impact on UK and EU economies and the spillover effect on export activity with key trade partners in the region, including Brazil and Argentina.

The Risk Radar report frames the potential impact macroeconomic risks could have on Fitch's ratings portfolio and their relative urgency. In today's interconnected markets, similar issues may have an impact on multiple asset classes. The Risk Radar provides independent and objective views on potential risks not currently incorporated in Fitch's base case analysis.

For more information, the special report titled 'Risk Radar LATAM 2Q16 - Regional Downside Risks Largely Unchanged' is available on the Fitch Ratings website at www.fitchratings.com, or by clicking on the link.

Additional information is available at www.fitchratings.com

Risk Radar Latin America 2Q16

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=884044

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View source version on businesswire.com: http://www.businesswire.com/news/home/20160706005524/en/

Fitch Ratings
Rui J. Pereira, +1-212-908-0766
Regional Credit Officer - Americas
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Eileen Fahey, +1-312-368-5468
Chief Credit Officer
or
Media Relations:
Elizabeth Fogerty, +1-212-908-0526
New York
[email protected]

Source: Fitch Ratings

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