Political Risk: Latin American Markets Brace
Mar 3, 2010
Investors are troubled much less by the politics of Latin
America than they fret over governance in Washington and Europe. However, even Brazil conceals risk that is not priced in.
by James Crombie
As Southern Europe teetered and Obama rattled Wall Street early in 2010, emerging markets experts were uncharacteristically sanguine about Latin America, once the most politically charged region. In many ways, the climate is radically different to 2002, when Brazil last appointed a new president and markets collapsed. Erstwhile aid recipient Brasilia now lends to the IMF, which in February appeared close to having to bail out some "developed world" economies.
Investors assume 2010 will be a breeze for Latin American markets when it comes to internal politics. Everyone knows the bad countries – Ecuador, Venezuela, Bolivia, Argentina – and steers clear. But the rest seems plain sailing into tranquil waters.
However, despite the relative merits of LatAm versus other parts of a troubled world, investors reek of complacency about polls, even in the bigger markets.
"Structurally, Brazil is on a good path, but the assumption that...
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