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Investor Report: Andean Region

Sep 25, 2013

The sudden departure of benign global conditions this year took Latin America’s rising star economies by surprise. Chile, Colombia and Peru must now work out how to deal with the consequences.

Investors are gearing up for an end to the abundant liquidity that has characterized the post-crisis period. Growth in China is slowing as its economy rebalances away from export-led growth. Already, falling commodities prices are hitting economic forecasts, and capital markets are braced for an eventual change in US monetary policy.

We examine the measures the three Andean countries are pursuing to support growth as the cycle turns.

Yet, the region also has much to celebrate. Peru’s credit rating was upgraded in late August in spite of falling commodities prices. Andean financial markets and systems are deepening and expanding, and becoming more self-sufficient.

Colombia’s banks are advancing on a wave of international acquisitions, snapping up lenders across Central America as European banks retreat. Their financial regulator is keeping a watchful eye on the systemic implications, but so far, the deals appear to offer a chance to diversify away from a domestic economy whose fortunes are closely linked to the oil price. We speak to the chief executives of Banco de Bogotá and Bancolombia  about the risks, and rewards, of expanding away from home.

Regulators in Colombia and Chile are also carefully monitoring the effects of the growing pension pots in these countries. We look at how Chilean pension savers are moving the local debt markets, and how Colombian funds are becoming a tool for currency manipulation.

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