Latin American countries are emphasizing the need
to integrate their economies and increase intraregional trade
and investment to counter a surge in protectionist rhetoric in
the US and other developed countries, said panelists at
LatinFinance’s 14th Annual IDB Breakfast
in Asuncion, Paraguay.
"After the commodities cycle, there is another
[cycle] that is starting to impact Latin America, and that is
protectionism in developed countries," Alejandro Micco, the
undersecretary of finance for Chile, said. "The idea that
growth has moved inward has translated into things like Brexit
and the subject of NAFTA."
Despite US President Donald Trump’s
talk of a trade tariffs, the existing economic cycle remains
positive for emerging market (EM) investments. Graham Stock,
the head of EM sovereign strategy at BlueBay Asset Management,
said growth in Southeast Asia is having a knock-on effect on
the global economy and propelled investments in emerging
"There are risks to this outlook, which could come
from policy in the US," he said. "But we have seen a recovery
from 2008-2009 that is helped by monetary policy put in place
and sensible economic policies."
Colombian Finance Minister Mauricio Cardenas said
the dangers of protectionist rhetoric went beyond tariffs and
the repatriation of capital from abroad and he urged Latin
America's economies to be prepared. "There is a big contingency
here to do with US domestic policies that can impact us," he
said. "Analysts are putting most emphasis on Mexico, but it
Alexei Remizov, managing director and co-head of
Latin America debt capital markets at HSBC, said rhetoric from
the Trump administration had toned down. "This was a key risk
for emerging market policies," he said.
Several Latin American countries, including
Colombia and Honduras, anticipated a hike in interest rates by
the US Federal Reserve and took advantage of market conditions
to raise external debt in January, one of the busiest months in
years for new sovereign issues in the region.
"The markets have become normal again," Cardenas
said. "International conditions have improved. There is less
uncertainty, more liquidity and appetite for emerging market
Remizov added that the fixed income market is
seeing limited fiscal stimulus in the US, which has prompted US
Treasury bonds’ yield curve to tighten.
Market shocks such as Trump’s victory
last November and Great Britain’s vote to leave
the European Union halted new bond issues, but the impact
Christopher Mann, a partner at Sullivan &
Cromwell, said these "crises" could have had a lasting impact
but he applauded Latin American economies’ robust
structures, which now served as shock absorbers.
"There is a lot of sophisticated planning being
done in a responsible way, and hopefully we will continue to
see this approach in most cases," he said.
The Dominican Republic’s Finance
Minister Donald Guerrero said low oil prices have helped the
country lower debt and he expects growth in the US to benefit
the Caribbean island.
"The dynamics in the US will help us," he said.
"We are seeing more tourists in our country with a strong
He also said international investors are showing
increased interest in the Dominican Republic’s
fixed income instruments.
Corruption and natural disasters, however, have
dented growth for some countries in Latin America and the
Peru’s Finance Minister Alfredo
Thorne said the Odebrecht bribery scandal has led the
government to revise its GDP forecasts but he added that the
country needs to keep driving investments in the infrastructure
Thorne avoided naming Odebrecht on the panel,
referring to it as "the Brazilian constructor," but he said the
company was "leaving now" and that Peru has advanced plans to
move infrastructure projects forward. "Now we have to transfer
these projects to new contractors," he said.
Colombia’s Cardenas warned of the
threat of corruption and its potential impact on the region but
he emphasized the need to retender the affected projects.
"We have to be immune and change contractors so
there is no interruption," he said. "It shows a deeper issue,
which has to do with a lack of ethics in some multinationals.
Our systems need to be more resilient to this influence."
Several Latin American countries also said they
are looking to strengthen efforts to respond to the economic
impact of natural disasters. Heavy rainfall in Peru has caused
landslides and flash floods this year. Over the weekend, a
mudslide in Colombia killed more than 250 people.
Cardenas said to respond to the natural disasters
impacting the Andean region, members of the trade bloc Pacific
Alliance (PA), which includes Chile, Colombia, Peru and Mexico,
are working on issuing a catastrophe bond. The four countries
plan to meet in July in Cali, Colombia, to finalize their
Chile’s Micco said the PA members
were also focused on deepening economic ties and increasing
"If we are not open [towards other markets], then
trade will not grow," Micco said. "Chile has a commitment to
keep itself open to the world and capital movement."