"It took me 17 years and 114 days to become an overnight success." - Lionel Messi

MARKETS

January 23, End Of Day

• Argentina
  • S&P MERVAL Index = 2,625,049.91 (YTD = 2.22%)
• Brazil
  • BOVESPA Index = 122,470.82 (YTD = 1.82%)
• Chile
  • S&P IPSA Chile = 3,799.75 (YTD = 5.22%)
• Colombia
  • MSCI COLCAP = 1,397.33 (YTD = 1.29%)
• Mexico
  • IPC Mexico BMV = 51,108.22 (YTD = 3.22%)
• Peru
  • S&P/BVL Peru = 29,051.38 (YTD = 0.31%)

BUSINESS

Insights from Davos 2025 on Latin American Economy

At the World Economic Forum event ‘Addressing Latin America's Faultlines,’ three distinguished speakers, including Ilan Goldfajn, President of the IDB, Dina Ercilia Boluarte, President of Peru, and José Raúl Mulino Quintero, President of Panama, shared their insights on key economic trends shaping Latin America in 2025.

1. Economic Recovery with Persistent Challenges

• Economies are recovering from inflation and supply chain shocks caused by the Ukraine war.
• Growth prospects are improving but remain lackluster in the medium term, according to the IMF.
• Key challenges include low labor productivity, climate resilience, food security, and limited fiscal space.

2. Trade and Geopolitical Tensions

• Latin America’s economies benefited from global trade during the commodity boom but now face risks from trade fragmentation.
• Chile, with trade agreements in over 60 countries, exemplifies the region's reliance on global trade but warns of risks from US-China tensions and potential tariffs.
• Organized crime costs the region 3.4% of GDP—nearly 80% of its education spending—highlighting the need for multilateral responses, like the Alliance for Security, Justice, and Development involving 19 governments.

3. Nearshoring as a Growth Driver

• Nearshoring is creating opportunities for countries like the Dominican Republic, which has averaged 5% annual economic growth.
• Latin America is positioning itself as a hub for new value chains in critical minerals, healthcare, semiconductors, and infrastructure.

4. Climate Change and Food Security

• Over the past two decades, Latin America has faced 74 droughts and recurring extreme weather events like Cyclone Yaku in Peru in 2023.
• Climate resilience is a priority as water scarcity and extreme weather threaten the region’s agricultural output.

5. A Turning Point for Sustainable Growth

• The IDB emphasizes that "investing in Latin America makes economic sense" due to opportunities in critical minerals, renewable energy, and innovative services.
• Public-private collaboration is essential to address high public debt, improve labor productivity, and create inclusive growth.
• The private sector is increasingly integrating technology, innovation, and sustainability to position Latin America as a global growth leader.

CURRENT AFFAIRS

Argentina: Argentina recorded its first budget surplus in over a decade in 2024, achieving a 0.3% of GDP surplus, or 1.76 trillion pesos, with a primary fiscal surplus of 1.8% of GDP. President Javier Milei delivered on his "zero deficit" promise through significant spending cuts aimed at curbing inflation, which peaked at nearly 300% in early 2024. While December saw a deficit due to seasonal spending, the government plans to maintain its fiscal discipline in 2025.

Brazil: Brazil's debt market is expected to thrive in 2025 after a record year in 2024, with debt issuance reaching $120.1 billion—up 77.5% from 2023. Flavio Souza, president of Itaú BBA, noted the strong performance was driven by high interest rates and anticipates continued activity in the debt market, while equity activity could rebound in the second half of 2025 if fiscal discipline signals improve market sentiment. M&A activity, particularly in energy and education, is set to grow, with institutional investors eyeing Brazil as a promising entry point.

Mexico: President Claudia Sheinbaum pledged to defend Mexico’s sovereignty while pursuing dialogue with U.S. President Donald Trump after his immigration orders and proposed tariffs on Mexican goods. She refrained from immediate retaliatory threats, opting for a cautious approach. Sheinbaum emphasized humanitarian support for migrants and coordination on security with the U.S., while noting the USMCA review is set for 2026. The peso briefly rose during her remarks, which analysts saw as an effort to separate rhetoric from concrete actions.

FURTHER READING

Check our recently published insights here. Recent post:

🌍 🤝 Impact Investing in Latin America

Untapped Potential: Latin America faces a 43-million-unit housing deficit and leads in renewable energy, with Paraguay generating 100% of its electricity from hydropower.

Limited Capital Flow: The region receives only 5% of global impact investing, highlighting the need for blended finance and philanthropic partnerships.

Resilient Entrepreneurs: Local entrepreneurs thrive despite volatility, showcasing adaptability and driving scalable solutions in FinTech and agriculture.

Collaboration Matters: Local networks, intermediaries like IDB, and international partnerships are essential to unlocking opportunities.

🔍 Read more here.