"The boundaries are not in outer space but in ourselves... We have to break our own boundaries and go beyond them." - Franklin Chang Díaz (Costa Rican astronaut and physicist)

MARKETS

February 7, End Of Day

• Argentina
  • S&P MERVAL Index = 2,416,381.75 (YTD = -4.63%)
• Brazil
  • BOVESPA Index = 124,619.40 (YTD = 3.60%)
• Chile
  • S&P IPSA Chile = 3,907.20 (YTD = 8.09%)
• Colombia
  • MSCI COLCAP = 1,515.99 (YTD = 9.89%)
• Mexico
  • IPC Mexico BMV = 52,817.75 (YTD = 6.67%)
• Peru
  • S&P/BVL Peru = 29,561.15 (YTD = 2.07%)

BUSINESS

Public Finance & Capital Markets in Latam: Trends from 2024

Latin America continues to navigate economic recovery amid structural challenges, financing gaps, and evolving global conditions. While inflationary pressures are easing and investment initiatives are expanding, the region faces persistent barriers to productivity, fiscal sustainability, and private capital mobilization. OECD, CAF, UN and EU joint report discusses the key take aways of economic outlook on financing sustainable development.

1. Economic Context

• Labour productivity in Latin America is only 33% of the OECD average (down from 40% in 1990).
• 26.8% of Latin America's population lives in poverty, with 10% in extreme poverty.
• Inflation disproportionately affects low-income households, with food price inflation rising faster than general inflation.

2. Public Finance & Taxation

• Tax-to-GDP ratio is 21.5% in Latin America vs. 34.0% in OECD countries.
• Corporate income tax accounts for 16% of total taxes in Latin America, compared to 12% in OECD.
• Debt service payments rose from 9.8% (2012) to 12.2% (2022) of tax revenue, limiting public investment capacity.

4. Financial Market Development

• Financial depth: Domestic credit to the private sector is 50% of GDP, while in OECD countries, it exceeds 80%.
• Stock market capitalization is only 35.9% of GDP in Latin America, compared to 64.7% in OECD countries.
• 58% of Latin American corporate bonds are issued in foreign currency, increasing exchange rate risk.

5. Alternative Financing & International Support

• EU’s Global Gateway aims to mobilize EUR 45 billion for Latin American infrastructure and development.
• Green, social, and sustainability bonds are growing but remain a small share of total financial instruments.
• Development Finance Institutions (DFIs) play a key role, but only 19% of financial instruments support green or digital transitions.

CURRENT AFFAIRS

Panama: President José Raúl Mulino is set to speak with U.S. President Donald Trump amid rising tensions over the Panama Canal. Meanwhile, U.S. Defense Secretary Pete Hegseth and Mulino agreed to expand military cooperation, emphasizing canal security. Following talks with U.S. Secretary of State Marco Rubio, Mulino announced Panama would not renew its participation in China’s Belt and Road Initiative and may terminate it early.

Argentina: Analysts lowered their 2025 inflation forecast to 23.2%, down 2.7 percentage points, while raising GDP growth expectations to 4.6%. Inflation has eased from a peak of nearly 290% last April but remains in triple digits. President Milei's austerity measures have curbed price rises, though poverty exceeded 50% last year. The central bank recently cut its interest rate to 29%, anticipating further inflation declines.

Brazil: Central bank chief Gabriel Galipolo noted a surge in crypto use, with 90% tied to stablecoins, mainly for payments and cross-border shopping. Speaking at a BIS event, he cited regulatory challenges in taxation and oversight. He also emphasized Drex as a credit tool, not a digital currency, and highlighted Pix’s potential for cross-border integration.

FURTHER READING

Check our recently published insights here. Recent post:

📡 5G in Latin America: The Next Digital Leap

Latin America is gradually adopting 5G, with Brazil, Mexico, Chile, Argentina, and Colombia leading the way. By 2030, 5G will power nearly 60% of mobile connections, adding $60B+ to GDP.

Opportunities & Challenges:

🚀 Economic Impact: Boosts digital transformation, smart cities, and job creation.

⚠️ Barriers: Spectrum allocation delays, high infrastructure costs, and regulatory hurdles.

💡Growth Potential: Demand for 5G in business, consumer markets, and public services is rising.

⏳ Investing in 5G now is key to unlocking Latin America's digital future.

🔍 Read more here.