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April 15 (Reuters) - (The following statement was released by the rating agency)
With risk associated to U.S. fiscal challenges less urgent, Latin America remains tested by slowing growth in China and its effect on commodities demand, according to Fitch Ratings Latin America Risk radar. ‘Growth across Latin America, while still rising has slowed, and the forecast remains modest. With China’s growth also slowing, a sustained reduction in investment may place pressure on the demand for commodities, long an important contributor to growth in many Latin American countries,’ said Peter Shaw, Regional Credit Officer for Latin America.
Credit growth continues at a somewhat slower, albeit double digit, growth rate exposing banks to a potential slowdown.
Sustained credit growth has led to a significant increase in consumer indebtedness, while corporate leverage has risen more modestly.
A rise in risk aversion and volatility as the US Fed continues its tapering has exacerbated the challenges issuers face in foreign funding and forex management. Lower-rated borrowers may find access to international capital markets limited while pricing pressure moves upwards.
Increased access to credit in many of the region’s markets has helped fuel a rise in real estate prices over recent years, most notably in Brazil, but also in Peru, Chile and Colombia.
For more information, a special report titled ‘Risk Radar: LATAM Overview’ is available on the Fitch Ratings web site at www.fitchratings.com.
Link to Fitch Ratings’ Report: Risk Radar LATAM - 1Q14