Reuters logo
Fitch: 2017 Recovery Expected to Be Weak for LATAM Sovereigns Amid Subdued Commodity Prices
December 1, 2016 / 3:26 PM / a year ago

Fitch: 2017 Recovery Expected to Be Weak for LATAM Sovereigns Amid Subdued Commodity Prices

(The following statement was released by the rating agency) NEW YORK, December 01 (Fitch) After two years of economic contraction, Latin American GDP growth is expected to recover moderately to 1.6% in 2017, driven by stronger external demand, a moderate rise in commodity prices and improved performance in Argentina and Brazil, according to Fitch Ratings in a new special report. However, negative rating pressures have emerged, with five countries carrying a Negative Outlook (Brazil, Colombia, Costa Rica, Ecuador and Suriname) and none with a Positive Outlook, reflecting subdued growth and commodity prices as well as deteriorating fiscal and external debt metrics. Fitch forecasts the region to grow at an average 2% in 2017-18, compared with an average 4.1% during 2010-13. Negative spillovers from weak terms of trade have been felt in investment, consumption and domestic confidence indicators. Greater trade protectionism and tighter immigration controls following the U.S. elections are downward risks for the region, particularly for Mexico and Central America, which remain the most exposed to the U.S. through trade, financial and workers' remittance channels. A faster economic deceleration in China, a renewed slide in commodity prices, higher volatility of domestic asset prices, and tighter external financing conditions could also pose downside risks to the region's economic prospects. The capacity of monetary policy to support growth remains limited in the region, as central banks seek to consolidate the current disinflation path and, in some countries, support the economy's external rebalancing. On the fiscal side, Fitch does not expect material consolidation to take hold in 2017, due to sluggish growth, reduced commodity price-related revenues and continued spending pressures, which should lead to an increase in the median government debt burden for the sixth year in a row, to around 47% of GDP in 2017. External current account deficits are gradually stabilizing after deteriorating in recent years as a result of reduced commodity prices, and international reserves are expected to remain broadly stable in 2017, compared to a sizable decline in 2015, providing a buffer against external shocks. Latin America's increased external debt burden (especially related to non-sovereign sectors) will continue to be a source of vulnerability as the U.S. embarks on monetary tightening. Next year will be a light election year for Latin America, with presidential and/or congressional elections only taking place in three countries (Chile, Ecuador and Argentina). However, this will be followed by a heavier cycle in 2018, which could influence policies and reform progress next year. Moreover, low popularity rates for presidents, fragmented congresses, corruption-related investigations, high incidence of crime and growing demands of the middle class lead to a complicated political environment in the region, especially amidst sluggish growth. Most of Latin America's sovereign ratings currently have a Stable Outlook. With credit metrics not expected to improve significantly for most of Fitch's LatAm portfolio, upward rating movements in the region are likely to be limited in 2017. Positive growth dynamics, fiscal consolidation, and declines in government debt burdens will be important factors to watch for improvement among sovereign credit trends in the region. On the other hand, given that several sovereigns already have a Negative Outlook and others are also confronting external headwinds, Fitch will continue to focus on how authorities adjust policies to reduce macroeconomic and fiscal pressures and implement requisite reforms to boost growth prospects and aid fiscal consolidation. Fitch's report '2017 Outlook: Latin America Sovereigns - A Weak Economic Recovery Amid Subdued Commodity Prices' is available at '' or by clicking on the link. Contact: Shelly Shetty Senior Director +1-212-908-0324 Fitch Ratings, Inc. 33 Whitehall Street New York, NY 10004 Erich Arispe Director +44-203-530-1753 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: Additional information is available at Related Research 2017 Outlook: Latin America Sovereigns here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch's factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch's ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below