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Market Review: Latin America
The Latin American markets, represented by the MSCI LA index, continued to rally in 2009, rising 2.0% in December. While all global markets rebounded in 2009 from their 2008 lows, MSCI LA’s 2009 year appreciation of 103.8% surpassed all other regions of the world. The extraordinarily high returns of the Latin American markets can largely be explained by investors’ reaction to the global recession. After the Latin American markets suffered significant declines in 2008, investors feared the global recession would amplify itself in the historically less stable economies of Latin America. However, as investors realized that the much improved economies of Latin American would be relatively insulated from the worst effects of the global credit crisis, the markets came roaring back.
Brazil, bolstered by its currency’s 33% appreciation against the US dollar, led the Latin American rebound, rising 128.1% in 2009. The Brazilian economy experienced a mild slowdown and is expected to have had flat growth for 2009, however in 2010 the growth rate is predicted to return to its typical 4-5%. The country should continue to benefit from its stable economy and falling interest rates, which is catalyzing a growth in consumption.
Despite the Chilean market’s 2009 return of 85.6% (the second highest in the region), it underperformed in comparison to the remarkable 2009 return of the MSCI LA index. Chile remains the most stable and best managed economy in Latin America, which will help it return to growth rate of over 4% in 2010 after falling almost 2.0% in 2009. Chileans will be voting for a new president on January 17, 2010. The expected victory of the pro-business candidate Sebastián Piñera could be seen as a long-term positive for the country’s economy and its markets. The Mexican market was the laggard in 2009, with a return of 56.6%. Mexico’s economy was severely affected by the decline in its exports to the US. The Mexican economy contracted 7.0% in 2009, but is expected to have growth rate of over 2% as the US economy strengthens.
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