LATIN AMERICA: Political Risk Is Key For Sovereign Ratings In 2018 – Fitch

The political risk in Latin America could become a key source of uncertainty for governments in the region during 2018, even though macroeconomic and credit outlook is improving, said Fitch Ratings in a report. The credit risk rating agency said regional sovereign credit profiles are stabilizing after a few consecutive years of downward pressure.

Fitch noted, however, that a series of key elections this year in Latin American major economies, including Brazil, Colombia and Mexico, added to the uncertain trade and migration policies of the United States are important risks that must be controlled because economic recoveries are not well entrenched, while continued fiscal weakness and rising debt burden continue to be credit constraints for several countries.

Regarding Peru, the agency said that a weak presidential mandate and political tensions are likely to challenge governance, limiting possible reforms and weighing on investment and infrastructure growth.

Fitch believes that there are unlikely to be major changes in the policies resulting from the elections in Colombia, although the new administration should face challenges in reducing fiscal deficits and leading the debt burden to a consistent downward path.

In Argentina, the developments point to a continuation of the economic policy changes by the President Mauricio Macri administration, promoting macroeconomic stability and gradually reducing imbalances in the economy. Argentina is currently one of the two sovereign states of Latin America with a positive rating outlook.

In Brazil, the recent postponement of a key vote on the pension reform bill, now set for mid-February in Congress, underlines the risks of tackling large fiscal imbalances.

The material has been provided by InstaForex Company – www.instaforex.com