Latin American Market Commentary


Latin America


Inflation concerns remained among the most pressing issues facing Latin American economies. In Venezuela, the latest figures showed a relatively small uptick had taken annual inflation past 32%. Similar concerns forced Brazil's central bank to raise interest rates for the third time this year with a 0.75% hike taking the benchmark rate to 13% in July. Mexico took similar steps. Its second 0.25% rise of the year took interest rates to 8%. Latin America underperformed global markets by a considerable margin over the month. The FTSE AW Latin America Index fell more than 10% compared to a decline of almost 2% for the FTSE All-World Index in local currency terms, making it the weakest regional market. The majority of the damage was caused by global commodity prices easing strongly from their recent record highs. Having been Latin America's top performing market for several months, Argentina's fortunes went into reverse as Tenaris, the steel producer and index heavyweight, contributed heavily towards a 19% fall in July. Elsewhere, Brazil came under similar pressure as commodity prices fell, withthe oil and gas giant Petrobras and the metals producers Vale and SID Nacional both suffering. Meanwhile, the strong performance of the banks Bancolombia and Suramericana helped the Columbian market to deliver a small positive return. It was the only market in the region to do so.

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