An economic crisis accompanied by political instability in the countries Latin Americathreaten growth in a region that is slowly losing momentum, according to a study by Moody’s Investors Service.
This study examines the credit quality of non-financial companies and infrastructure projects in Argentina, Brazil, Chile, Colombia, Mexico and Peru by 2023.
Marcos Schmidt, Deputy Managing Director of Moody’s, explained that the purchasing power of Latin American consumers is deteriorating due to the crisis, which is affecting the supply chain, especially in Brazil, Chile and Peru, whose creditworthiness will “worsen”.
In the case of Peru, deterioration the credit quality of many non-financial and infrastructure companies in Peru; however, his situation is needed to adjust to high inflation and a slowdown in global growth until 2023.
Most producers can offset price adjustments and have sufficient liquidity to cut dividends without significant maturities in the short term. Nonetheless, as growth slows locally, the risk of illiquidity will increase.
Meanwhile, what is happening in other Latin American countries?
For Argentina, the study warns of severe financial crises the country will face, accompanied by accelerated inflation, a weak currency and political tensions. It is worth saying that macroeconomic imbalances will put direct pressure on companies.
Meanwhile Brazil until 2023, there will be a decrease in EBITDA and cash generation, which will affect the credit quality of rated companies. Aggregate EBITDA and FCF generation will decrease from 2021-2022 levels, which will contain deleveraging; however, corporate liquidity and balance sheets will remain adequate following the improvements implemented by companies in 2021-2022, allowing them to weather volatility until 2023.
Chile does not avoid forecasts, according to Moody’s, it will also have deteriorated credit quality of non-financial companies due to inflation and interest rates.
While Colombia will maintain its economic momentum in 2023 despite inflation shock. Moderate growth in 2023, despite a relatively challenging global economy, will lead to favorable lending conditions for companies, infrastructure issuers, and Colombian local and regional governments. Investor confidence will be essential for the new government, which plans to limit investment in oil and gas.
Source: RPP
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