The economy of each individual Latin American country can be a good reflex of what the local steel markets look like, according to Sara Johnson, senior research director at IHS Markit Economics. At a panel during the Alacero conference in Rio, Brazil, from October 25-26, she said that the emerging markets will “lead a pickup in global growth,” adding that “we’ll see some some stabilization in both Brazil and Russia after deep recessions.”
“There should be some return of risk capital to the emerging markets. But there’s a missing ingredient: fiscal reforms to improve resource allocation,” she noted.
A sluggish economy in Brazil, Latin America’s largest economy, had an impact on the local steel segment, which has seen in the past few years a declining domestic demand for steel products, Johnson said. But economy prospects for Latin America and other emerging markets seem to improve, as other panelists were also upbeat about 2017.
Looking more broadly at Latin America, Juan Carlos Rodado, Latin America research director at Natixis, made different assumptions for the different Latin American countries.
“The Mexican peso is increasing, backed by an increase in the country’s fiscal rates,” he said.
But what if Donald Trump wins, Rodado asked. “Trump is at face value: there’s a serious risk of recession,” he said, while relating Trump’s potential win to the Mexican peso (MXN). On the other hand, there are opportunities for the MXN if Hillary Clinton wins, he said.
As for Chile, the economic growth should “decelerate” in 2016, as the economy continues to weaken.
In Colombia, the risks are the recently approved by the local population in a referedum break-down of peace talks with the armed forces of Farc, and the polarization of elections in 2018. Opportunities include, among other things, infrastructure needs, which could drive more steel projects.
Venezuela has been labeled by the panelist as the “riskiest.”
“We don’t know how, but there will be a default. There’s no money [in the country] to pay its debt payments in April. It will be hard for Venezuela to then find the money. It may depend from China,” he noted.
Brazil's GDP is expected to drop some 3.3 percent this year and barely break even in 2017.