The markets have rebounded from their summer swoon and emerging markets have seen an uptick in fund flows. Enter the perennial bear mantra that growth is over for the developing economies.
Cesar Vallejo, co-director of the Central Bank of Colombia, said this week that the country’s monetary authorities are open to further market intervention to help stem this year’s 7.7% appreciation in the Colombian peso.
With exports to China and developed markets down, investors need to look closely at the macro environment in Latin America and position themselves for strength in domestic consumers.
The Colombian Central Bank surprised investors last week with a cut in rates to 5.0%, its first since 2010. The Colombian economy had been one of the few in the region to continue a restrictive policy in the face of the global economic slowdown.
The Mexican economy fell in May for the first time since April as manufacturing and services both showed weakness, offset by gains in agriculture. The monthly gauge of economic activity fell 0.36%, showing yearly growth of 4.1% against gains of 4.78% in the twelve months to April.
Speaking at a Bloomberg conference on the progress of Latin America market integration for Chile, Colombia, and Peru last September was an exercise in optimism. Average volume traded since the beginning in May had been underwhelming and had yet to open the world’s investors to Latin America’s fastest growing region.