In a global environment caught between abundance and scarcity, BlackRock maintains a constructive yet selective view on Latin America.
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The latest “Midyear Global Outlook” from the asset manager highlights that various countries in the region show relatively controlled inflation – especially Peru and Chile – credible monetary frameworks, and attractive real yields; while, on the other hand, much of these economies hold a key exposure to infrastructure development, minerals, and energy linked to Artificial Intelligence (AI): a strategic value chain for the region.
“We are optimistic about Latin America. We feel that, when you compare the region with the rest of emerging markets, it is quite well positioned, but again, this starts from a global view,” says Día1 Diego Mora, Country Manager for Colombia, Peru, and Central America.
The latest BlackRock report focuses on the scarcity environment the world is in – of energy, labor, capital, and infrastructure – while AI paves the way to a future “abundance” through productivity gains. Since this scenario demands multi-million investments in data centers, chips, and digital infrastructure, Mora emphasizes the potential Latin America has to attract such capital.
“For portfolios, we propose turning to active management and investing in the bottlenecks of AI deployment. This connects directly with Latin America and Peru,” the executive points out.
Mora emphasizes, for example, the regional affinity with two of the five megaforces that BlackRock identifies as shaping the global economy: digital disruption and AI; and energy transition and resilience. “Both create enormous demand for raw materials that the region and Peru, in particular, provide. There are great opportunities and we do not see it as a momentary boom. It is a structural need of the economy, for which the region is well positioned,” he adds.
Another megaforce with which Latin America aligns very well, according to Mora, is demographic divergence: although the region is aging, its population structure faces the transition in better conditions than developed countries.
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Harnessing the potential
BlackRock sees the region as an attractive focus for capital inflow. In this regard, to not miss the tailwinds and attract, for example, investments in data centers – which are already expanding regionally – Mora stresses that countries need to have an increasingly resilient and reliable energy matrix: energy and data center investments must progress hand in hand. And Peru, of course, is no stranger to this reality.
“The infrastructure gap in the region is very evident. Government balances do not allow all infrastructure to be built with public capital. Private capital is called upon to make these investments. We continue to see opportunities and affirm this as current investors in Peru,” Mora indicates.
In terms of credit, the executive points out that there are three asset classes that BlackRock considers notable. First are short-duration fixed income investments, due to their lower volatility and attractive interest rates; then private credit with cash flows, lender protection conditions, and high recovery values in case of default; and finally, emerging market bonds in local currency.
“Here we return to the region: there are some Latin American countries with attractive local rates. We spoke from the equity side, both in public and private markets, but we also see how the region can benefit from positive capital flows in fixed income,” he specifies.
Update. In its latest report, BlackRock moved from a slight overweight to a neutral position in emerging market equities.
Fixed income. On the other hand, it raised to slight overweight its stance on emerging market local currency debt, considering its yield attractive relative to volatility and due to improved fundamentals.
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