These five key LatAm countries have benefited from the skyrocketing demand for commodities brought about by growth in other emerging markets, the report notes, with the result that “significant amounts of capital” have flowed into their economies – which, in turn, has significant implications for those with investment products to sell.
Indeed, the “deepening asset pools” now found in Latin America’s five major markets – estimated by State Street at $2.2trn – “point to potential business opportunities for informed financial service providers, investors and global asset managers”, the report says.
However, it adds, “taking advantage of these opportunities…will require a keen awareness both of the forces that drive them, and any significant limitations that may apply.”
Entitled “Latin America’s Major Five: Assessing the Opportunities”, the State Street report is the latest in the Boston-based financial services group’s Vision series.
Other key points of the survey:
- In 2010, the GDP growth rates of Brazil, Mexico, Chile, Colombia and Peru (BMCCP ) ranged from 4.3%, in Colombia, to 8.8% in Peru; Brazil, by far the region’s largest economy, grew at 7.5%. In the same year the US’s GDP expanded at an annual rate of 3% and that of the EU by 1.8%
- Wealth creation in BMCCP and other Latin American markets “is contributing to a projected five-year compound annual growth rate of 15% for the $2.2trn in institutional assets owned by Latin America’s central banks, sovereign wealth funds, pension funds and mutual funds”; half of these assets are represented by Brazil’s $1.1trn onshore funds industry, according to State Street estimates
- A significant development for the market is the integration of the stock exchanges of Chile, Colombia and Peru, in what is known as the Mercado Integrado Latinoamericano (MILA), which began operations last May. This “has important implications for investor liquidity and the future growth of these markets”, the report notes, and “also puts them on equal footing with Brazil and Mexico’s exchanges”
- Although Brazil is home to the largest number of high-net-worth individuals in the region, "it is likely the mass-affluent segment that will provide the greatest opportunity for alternative investment strategies, including international-oriented funds"
- Among Latin America’s five major markets, Chile is perhaps the most welcoming to offshore global financial service providers, especially global asset managers. "Given the inability of Chile’s domestic equities market to accommodate the country’s investment portfolio needs – especially for retirement funds – the country has an increasingly cross-border outlook".
To read or download the report, click here.
