It has also become more difficult to attract equity capital, because the region has a dwindling share of emerging market capitalization. That is a problem when flows are dominated by passive investment vehicles. At the turn of this century, Mexico briefly had the largest weight in the MSCI Emerging Markets index, and soon after that investment in Brazil boomed thanks to the vogue for BRIC (Brazil, Russia, India and China) investment. Now, “emerging markets” are effectively Asian. As Czerwonko’s chart, Latin America now only accounts for 7% of the MSCI gauge, while Asia is 81%.
Against this background, the region enters a wave of elections. Peru has presidential polls next weekend, as does Ecuador. Both have had very turbulent politics in recent years. Chile has regional and gubernatorial votes next weekend, with presidential elections to follow. The country had been an island of political calm until street protests triggered a constitutional crisis in 2019. In all cases, investors would prefer countries to resist the temptation of going with populist leaders. In July, Mexico has mid-term congressional elections that could conceivably trim the power of President Andres Manuel Lopez Obrador, who hasn’t been the wildly irresponsible left-winger that many international observers feared — but who has also failed so far to come up with ideas to deal with the country’s long-running problems.
Contrarians may be excited. Almost 20 years ago, the arrival of an avowed leftist, Luiz Inacio Lula da Silva, as president of Brazil proved the catalyst for a remarkable rally. After a decade of crises and turmoil, the region was ready to rebound. That might happen again. Middle classes have grown in the last two decades, and anyone willing to do the hard work of looking for bargains on the ground may find them. But as it stands, Latin America has been the greatest financial and economic victim of the pandemic, and there is a risk that the damage could be lasting.
Survival Tips
However, there is always joy to be found somewhere. The weekend brought a “buzzer-beater” for the ages in the final four of the U.S. college basketball championship, a glorious ritual for the country known as March Madness. You needn’t know the rules to enjoy it. Sport has the potential to produce moments of delirium out of nowhere. You cannot know that they are coming, and that is precisely their joy. So with that, I direct you to the greatest commentary call of all time, which described how Dennis Bergkamp of Holland scored the goal that beat Argentina in the dying moments of the World Cup quarterfinal in 1998. It will bring a smile to any face. It’s in Dutch, and that doesn’t matter. You’ll understand. I hope it helps get your week off to a good start.
John Authers is a senior editor for markets. Before Bloomberg, he spent 29 years with the Financial Times, where he was head of the Lex Column and chief markets commentator. He is the author of The Fearful Rise of Markets and other books.
With spring comes a step up in the sports calendar. England’s football season is nearing its finale, while baseball has just begun its 162-game odyssey. There is much joy, and reassurance, to be had from the natural rhythms and cadences of sport. In my case, hope and joy has already been dashed as the Boston Red Sox contrived to lose all three of their opening games, at home, to the supposedly terrible Baltimore Orioles. Meanwhile Brighton & Hove Albion, my hometown soccer team, had the lead over Manchester United and seemed destined for their first ever win at Old Trafford, before losing 2-1. So much for solace in sports.