Weighing Latin America's Juggernauts
Mexico and Brazil are two excellent places to invest, albeit for totally different reasons, says Heiner Skaliks, who explains his strategies for each.
We're talking the two Latin American juggernauts. We're here with Heiner Skaliks, and we're discussing two of probably the biggest markets in Latin America. But I don't think, other than that, investors really understand what the dynamics are at play, and how best to utilize these markets as investors.
Well, you mentioned that Mexico and Brazil are the largest companies in Latin America. They are indeed.
We at Strategic Latin America Fund (SLATX) invest not only on the equity front, but also on the fixed-income front, and in currencies as well. So whenever I ask the question, "What's hot in Latin America-why Mexico, or why Brazil?" I always give them the "depends" answer, and that is, it depends on what you're looking for.
If you're looking for fixed-income opportunities, for example, we favor Brazil in that sense, because their base rate is extremely high. The Selic is currently at 9%, so they have a high hurdle to overcome on the fixed-income rate. We're not so bullish on the equity market in Brazil, because we see that the growth prospect is not as strong.
On the other hand, in Mexico we favor the equity space, one of the main reasons being that any recovery from the US market will have a direct spillover onto the Mexican market, and also because many of the Latin American companies that have a regional presence are headquartered in Mexico.