Investing in the smaller markets of Latin America
8 Oct, 2024
Sponsored by BlackRock
BlackRock Latin American Investment Trust
Brazil may be the largest economy and stock market in Latin America, but that is not to say that there aren’t rich investment opportunities across other parts of the region. In countries such as Colombia, Argentina or Chile, investors can get exposure to natural resources, technological innovation and emerging consumer strength. These smaller markets bring a new dimension to the BlackRock Latin American Investment Trust.
Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
Many of these opportunities are idiosyncratic and occur in unlikely places. For example, Argentina may not appear to be a natural place to look for investment opportunities. Inflation is running at around 270% year on year [1] and there are multiple economic imbalances. We visited the country in January, a trip that further instilled our cautious view of the market.
However, Argentina is also home to a number of the region’s leading technology companies. This includes a pan-Latin American ecommerce platform, and a global software development company. Neither has anything to do with the fortunes of the Argentinian economy, but both have unique assets and interesting prospects. It takes careful company selection to uncover these options.
Overlooked natural resources providing valuable investment opportunities
The region also offers an abundance of natural resources that are often overlooked. There are well-managed companies that own valuable mining assets, such as gold mines in the region [2].
These unique natural resources are also to be found in Chile. Chile is the world’s largest copper producer, with around one-quarter of the world’s production[3]. It is also the world’s second largest producer of lithium with a 30% share of world production [3]. These resources are vital for the energy transition, with copper playing a vital role in electrification, and lithium an important component in battery technology.
Investment opportunities throughout Latin America
Investment opportunities are also available elsewhere. Columbia saw a significant post-pandemic rebound in its economy but has been forced into a readjustment in 2023 and 2024[4]. However, as inflation slows and interest rates drop, we believe there may be better times ahead [5]. We have a holding in the banking sector, where we believe the improving outlook could boost consumption and support economic activity[6]. It is the same in Panama, where we hold a budget airline, which operates across the whole of Central America. It may benefit from rising consumer wealth across the region.
Mexico may also hold a number of long-term investment opportunities. It is a key beneficiary of the friend-shoring of global supply chains, which is supporting its economy and creating options to invest for growth.
In every case – and in keeping with BlackRock’s broader approach to investing in emerging markets – we balance risk and opportunity. The political and economic backdrop has to be right, and we naturally move away from areas of significant social unrest, or political disruption. The key for investing in fast- growing Latin American economies is to ensure the successes outweigh the failures. In the BlackRock Latin American Investment Trust, we seek to do this through forensic, on-the-ground research and diligent risk management.
There is no guarantee that research capabilities will contribute to a positive investment outcome.
While the investment approach described herein seeks to control risk, risk cannot be eliminated.
For more information on how to access the opportunities presented in Latin America, please visit www.blackrock.com/uk/brla
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[1] AP News - Argentina’s inflation edges up in June, breaking a months-long streak in a blow to President Milei - 13 July 2024
[2] Lundin Gold - Operating one of the highest grade, lowest cost mines in the world - July 2024
[3] International Trade Administration - Chile - Country Commercial Guide - 7 December 2023
[4] Corfi Colombiana - Colombia Country Report 2024: The Last Mile Is The Longest - January 2024
[5] Reuters - Columbia economic growth forecast - 1 April 2024
[6] BlackRock - BRLA annual report and accounts - December 2023
Risk Warnings
Investors should refer to the prospectus or offering documentation for the fund’s full list of risks.
Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
BlackRock Latin American Investment Trust specific risks
Counterparty Risk: The insolvency of any institutions providing services such as safekeeping of assets or acting as counterparty to derivatives or other instruments, may expose the Fund to financial loss.
Currency Risk: The Fund invests in other currencies. Changes in exchange rates will therefore affect the value of the investment.
Emerging Markets: Emerging markets are generally more sensitive to economic and political conditions than developed markets. Other factors include greater 'Liquidity Risk', restrictions on investment or transfer of assets and failed/delayed delivery of securities or payments to the Fund.
Gearing Risk: Investment strategies, such as borrowing, used by the Trust can result in even larger losses suffered when the value of the underlying investments fall.
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