S & P and Fitch warn of political risks in Latin America

While rating agency Standard & Poor's warned of risks to investments based on the election results in Mexico, Brazil and Colombia, Fitch pointed to such events as important factors for sovereign ratings.

This week the rating agency Standard & Poor’s updated its macroeconomic forecasts for Latin America and, with the exception of Argentina and Venezuela, increased its GDP projections for 2018 and 2019 in all countries.

In the case of Colombia, for this year the forecast went from 2.4% to 2.5% and for 2019 from 2.5% to 2.6%.

However, the rating agency also warned that “an unfavorable exit from the current Nafta negotiations or a significant change in the direction of the policy as a result of the elections in Colombia, Mexico and Brazil could discourage investment in those countries and prevent them from materialize the expected economic recovery “.

A moderate risk in Latin America for S & P is precisely political uncertainty. In addition to the aforementioned election results, which could result in the victory of candidates who do not support the necessary reforms in each country, other countries in the region have risks associated with corruption scandals such as the one already known to Odebrecht.

For its part, the rating agency Fitch Ratings warned that the political risks of different countries are “a key determinant for the creditworthiness of countries.”

For the firm, a political risk can be any political or governance event that affects a country’s ability to meet its sovereign debt obligations.

According to Fitch, such events may include “vulnerability to civil protests, political violence, and conflict or social instability; the effectiveness of the Government and the institutions to manage economic activity and absorb adverse shocks “.

Other types of risks could be pressures that lead to a turn in economic policy or political paralysis, as well as conflicts or international tensions that lead to sanctions, blockades or threats to security.

However, the rating agency also stressed that in the world there are government models that guarantee the political and economic stability of each country.