Opportunities can be found, but the outlook is negative overall
As my Invesco Fixed Income colleague Sean Newman outlined in his blog, Brazil: Macro Headwinds are Strengthening, the country is suffering from economic, fiscal and monetary risks. The increasingly negative macro backdrop — as well as an ongoing scandal involving the country’s largest company, Petrobras —has weighed heavily on Brazilian corporate credit.
Year-to-date, Brazil is the worst-performing Latin American country within the JP Morgan Corporate Emerging Market Bond Index (CEMBI) with a total return of -1.35%.1 It was the third worst globally behind only the Ukraine and Nigeria. This performance stands in stark contrast to that of the CEMBI overall, which has returned 1.9% year-to-date.Read More
Of the many initiatives Enrique Peña Nieto’s administration is attempting to enact, energy reform is among the highest profile and potentially the most impactful.
For approximately a decade, oil production in Mexico has been on the decline due to under-investment and inefficiency. Despite that, revenues from the state-owned Petróleos Mexicanos (Pemex) constitute approximately 34% of the federal budget. If the country can successfully attract outside investment to help reverse this decline in oil production, in addition to exploiting its substantial shale resources and generally improving the efficiency of the industry, the implications are broadly positive.Read More
During Invesco Fixed Income’s Emerging Markets team’s recent trip to Russia and Ukraine, we met with the management teams of 20 companies, as well as with analysts and economists of local investment banks. Overall, we left the meetings believing that de-escalation of the situation in Eastern Ukraine will continue.Read More