The case for corporate credit: Mexico offers long-term opportunity

Key is identifying corporate beneficiaries of the current economic and political backdrop

The case for corporate credit: Mexico offers long-term opportunity

We recently spent several days traveling through Mexico City and Monterrey meeting with corporate bond issuers across a wide swath of sectors. While the overall message was mixed, the meetings support our constructive view of Mexican corporate credit. The current economic backdrop of solid US growth, a weak Mexican peso and low energy prices — coupled with progress among Mexican corporates toward meeting developed market standards of corporate governance and operations — provides a positive fundamental backdrop over the longer term, in our view.

That’s not to say that the Mexican corporate credit story, especially in the intermediate term, fits neatly into a simple, positive narrative. The country is facing some headwinds, and there are winners and losers. In our view, understanding the current economic and political dynamic is critical to a successful investment strategy in the Mexican corporate space. Below we elaborate on the impact of several issues confronting Mexico.

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Brazil: Macro Headwinds Buffet Corporate Bonds

Opportunities can be found, but the outlook is negative overall

Brazil: Macro Headwinds Buffet Corporate Bonds

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.

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