Fitch: Latin American Corporates Face Weak Prospects in the Face of Slow or Negative Growth

NEW YORK--()--Latin American corporates face a challenging remainder of 2016 due to a range of issues including sluggish growth, depressed commodity prices, and political risk, according to a new Fitch ratings report.

"Across Latin America, corporates face headwinds that are not expected to abate before year end. The only bright spots are Mexico and Peru - both countries are expected to enjoy positive GDP growth that should support the corporate sector," said Jay Djemal, Director.

In Argentina, short-term growth prospects for corporates remain weak with the economy expected to contract in 2016 by 0.3%, reflecting the effect of higher utility tariffs, a weaker exchange rate and reduced policy stimulus.

Brazilian corporates continue to face a cash flow crisis without a measurable recovery expected in 2016. High political uncertainty, low commodity prices and tight financing conditions continue to depress economic conditions and credit quality.

The Chilean economy is enduring a third year of sluggish activity, partly due to lower copper prices, low investments as a result of unclear structural reforms promoted by the government, and persistent weakness in consumer economic perception.

Colombian corporates face a challenging environment for the remainder of 2016. After growing 3.1% during 2015, Fitch expects GDP growth to average 2.3% for 2016. The agency revised the Outlook on Colombia's ratings to Negative from Stable and affirmed the Long-Term Foreign-Currency Issuer Default Rating at 'BBB' in July 2016.

Mexican corporate credit trends are expected to be stable in 2016, with a projected 2.5% GDP growth driven mainly by domestic private sector consumption and service-related activities. This growth should maintain the better operating performance for corporates in the food and beverage, retail and tourism sectors.

Peru's GDP is expected to grow at 3.3% in 2016 due to new copper export volumes from recently completed mining projects alongside infrastructure investments across the country. The expected continuity of macroeconomic policy by the new president is viewed positively.

For more information, a special report titled "Latin America Corporate Compendium 2016" is available on the Fitch Ratings web site at www.fitchratings.com.

Additional information is available at 'www.fitchratings.com'.

Related Research

Latin America Corporate Compendium 2016
https://www.fitchratings.com/site/re/885470

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Contacts

Fitch Ratings
Jay Djemal, +1-312-368-2080
Director
Fitch Ratings, Inc.
70 W. Madison St.
Chicago, IL 60602
or
Diana Barriga, +1-312-606-2319
Analyst
or
Media Relations:
Elizabeth Fogerty, +1-212-908-0526
New York
elizabeth.fogerty@fitchratings.com

Contacts

Fitch Ratings
Jay Djemal, +1-312-368-2080
Director
Fitch Ratings, Inc.
70 W. Madison St.
Chicago, IL 60602
or
Diana Barriga, +1-312-606-2319
Analyst
or
Media Relations:
Elizabeth Fogerty, +1-212-908-0526
New York
elizabeth.fogerty@fitchratings.com