Growth should be better in several major regional economies, including Chile, Colombia, and
, while Argentina, Nicaragua, and Venezuela are likely to remain in recession, Fitch Ratings has projected.
On the other hand, Brazil is expected to recover and Mexico's growth will remain relatively stable in 2019, but any disappointment with reforms and/or deterioration in the policy environment could undermine investor confidence and growth in both countries.
Likewise, tougher external financing conditions will continue to be a macroeconomic theme for the region next year and will be a greater challenge for countries with larger current account deficits, limited FDI
, weak liquidity and high US dollar-denominated government debt.
"Argentina and Ecuador will be the most vulnerable, with market access continuing to be challenging as both countries undergo fiscal adjustments," the credit rating agency indicated.
Negative rating pressures emerged in several Latin American countries in 2018
, and tightening external financing conditions, lukewarm and uneven growth, and persistent fiscal challenges and political risks will continue into next year.
While most sovereigns in the region are on Stable Outlook, the 3:1 ratio of Negative to Positive Outlooks/Watches indicates that the scope for downward rating actions significantly outweighs that for positive actions even after nine downgrades seen in the region over 2017-2018.
Six sovereigns in the region are currently on Negative Outlook/Watch (Argentina, Aruba, Costa Rica, Mexico, Nicaragua, and Uruguay) versus three at the end of 2017. By comparison, only two have Positive Outlooks (Jamaica and Paraguay).
"In addition, we do not expect any speculative-grade sovereigns to reach investment grade in 2019. We expect the resolution of Venezuela's default to take a long time," it stated.
Editor's note: Based on information provided by Fitch Ratings.