Coronavirus may sideswipe Chile, Peru and Brazil economies, leave Mexico unscathed

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Source : Reuters

BRASILIA (Reuters) – The coronavirus outbreak in China may be altering the 2020 investment outlook for Latin America, souring sentiment toward regional free market beacons Chile and Brazil, while turning heads – and cash – toward left-leaning Mexico.

The consensus among economists is that while the overall impact on Latin American growth and financial markets from the outbreak will be limited, there may be wide divergences across the region.

Chile’s heavy reliance on the export of commodities, especially copper, make it particularly vulnerable to weaker demand from China, its main trading partner and the world’s largest buyer of commodities.

It is a similar situation for Peru and Brazil – a leading iron ore producer – where almost a third of all exports go to China. In the case of Brazil, growth forecasts were already being reduced and the currency was sliding to all-time lows against the dollar before the global ripple effects of the coronavirus began.

“The most exposed economies are Chile, Peru, and to some extent Brazil,” said Alberto Ramos, head of Latin American research at Goldman Sachs. “The key source of downside risk to LatAm is a deterioration of the terms of trade triggered by deep long-lasting impact of a China slowdown on commodity prices.”

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