Latin American companies will face credit quality pressures in 2024, Moody’s says

Low commodity prices, uneven growth and climate complications will test the credit quality of companies in most Latin American economies in 2024, except Mexico, which benefits from “nearshoring”, l rating agency Moody’s.

In a report on credit conditions for companies in the region, the agency highlighted that Brazil and Chile will face weaker prospects next year due to low prices for the raw materials they export and lower demand for consumer goods .

“(The decline in commodity prices is expected to weaken the cash flow of mining and pulp producers,” the report estimates in reference to companies in the world’s top copper producer.

At the same time, an intense development of the El Niño phenomenon later this year could delay important infrastructure projects in Colombia, affecting the supply of hydraulic works and electricity prices for companies and consumers, the report said.

Climate fluctuations with a “strong El Niño,” which can cause torrential rains, deadly floods and high temperatures in important agricultural areas of South America, put crops and primary activity at risk in grain-producing countries such as Argentina and Brazil.

Argentina, Latin America’s third-largest economy, will see its companies’ credit quality weaken as lower economic activity and triple-digit inflation add to political uncertainty, Moody’s added.

Among the six ratings presented by the credit agency, only Mexico received a positive rating for its business profiles, helped largely by the slew of foreign investments that have been installed in the region’s second-largest economy.

“Foreign investment through ‘nearshoring’ is boosting some sectors and regions,” Moody’s said. “Credit quality will improve overall for Mexican companies and infrastructure groups,” he added.

However, the report warns that Mexico’s main obstacles are problems with infrastructure and water availability.

As for Peru, already hit at the beginning of the year by political unrest and floods linked to El Niño, Moody’s highlighted the decline in confidence, high financing costs and social instability that will continue to impact the credit quality of businesses in the country in 2024.

Source: Terra

Rose

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