The investment outlook in the Americas region has become increasingly challenging, driven by financial turmoil, anti-government protests, and elevated price levels. These factors have had a detrimental effect on investor confidence, potentially resulting in a decrease in lending and investment activities.
Consequently, the risk score for the region during the first quarter (Q1) of 2023 reached 47.4, up from the pre-Ukraine war level of 46.9 in the fourth quarter (Q4) of 2021, making it the second-highest risk level globally, reveals GlobalData, a leading data and analytics company.
In the 20th update version of GlobalData’s “Global Risk Report Quarterly Update – Q1 2023,” which evaluated 24 countries in the Americas region, two countries were classified as being in the very low-risk zone, three countries in the low-risk zone, 10 countries under manageable risk, seven countries under high risk, and two countries in the very high-risk zone.
Sadaf Ambari, Economic Research Analyst at GlobalData, said: “Despite remaining at elevated levels, risk in the Americas region has decreased since the last update in Q4 2022 due to declining price levels, a strengthening labor market, and improving consumer confidence. The major economies in the region displayed improved economic performance in Q1 2023.
“The US economy expanded, with consumer spending rising by 4.2%. Canada’s economy rebounded with 0.8% growth after no growth in the previous quarter. Mexico’s economy expanded by 1% compared to 0.5%, and Brazil’s economy saw a 1.9% expansion following a previous contraction. These indicators signal positive developments in the region.”
The Q1 2023 GCRI update reveals that Venezuela’s rank improved by two places due to high oil production. Costa Rica also experienced an improved rank due to better economic performance in Q1 2023, driven by strong private consumption and exports. However, Colombia and Bolivia’s risk rankings declined in the same period, primarily due to the impact of violence and anti-government protests on their respective economies.
GlobalData highlights that the US is on the list of the top 15 lowest-risk countries worldwide. However, Venezuela and Haiti are among the top 15 highest-risk countries.
The Latin American region remains plagued by organized crime, threats to democracies, social unrest, economic challenges, migration crises, food insecurity, and cyber-attacks. These incidents highlight the region’s complex and insecure environment, presenting significant challenges to the stability and progress.
The US financial sector faced challenges after a series of bank failures, including Silvergate Bank, Signature Bank, and Silicon Valley Bank, in March 2023. Regulatory interventions and central bank actions aimed to stabilize the sector but concerns about uninsured deposits and potential risks of a broader banking crisis persist.
On a positive development, the US Senate passed legislation in June 2023 to suspend the debt ceiling and impose spending restraints until 1 January 2025, averting a global financial crisis. Although the risk of default has been temporarily avoided, the issue of the debt ceiling remains a future challenge.
Ambari concludes: “High inflation rates, persistently above the Central Bank’s target range, coupled with elevated financing costs, are causing significant apprehensions for households and businesses in the Americas region. Moreover, the ongoing anti-government protests, political uncertainty, and financial distress further amplify risks for investors.”
