Americas shows marginal improvement in investor risk during Q2 2023, reveals GlobalData

The Americas region experienced a minor decline in its risk score from 47.0 out of 100 in Q1 2023 to 45.8 in Q2 2023 in the GlobalData Country Risk Index (GCRI). This shift was primarily driven by reduced inflationary pressures and an improving labor market, reveals GlobalData, a leading data and analytics company.

However, despite this decline, the Americas continued to maintain its second-highest global risk ranking, after the Middle East and Africa. This position was predominantly shaped by the heightened cost of financing, increasing debt levels in the US, the humanitarian crisis, and instances of protests and violence in the Latin American region.

In the 21st update of GlobalData’s “Global Risk Report Quarterly Update – Q2 2023,” which analyzed 24 countries in the Americas region, two nations were classified as having very low risk, two as low risk, 14 as manageable risk, four as high risk, and two as very high risk.

In the Q2 2023 GCRI update, Uruguay advanced two positions to 56th place out of 153 nations, indicating a stable economic recovery driven by robust demand, reduced commodity prices, and the resolution of bottlenecks. In contrast, Colombia’s risk ranking fell by two positions to 57th place, primarily due to a significant economic slowdown.

Arnab Nath, Associate Project Manager at GlobalData, comments, “The US slipped one spot to seventh place in the Q2 2023 GCRI update. The soaring US federal government debt, reaching a record $32 trillion in Q2 2023, sparks worry regarding the country’s financial stability. As interest expenses escalate, the resources allocated for critical investments like infrastructure and healthcare might face limitations. Policymakers must tread carefully to address this fiscal challenge. Simultaneously, the surging US household debt, hitting an all-time high of $17.1 trillion in Q2 2023, poses stability concerns across the Americas, potentially affecting trade and financial institutions, demanding vigilant oversight.”

Meanwhile, the Q2 2023 GCRI update places the US in the list of the world’s 10 least risky countries, while Venezuela and Haiti find themselves among the top 10 highest-risk nations.

The South American region made efforts to revive continental integration by bringing back the Union of South American Nations (UNASUR) in June 2023. Nevertheless, due to ideological divisions, more than half of UNASUR’s member countries withdrew their backing. Unresolved conflicts, human rights concerns, crime, corruption, inequality, and social upheaval present significant challenges to the pursuit of regional unity.

Peru faced ongoing political turmoil, resulting in deteriorating human rights. Haiti grappled with escalating violence as gangs controlled much of the capital, Port-au-Prince, prompting calls for international aid to combat the crisis, as of August 2023.

In Q1 2023, Latin America and the Caribbean experienced a sharp slowdown in export growth, with only a 2.9% annual expansion compared to the robust 16.4% surge in 2022, per an Inter-American Development Bank (IDB) report from June 2023. This deceleration is mainly due to a substantial 14% decline in global commodity prices during Q1 2023. The World Bank predicts a 21% decrease in commodity prices for the year, posing a significant risk to the region, which heavily relies on commodity exports.

Meanwhile, Latin American (LATAM) central banks are adjusting their strategies amid decreasing inflation concerns. Brazil’s central bank reduced its rates for the first time in three years in July 2023 while Chile’s central bank implemented its second consecutive rate cut in September 2023. This reflects a broader regional trend as central banks in major LATAM economies aim to strike a balance between managing inflation and promoting economic stability and growth.

Nath concludes: “While there are positive signs such as a strengthening labor market and easing price pressures, addressing critical issues like rising debt levels, humanitarian issues and instances of violence and political unrest is crucial for the Americas region. Effective policymaking and vigilant oversight are essential to navigate these challenges and promote regional stability and growth.”

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