ISSUE 1 | 2022
14
and it is likely to take a few more quarters for a full recovery. Additionally, due to a likely rise in interest rates to contain inflation and an increased exchange rate, the domestic market is expected to retract. However, it’s worth noting that this particular scenario can present opportunities for foreign investors looking for cheaper assets due to the devaluation of local currencies, as well as encouraging strategic acquisitions involving local companies with purchasing power. With this in mind, Brazilian investment brokers are expecting higher levels of foreign investment in 2022, due to the attractive pricing of assets, as well as rising government revenues which can help to minimize recent fiscal concerns.
The biggest deal was the acquisition of 30% stake in Comerc Energia Ltda. by Vibra Energia for USD 363m and in second place was the acquisition of 100% in Celg GT by Energias do Brasil S.A. for USD 359m. Both companies operate in the Energy, Mining & Utilities sector. The Energy, Mining & Utilities sector is currently enjoying a boost due to high demand for renewable energy worldwide and Brazil is especially attractive to investors in this regard due to its natural resources and regulatory stability. The lower costs and large market in Brazil are also factors that make the country an interesting alternative to the US and Europe for investments in the renewable energy sector.
reforms to address structural challenges in Latin America. The OECD also suggests that governments should introduce fiscal, social and transformational policies. The governments across the region, which historically suffers from low productivity, inequalities, social vulnerability, institutional weaknesses and threats to environmental sustainability can, according to the OECD, use the current economic context to adopt multi-dimensional strategies to implement the many reforms needed to drive recovery. Taking all this into consideration, Latin America is expected to see growth in 2022, but at a slower pace than observed in 2021. Additionally, in the near term, according to the Economic Commission for Latin America and the Caribbean, most countries in the region will not have recovered to pre-pandemic levels of GDP by the end of 2022, some three years after the start of the pandemic. As examples, according to Moody’s, some countries, such as Chile, Peru and Colombia, are already operating above pre-pandemic production levels, while Brazil and Argentina are close to pre-pandemic levels. However, in the majority of Central America and the rest of Latin America, production levels are still below what they were pre-pandemic
POLITICAL AND ECONOMIC CONTEXT
Finally, the upcoming presidential elections in Brazil, Colombia, and
Costa Rica may temporarily impact the economic recovery of these countries and affect the attractiveness of investment in those countries.
Latin American economies have been some of the most heavily impacted by the crisis brought on by the COVID-19 pandemic, which has resulted in deep recessions across the region. According to the Organization for Economic Co-Operation and Development (OECD), this moment could be seen as an opportunity to implement the necessary
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