MLIM forecasts good year for Latin America

Merrill Lynch Investment Managers expects 2006 to be a strong year for Latin American equity markets. Stability, coupled with regional current account and trade surpluses, has reduced investment risk and MLIM says this has not been priced into equity valuations.

Brazil and Mexico are particularly encouraging markets. MLIM says concerns over previous elections have driven investors away. However, if Brazil’s main opposition party is elected in the forthcoming ballot, the economy is expected to receive an even higher priority. Brazil’s central bank is also promoting stability through reduced domestic interest rates, because of low inflation forecasts.

The Mexican economy has performed well despite disappointments regarding president Fox’s reform agenda, says MLIM. Strong oil revenues and economic policies have driven growth.

Latin America is also expected to benefit from increasing demand for raw materials from India and China. Will Landers, manager of the offshore MLIIF Latin America fund, and also manager of the Latin American investment trust, says the region will post high economic growth rates this year despite a slowing global economy.

Patrick Collinson, Analysis.