Interview with David Feliba, Financial Reporter for S&P Global Market Intelligence
We interview plenty of South American mining companies at Crux Investor. It's important for investors to understand the latest developments in the region in order to carry out informed investment decisions. That's why we spoke David Feliba: an expert in South American markets.
We started by asking about Feliba's background. He is a financial market and banking reporter who works within a newsroom for S&P Global, which is a global inside information provider of investors. The newsroom is deployed around the globe, with around 500 journalists hard at work specialising in different sectors and jurisdictions.
We start with Chile: the country with the strongest credit rating in Latin America. Feliba is aware that all countries are under enormous financial pressure because of the difficulties created by COVID-19. Chile has already had some financial pressure, which was created in late 2019. The Chilean government created a social/constitutional crisis by hiking the metric ticket of Santiago (the capital of Chile). This led to a huge amount of social unrest. Chileans now have to vote if they want a new constitution from scratch to include more social issues. Last year was a wild one for Chile: the economy fell by 2.1%. Now, COVID-19 has served as the second blow. In 2019, the profits of banks receded by c. 16%, and now this second blow has created even more disruption. However, Feliba claims Chile is in a strong economic position to cope with these difficulties. Copper makes up 40% of total Chilean exports. However, demand for copper, particularly from China, is not that high nowadays.
Chile has deployed its central bank at 10% of GDP to try to cope with COVID-19. In relative terms, this is similar to the U.S and other developed countries. It is keeping the engine running and providing liquidity in an effort to try to sustain lending as best as possible. Chile looks like it'll be fine, provided the COVID-19 crisis doesn't extend too much.
What is the sentiment like in Chile, with anti-government protests happening just last month? Should investors be worried? Feliba claims the Chilean lockdown isn't as stringent as in other Latin American countries, and he also claims Chile has deeper "financial market penetration" than other countries in the region. How do the South American countries stack up against one another? While Feliba doesn't comment on specific policies, he explains that Chile has a reputation fiscal prudents and good management of its debt, with enough buffers in place to take on this new crisis. He claims analysts state Chile has adequate ammunition to cope. The countries that have avoided the strictest lockdowns appear more likely to flourish economically. Similarly, if you take a look at Peru, a country on a wave of 25-years of economic growth, they look well-positioned. What about Brazil? Brazil has weak growth and a weaker credit rating, with limits on its capacity and debt levels, having just emerged from its worst fiscal crisis in years. Argentina was struggling even before COVID-19, with significant fiscal deficits and inflation.
What's gone wrong in Brazil? President, Jair Bolsonaro, is certainly a polarising figure. He was sworn in in January 2019, and the rest of 2019 saw strong share price performance for the majority of Brazilian companies, with compression in debt spreads/borrowing costs. This helped alleviate some investor's concerns. However, this year, Brazil will not be seeing growth: projected at a fall of 5.3%. The BOVESPA index has seen a whopping 50% decline in dollar terms since February, wiping clean 4 years of returns. Worrying.
Feliba then moves into his particular area of expertise: fintechs. As many as half the people in Latin America are underbanked, and fintechs are looking to plug the gap.
Company page: https://www.spglobal.com/marketintelligence/en/
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