Fitch: Brazil and Mexico most vulnerable Latin American markets for recession

Cedric Chehab, global head of country risk at Fitch Solutions, said: “We do not expect a recession in 2019 or 2020 but the risks have risen significantly, with certain models pointing to a 30-40% chance in the next year or so. The risk is rising, and if one were to hit, it could possibly hit at the tail end of 2020 or in 2021.”

Chehab, speaking during the organisation’s Global Recession Risks: What to Watch? webinar, said that issues including fiscal policy flexibility and commodity price risks were all contributing factors.

Mexico fared worse than Brazil for foreign reserves but better for real interest rates, he added.

Chehab described US trade policy as “the single biggest risk to the global economy right now” and suggested that potential tariffs imposed on Mexico, among other markets, could contribute to a recession.

Political fragmentation and populism are expected to continue globally, Chehab said, with examples including Mexico’s left-wing populist president Andres Manuel Lopez Obrador and Brazil’s far-right leader Jair Bolsonaro.

Chehab added: “In the event of a recession, we believe this trend would only get worse.”