Latin America Unrest Turns Bonds Into Emerging-Market Laggards

Latin America Unrest Turns Bonds Into Emerging-Market Laggards

Region’s bonds are the worst-performers in emerging markets. Strife from Argentina to Bolivia and Chile unnerves investors

Spreading social and political unrest is taking a toll on Latin American assets.

The region’s dollar bonds have lost 3.5% since early August, when Alberto Fernandez’s surprise victory in Argentina’s primary vote put the leftist on course for the presidency. That’s the worst performance among emerging markets, according to JPMorgan Chase & Co.’s indexes.

The slump has been exacerbated over the past month by violent demonstrations that led Chile to declare a state of emergency and protests in Ecuador that forced the government out of the capital. Bolivia’s Eurobonds tumbled on Tuesday after President Evo Morales resigned and fled to Mexico in the wake of a disputed election that triggered weeks of unrest.

Of the 10 emerging markets with the worst-performing dollar debt in November, six are from Latin America.

There’s little to suggest the strife will end soon. Fernandez hasn’t convinced investors he can fix Argentina’s finances once he’s sworn in next week. BNP Paribas Asset Management said Bolivia’s political transition will be rocky and doubts bond prices have fallen far enough to make them worth the risk. Bank of America Corp. lowered its economic-growth forecasts for Chile on Tuesday and said the opposition may try to force the government into deeper fiscal concessions than those it’s made so far.

Regional currencies have begun to feel the heat. Chile’s peso has sunk more than 9% since Oct. 18, when rioters torched subway stations. The Colombian peso strengthened last month, but weakened more than 2% on Tuesday, when Mexico’s peso, Peru’s sol and Brazil’s real also fell.

 

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