On the BlackRock Latin American Investment Trust, we aim to understand the companies in which we invest from every angle. To that end, travelling serves as an important source for our research as some insights only emerge from being on the ground in the region. These include understanding the full ecosystem in which companies operate, local business practices, economic dynamics and the political situation.
Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
The insights we gather from these trips inform our macroeconomic process and ultimately our country allocation decisions. While analysis of economic data can show a country’s economic journey to date, talking to business leaders, local politicians, central bankers or journalists can bring a different perspective on a country’s future. It can reveal elements such as confidence, which are difficult to judge from numbers alone.
These trips also directly feed into our bottom-up stock selection. We use travelling as a means to meet with companies we are already invested in, and it also serves as an important tool to find new and exciting investment ideas. We have direct conversations with the companies, their competitors, their suppliers as well as with industry representatives. Engaging with a large group of stakeholders allows us to get a more holistic view of the companies and the markets we invest in.
Shaping our Latin American Investment Strategy
So far this year, we have visited a number of different countries in the region, where each and every visit taught us something new and interesting. Examples include Argentina, Brazil, Costa Rica, Ecuador, El Salvador, Mexico, and Panama.
In Brazil, we are very impressed with the impact of the country’s innovative Pix system. This is a payments system created by the central bank that has helped broaden financial inclusion. We saw its astonishing impact on SME lending, for example. As PIX is offered by the central bank, almost all banks allow their depositors to use it. Small banks can now compete more effectively with large banks in the deposit market. In turn, this has brought about a change in lending patterns, with small banks now able to offer more loans to smaller, local businesses.
More broadly, we also note the increased digitisation across Brazil. People have moved from paying their utility bills in person to being able to do this online. This benefits the population but also helps companies, as more vendors move to digital payment systems.
Hidden gems of Latin American Investing
In Ecuador and Panama, we came back with renewed conviction in the mining sectors of each of the countries. They are being supported by the energy transition, which is creating demand for resources such as copper and silver. These countries are also seeing rising political stability. Ecuador’s president, Daniel Noboa, is highly regarded among the population, which means he has a better chance of streamlining and incentivising responsible mining in the country. Other highlights included Argentina’s promising oil and gas sector, and Colombia’s improving macroeconomic indicators.
Recently, our portfolio managers were in Mexico trying to get a better sense of the likely implications of the election results after the country welcomed its first ever female president, Claudia Sheinbaum. She won a landslide 59.5% of the votes in what turned out to be the highest voter turnout in Mexican (democratic) history.
Being on the ground can give us real insights into the different Latin American economies, what local companies are doing and it also gives us a sense of domestic confidence. On the BlackRock Latin American Investment Trust, we believe this type of research is vital when investing in emerging markets, to uncover opportunities and manage risk.
