Wealth Outlook 2024 - Slow then grow

122 Wealth Outlook 2024 | Regional outlook Latin America: potential opportunities amidst low valuations FIGURE 1 The oversized influence of the US, China and their growing rivalry on trade in Latin America 2022 exports (as % of total exports) China US Next major Argentina 9.0 14.0 14.0 Brazil Brazil 27.0 11.0 4.6 Argentina Chile 38.0 15.0 7.6 Japan Colombia 4.4 31.0 14.0 Panama Mexico 2.0 78.0 2.7 Canada Peru 30.0 14.0 5.0 Japan Source: World Bank, Santander Trade as of December 2022 A sturdy anchor for Mexico’s most recent strong performance has been the inflows of foreign capital associated with US near-shoring. The influx drove a 20% appreciation in the peso to 16.62 to USD, before settling around 17.11, as of November 23, 2023. As electoral uncertainty picks up ahead of the June 2, 2024 general elections, this longer-term trend should at a minimum continue to provide a floor under the peso. In Brazil, we expect the economy to slow to below 2% real GDP growth in 2024. Legislative focus seems to remain on structural reforms and ongoing debates over the fiscal balance. The central bank does at least have further room to cut rates – we expect 9-10% policy rates by year-end 2024, down from 12.25% as of November 2023. Commodity price performance could be mixed, but generally supportive for the region. The expected slowdown of the global economy could weigh on some commodity prices while the ongoing climate pattern disruptions caused by El Niño, and the continuation of the war in Ukraine could lead to periodic spikes. More broadly, though, there are also longer-term, more constructive trends at work. Copper has become the largest and perhaps most indispensable component in the move toward electrification – a central thrust of the global energy transition – with critical applications in electric vehicles (EVs), wind turbines and practically every facet of the grid (No. 4 in Our top 10 high conviction potential opportunities on page 54 ) . Lithium is