Low Prices To Weigh On Investment In LatAm

Instant Max AI

(Reuters, 23.Jun.2020) — Foreign investment in Latin America risks “drying out” due to economic turmoil and fiscal instability sparked by the COVID-19 pandemic, especially if Chinese-led commodity demand remains weak, a former Colombian finance minister said on Tuesday.

“There is a risk that markets for the region dry out somewhat, [due to] large recessions, high unemployment, deteriorated fiscal accounts and low terms of trade,” Mauricio Cardenas told the Reuters Global Markets Forum.

“My sense is China will not grow more than 5% in the next few years and the model will favor renewables,” said Cardenas, adding that a stronger Chinese recovery could aid Latin America by buoying demand for commodity exports.

Shutdowns to battle the coronavirus have hit global oil prices this year, broadly knocking the shares of producers and compounding the economic fallout for Latin American countries, especially those heavily dependent on oil revenue. Cardenas expects Colombia’s oil production to fall from around 900,000 barrels per day (bpd) to around 800,000 bpd this year, adding that majority state-owned oil firm Ecopetrol is unlikely to receive much government support.

“The government will try to take as much cash from Ecopetrol as possible in 2021,” he said.

Colombia has projected oil production for this year between 820,000 and 850,000 bpd.

Cardenas said Brazil’s Petrobras is unlikely to add more than 1 million bpd to its production between now and 2025, while Mexico’s Pemex is unlikely to boost production or meet its stated oil production goals due to lower capital spending.

Cardenas, finance minister from 2012 to 2018, said Colombia’s budget deficit was likely to reach around 7% of gross domestic product. The government has suspended fiscal deficit limits until 2022.

__________

Reporting by Lisa Pauline Mattackal and Aaron Saldanha in Bengaluru; Editing by Tom Brown

Previous post Fiscal Effects Of Covid-19, Oil Could Last Years In Colombia
Next post Petrobras On Deal With Sete Brasil

Leave a Reply

Your email address will not be published.