BlackRock
Updated 21 Apr 2023
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Disclaimer

This is a non-independent marketing communication commissioned by BlackRock. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

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.

Latin America has been a relative bright spot in 2022. While the region has not escaped global inflationary pressures, central banks moved quickly on interest rates, which supported currencies across the region. The same time, the region’s abundant natural resources provided a buffer against weaker consumer growth.

While plenty of global economic uncertainty remains, on the BlackRock Latin American trust, we believe the region could be among the first out of the blocks when inflation turns, recovering ahead of many developed markets1.

The immediate advantage for Latin America is that it is further ahead in its interest rate cycle than many other countries. Well-versed in dealing with inflation, its central banks were quick to raise rates2. Brazil, for example, raised its rates to almost 14%3, where they have remained since August. Interest rates operate with a lag, with their economic effect felt in inflation and economic statistics some time after they are implemented4. Brazil and other Latin American countries are closer to a turning point.

The region should also continue to be a beneficiary of higher natural resources prices. It has abundant fossil fuels, which remain in demand as other sources of supply (such as Russia) are cut off. As geopolitical tensions mount, Latin America has been seen as a more reliable long-term trading partner for the West. The region is also a major supplier of copper and lithium. These latter commodities are vital for the energy transition, and are widely used in electric cars and batteries.

Longer-term

These are short-term factors, but there are other factors that suggest long-term strength for Latin America. They should be a beneficiary of deglobalisation5: the disruption to supply chains experienced during Covid has seen many US companies bring manufacturing closer to home and hold higher inventories as they recognise the vulnerability of long, complex, cross-border supply chains.

Latin America’s geographic proximity and manufacturing strength is already seeing its companies benefit from this trend6. Mexico has long been a manufacturing hub for US industry and this may accelerate as companies move away from Asia to Latin America7.

At the same time, there are efforts among Latin American countries to diversify their economies away from natural resources. Brazil’s president Lula da Silva has promised to move Brazil on from being “an eternal exporter of raw materials”8. The country has a good head-start. Brazil is a regional trailblazer on digital payments9, for example. In a recent research paper, the World Economic Forum said: “The explosion of digital payments in Brazil has created an innovative financial ecosystem that works for ordinary people. This progress is the result of a combination of an overhaul in the payments regulatory framework, intensive use of technology, entrepreneurship and a focus on creating products that address the needs of Brazilian customers.”

Brazil also has a vast consumer market – the 10th largest in the world10 - with ecommerce giants such as Alibaba looking to expand in the region11. This is a strong base from which to diversify the Brazilian economy. It should create new opportunities for investors and lead regional development.

Our portfolio

In our view, understanding the macroeconomic forces driving Latin America is a crucial part of investing there. At BlackRock, we have built a macroeconomic model that informs our view on individual countries. We want to capture them at the bottom of the cycle, when they are posed for recovery.

Today that leads us to be underweight commodities versus our benchmark (the MSCI EM Latin America Index) and overweight Brazilian domestic growth stories. This includes companies such as Ambev, which – we believe – can gain market share in lower-priced segments and may see falling input costs, or convenience store operator FEMSA in Mexico.

1 https://www.trustintelligence.co.uk/investor/articles/fund-research-investor-blackrock-latin-american-retail-jan-2023/portfolio#profile
2 https://www.ft.com/content/47d7fa8a-47d9-4a4d-ade2-9472dca146b9
3 https://tradingeconomics.com/brazil/interest-rate
4 https://www.economicshelp.org/blog/glossary/time-lags/#:~:text=Time%20lags%20can%20make%20policy,can%20be%20difficult%20in%20practise.
5 https://www.barrons.com/articles/latin-american-stocks-51670003409
6 https://www.businessoffashion.com/articles/retail/snarled-supply-chains-force-manufacturing-exodus-to-balkans-latin-america/
7 https://fortune.com/2022/12/23/supply-chain-chaos-leading-to-2023-nearshoring-boom-latin-america/
8 https://www.reuters.com/world/americas/lula-promises-unite-divided-brazil-seek-fair-global-trade-2022-10-31/
9 https://www.weforum.org/agenda/2022/05/brazilians-are-adopting-digital-payments-faster-than-anyone-else-what-lessons-can-we-learn/
10 https://en.wikipedia.org/wiki/List_of_largest_consumer_markets
11 https://www.cnbc.com/2022/11/14/alibabas-cainiao-opens-latam-headquarters-in-brazil.html

Risk Warnings

Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.

Changes in the rates of exchange between currencies may cause the value of investments to diminish or increase. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time.

Trust Specific Risks


Exchange rate risk: The return of your investment may increase or decrease as a result of currency fluctuations.
Emerging markets risk: Emerging market investments are usually associated with higher investment risk than developed market investments. Therefore, the value of these investments may be unpredictable and subject to greater variation.

Gearing risk: Investment strategies, such as borrowing, used by the Trust can result in even larger losses suffered when the value of the underlying investments fall.

Important Information

Issued by BlackRock Investment Management (UK) Limited, authorised and regulated by the Financial Conduct Authority. Registered office: 12 Throgmorton Avenue, London, EC2N 2DL. Tel: + 44 (0)20 7743 3000. Registered in England and Wales No. 02020394. For your protection telephone calls are usually recorded. Please refer to the Financial Conduct Authority website for a list of authorised activities conducted by BlackRock.

The material is marketing material. The Company is managed by BlackRock Fund Managers Limited (BFM) as the AIFM. BFM has delegated certain investment management and other ancillary services to BlackRock Investment Management (UK) Limited. The Company’s shares are traded on the London Stock Exchange and dealing may only be through a member of the Exchange. The Company will not invest more than 15% of its gross assets in other listed investment trusts. SEDOL™ is a trademark of the London Stock Exchange plc and is used under licence.

Net Asset Value (NAV) performance is not the same as share price performance, and shareholders may realise returns that are lower or higher than NAV performance.

The BlackRock Latin American Investment Trust plc currently conducts its affairs so that its securities can be recommended by IFAs to ordinary retail investors in accordance with the Financial Conduct Authority’s rules in relation to non-mainstream investment products and intends to continue to do so for the foreseeable future. The securities are excluded from the Financial Conduct Authority’s restrictions which apply to non-mainstream investment products because they are securities issued by an investment trust. Investors should understand all characteristics of the funds objective before investing. For information on investor rights and how to raise complaints please go to: https://www.blackrock.com/corporate/compliance/investor-right available in in local language in registered jurisdictions.

BlackRock has not considered the suitability of this investment against your individual needs and risk tolerance. To ensure you understand whether our product is suitable, please read the fund specific risks in the Key Investor Document (KID) which gives more information about the risk profile of the investment. The KID and other documentation are available on the relevant product pages at www.blackrock.co.uk/its. We recommend you seek independent professional advice prior to investing.

Any research in this material has been procured and may have been acted on by BlackRock for its own purpose. The results of such research are being made available only incidentally. The views expressed do not constitute investment or any other advice and are subject to change. They do not necessarily reflect the views of any company in the BlackRock Group or any part thereof and no assurances are made as to their accuracy.

This material is for information purposes only and does not constitute an offer or invitation to anyone to invest in any BlackRock funds and has not been prepared in connection with any such offer.

© 2023 BlackRock, Inc. All Rights reserved. BLACKROCK, BLACKROCK SOLUTIONS and iSHARES are trademarks of BlackRock, Inc. or its subsidiaries in the United States and elsewhere. All other trademarks are those of their respective owners.

MKTGH0323E/S-2768862

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