Investments  

Prospects abound despite Brazil crisis

But Mr Gutierrez believes Mexico – the “poster child for reform” – has been a disappointment, blaming the falling oil price. “It has been this great reform story, but the oil situation has complicated things for Mexico. When you look at total oil products including refined, it’s now an oil importer because it imports refined products from the US, though oil exports are still a big part of revenue for this government.”

As Mr Leyland points out: “Eighty per cent of Mexican exports go to the US. So the relatively steady recovery in the US economy is positive for the country.

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“Equally, Mexico just has a better economic framework [than other Latin American countries] – unemployment and inflation are both quite controlled, the central bank is credible, and there’s no real issue with leverage levels either at the corporate or household level.”

Invesco Perpetual head of emerging equity markets Dean Newman also sees opportunities in Mexico, which he says has a robust manufacturing sector.

“We are impressed that president [Enrique Peña] Nieto has followed through on his 2012 campaign promise to overhaul the country’s energy sector, which has been opened up for international investment for the first time in more than 70 years,” Mr Newman notes.

Ellie Duncan is deputy features editor at Investment Adviser

FUND PICKS

Juliet Schooling Latter, research director at Chelsea Financial Services, chooses her top-three Latin America funds:

Stewart Investors Latin America

This fund has a tremendous track record of investing in quality stocks with good corporate governance, and manager Tom Prew hasn’t been afraid to deviate significantly from the benchmark. For example, it currently has 44 per cent in Chile and 29.4 per cent in Brazil – vastly different weightings to the index. However, there have been a lot of changes at Stewart Investors in recent months and Mr Prew has taken more of a back seat on this fund as co-manager, with Dominic St George taking up the reins. It’s currently closed to new investments but investors may want to monitor progress.

Alquity Latin America

This is a relatively new fund, run in a similar vein to the Stewart Investors fund. It also has substantially different holdings from the benchmark, with 38 per cent in Mexico, 22 per cent in Brazil, 21.5 per cent in Chile and 10 per cent in Peru. It was only launched in 2014 and is still very small, but it has done well so far. The vehicle has slightly high charges, but 25 per cent of them go towards supporting local entrepreneurs in getting small businesses off the ground – so something a little different.

Aberdeen Latin America Equity

This fund has a ‘Warren Buffett-esque’ process, with the team looking to identify and build large positions in high-quality companies that are trading at reasonable valuations. Consequently, the process is entirely based on fundamental research, with four to five company visits typical before an investment is made. The average holding period is over five years and the team will look to add to positions during periods of market volatility. It has a much higher weighting to Brazil than the other two funds, at 52 per cent, with 26 per cent in Mexico and 10 per cent in Chile.