Latin America Reform Tracker: Outlook Remains Unfavourable Despite Modest Upwards Revisions

• Fitch Solutions maintains the view that Latin American governments will largely be unable to enact market-friendly policy reforms in the coming quarters, especially as Brazil and Colombia hold presidential and legislative elections in 2022 and leftist, populist presidents in Mexico and Peru likely attempt to weaken previous reforms. 
• Notably, reform efforts throughout Latin America were significantly disrupted due to a series of substantial public protests in Chile, Colombia, and Ecuador in Q4 2019, followed by the economic and public health shock of the COVID-19 pandemic. 
• However, while most of the region’s governments shifted to expansionary fiscal policies to mitigate the economic strains from the pandemic by supporting household incomes, rising food and fuel prices have prompted governments to increase subsidies or intervene in the market in other ways. This has further undermined the post-pandemic return to fiscal consolidation and underscored the less favourable outlook for reform. 
• The region’s average Q1 2022 score of 3.6 out of 10 in Fitch’s Reform Tracker is higher than last quarter’s score of 3.4, but remains below the score of 4.1 in Q1 2021, as public opposition will continue to impede large-scale reforms preferred by investors. Fitch’s reform tracker measures reform momentum on a scale from 0 to 10. 
• While the economy of the region is expected to improve in 2022, political and economic issues are expected to hinder the enactment of reforms, thereby complicating the recovery process. These hindrances include a series of protests, upcoming elections and the effect of the ongoing COVID-19 pandemic. 

 (Source: Fitch Solutions)