Other key emerging markets are found in Latin America. It only seems logical when considering that the 20 countries that make up Latin America have the largest combined amount of food, oil, energy, and mineral resources on the planet. Such abundance naturally leads to growing trade opportunities with countries that have robust populations, like India and China.
Additionally, the political unrest that has historically characterized several Latin American countries has measurably improved in recent years. Income levels in Chile and Uruguay have developed from low to high. Colombia has ended its civil war with a peace agreement. And, Peru has a rapidly growing stable economy.
Of course, there are going to be exceptions to the positive strides made in Latin American emerging markets. Venezuela, Argentina, and Nicaragua are all struggling to develop monetary policies that will help them compete in world markets. Most notable is the unfortunate situation brought about by the attempt at socialism in Venezuela. Not only has it been catastrophic for the resource-rich country, but massive emigration to Colombia and Brazil, pose an unknown threat to the stability of two strong economies in the region.
Mexico Rising as an Emerging Market
One emerging market that has just recently become a whole lot riskier is Mexico. They recently elected a populist president in Andres Manuel Lopez Obrador (aka AMLO). At best, his election has investors taking a neutral wait-and-see stance.
But, many people on Wall Street already have one foot out the door on Mexico as uncertainty grows. While Mexico is currently performing well due to the new NAFTA deal, the jury is still out on Mexico for the near future as AMLO took office just two weeks ago on Dec 1. The current risk assessment has depressed Mexico’s value as an emerging market. If investors want to gamble and pick up the second largest economy at a discount, now is the time to buy. But, there’s the possibility that AMLO’s populist policies could drive their economy into the ground.
Emerging markets are a great way to diversify a portfolio while hopefully adding some percentage points to returns. But those percentage points are never going to come without risk. As emerging markets in Asia, Latin America, and Mexico grow and mature, there are investment opportunities galore, but investors must be sure to do due diligence before diving in.