Sustainable & Impact Investment is making its way around the world, and Latin America (LatAm) is following the leading trends of Europe and other regions. Although traditional investment has significantly improved in the region, it is still early days for truly sustainable investment practices that make both a difference and garner solid returns. Private investors have long preferred LatAm over East Asian and Pacific or sub-Saharan African countries, choosing to pour US$700 billion into the region, compared to the $500 billion total to the others since 19901 just for infrastructure.
This level of capital injection has allowed the region to see significant economic growth since 2000, and especially since 2010. However, consistent with the root cause underlying conclusion by the Economic Commission for Latin America and the Caribbean (ECLAC), the exponential growth has been lopsided and an unintentional – or natural – consequence has been economic inequality. Governments’ strategies and policies play a considerable role. Therefore, in a period of growth and recessions, there may still be countries that are downgraded on MSCI ratings3. As counterintuitive as it sounds, there will be periods of volatility before stabilization, yet the markets can be profitable. When exchange rates fluctuate or rules are deployed to manage access to foreign currencies, the ripple effects can be felt across markets, but the shift eventually levels out if the right support is in place.