Nov 12, 2019

Chile's political instability is sinking Latin American assets

Dion Rabouin, author of Markets
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Data: Investing.com; Chart: Axios Visuals

Chile's peso fell to its lowest value against the dollar on record and the country's stock market dropped to near its weakest since early 2017, as continued violence and protests have pressured the government to rewrite its constitution.

Why it matters: Chile has long been an oasis of stability in volatile Latin America and was consistently among the strongest and most market friendly democracies. But it's now mired in wide-ranging disruption and chaos and pulling down asset values in the rest of the region.

Watch this space: "The fact that the slowdown in economic activity and the fall in inflation pressures occurred prior to the protests, only increased investors' concerns and exacerbated the peso's decline," Simon Harvey, FX analyst at Monex, told Reuters.

The big picture: Latin American currencies have collectively turned lower against the dollar as recent protests in Chile and Bolivia have followed unrest in Ecuador and a surprise election result in Argentina.

  • MSCI's index of Latin American stocks has fallen over the past week — with Chile and Argentina each sliding by more than 1% on Monday — even as equity prices around the globe have risen toward record highs.

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