Japan Will Not Impact LatAm

The earthquake and tsunami that devastated Japan are not expected to have a significant impact on LatAm. The trade link between Japan and LatAm is fairly weak, according to Nomura, which adds that as of 2009, Japanese trade with LatAm accounted for only 4.7% of its total. The sum of exports and imports from LatAm to Japan only amounts to 3.0% of the total trade to the region. In addition, Nomura says there is almost no outward FDI from LatAm to Japan. Meanwhile, Deutsche Bank says that “the main channel of transmission of weakness in Japan for LatAm equities would be via potential pressure on commodities prices.” According to BCP “in the short run, [the disaster] will depress commodity prices as the [Japanese] government decides how to address the public’s safety concerns about the nuclear generating facilities.” Nevertheless, this may not be a sign of trouble for LatAm commodity exporters, according to Nomura. Chile, which sends about 12% of its exports to Japan could benefit from a rise in demand, even if commodities prices are lower, Nomura says. Peru may also benefit, albeit to a lesser extent. About 6% of Peru’s exports go to Japan. Brazil, another important commodity producer, only sends about 3% of its total exports to Japan, according to Nomura. RBC says fears of Japanese repatriation of Brazilian financial assets is unwarranted, though there is a risk of a slowdown of further Japanese flows into Brazil in the short term as money is needed to finance local reconstruction.