LatAm Private Capital Flows to Plateau: IIF

Net private capital inflows into LatAm should be slightly less in 2011 than in 2010, but still remain strong, the IIF says. Net inflows to the region are forecasted for $254.7bn this year and $238.5bn in 2012, compared to $264.9bn in 2010. Though lower, the forecasts still remain strong compared to 2009’s $155.5bn and 2008’s $138.1bn. EM as a whole is forecasted to hit $1,041.1bn this year and $1,056.4bn for 2012, growing from $989.8bn in 2010. Following record inflows to LatAm last year, portfolio equity investment will moderate somewhat, the IIF says. “Carry trade inflows will likely remain substantial as key countries continue to tighten monetary policy in order to rein in rising inflation. Robust, albeit moderating private capital inflows, combined with further terms of trade gains will most likely continue to put upward pressure on local currencies, thereby complicating policymaking,” it says. Of the $254.7bn in net inflows forecast for the region this year, $100.6bn is expected to come in the form of direct equity investment, $50.1bn in portfolio equity investment and $104.0bn in private credit investment. Direct equity investment’s contribution should represent a slight rise, with the other two components dropping slightly. The IIF’s report is drawn from 30 economies in the emerging markets, including 8 in Latin America.