Lower US interest rate and new trade corridors could benefit Latin America, according to head of LATAM at Citi

By Rodrigo Loureiro

The start of the interest rate reduction cycle in the United States could favor a cyclical recovery of the main Latin American economies, such as Brazil and Mexico, which benefit from their large consumer market, diversity of natural resources and, in the case of Mexico, their proximity to the US border. This is the assessment of Julio Figueroa, head of Latin America at Citi, who gave an interview to Bloomberg Línea during his time in Brazil.

“The region can benefit from this new cycle of interest rate cuts in the US,” he says. The Federal Reserve cut the US interest rate by 0.5 percentage points at its last meeting, on September 18, to between 4.75% and 5% and Citi estimates that the US interest rate will be cut further at the next Fed meeting, in November. The change in US policy to control inflation and stimulate the economy could open the way for a cycle of monetary easing in other countries, such as Colombia and Mexico.

With lower interest rates in the US, investors should increase their appetite for risk, says Figueroa. “The economies of the region are also benefiting from the reorganization of global supply chains, and this applies not only to Mexico. We have a firm bet on the region in the long term,” he says.

Figueroa, who took over as the bank’s head of Latin America just over a year ago, has the mission of accelerating the bank’s growth in the region.  “Our activity in Latin America is very relevant, with a presence in 20 countries and the unique ability to serve our clients in their different financial needs anywhere in the world. All our lines of business are growing in the region,” he says.

Highlighting Brazil and Mexico as promising markets, Figueroa said that Brazil is deemed a country rich in talent and natural resources. Mexico, on the other hand, “has a strategic position in geographical terms that no other country has”, bordering the United States.

“Brazil will continue to attract foreign direct investment because of its industrialization and diversity of natural resources,” says Figueroa. “I believe that Brazil will be one of the main places to invest in over the next 25 to 30 years.” Last year, the country received $64 billion in foreign investment, second only to the United States ($341 billion), according to data from the Organization for Economic Cooperation and Development (OECD).

Although Citi’s head for Latin America mentioned some areas as market favorites for investment, such as infrastructure, renewable energies and agribusiness, the executive said “all sectors that serve domestic consumption are seen as important, with ample potential for expansion”.

The region’s economy could also benefit from growth in China and other international trade corridors. Citi estimates that China’s economy should grow between 4% and 5% over the next few years. According to Figeroa, this percentage is deemed as “sufficient” for the country’s trade with Latin America to “remain relevant”.

An example of future opportunities for expanding trade in Latin America are Chinese investments in infrastructure to facilitate exports between the region (including Brazil) and Asia.

Leadership in Latin America

Citi has a presence in 95 countries and moves an average of $5 trillion daily. Its global strategy focused on wholesale operations strengthens the bank’s leadership position in different segments, such as Treasury services, foreign exchange and investment banking. In addition, the great complementarity between the different business areas ensures that it offers solutions to support its clients in all their financial needs.

“Our 120-year presence in Latin America also allows us to offer a deep understanding of local realities, and it is this combination of local experience and global reach that allows Citi in Latin America to record growth in all business areas,” continues Figueroa.