Although the economic recovery in Latin America is building momentum, financial markets experienced a turbulent month and sold off sharply on concerns about the sustainability of the global recovery. But most markets have since clawed back losses to end the month unchanged. Nonetheless, overvalued currencies such as the Brazilian real were hit the hardest while political concerns in Argentina and Venezuela have weighed on CDS spreads and bonds. But while there has been little lasting impact from February’s sell-off, it serves as a reminder that if, as we expect, the global economy slows in the second half of this year and risk appetite wanes, financial markets in the region are likely to suffer once again.
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