Political Risk Tracker: Latin America Remains Restive While Caribbean Stabilizes

• Markets in the Americas face high political risks due to public dissatisfaction with incumbent governments, which will continue to manifest in persistent protests (such as in Peru) and the inability to pass reforms (as in Ecuador).
• As a result of these risks, in February 2023, Fitch made three further downward changes to its Short-Term Political Risk Index (STPRI) and six upward changes to the index (a lower score implies higher risk).
• Fitch has increased the STPRI score (specifically its social stability component) in five small markets in the Americas - namely Barbados, Bahamas, the Dominican Republic, Panama and Puerto Rico - where it expects a degree of economic recovery will lower the risk of public unrest. Risks in Guatemala have also decreased, given that an established candidate is expected to prevail in the 2023 elections after two outsider challengers were barred from the campaign. This is likely to lead to a degree of policy continuity for the country.
• However, the political risk in Peru, Ecuador, and Cuba has increased due to ongoing anti-government protests, rising gang violence, and expected social unrest increasing slightly due primarily to elevated inflation. Political risks for both Mexico and Brazil remain stable.
• Overall, the GDP-weighted average STPRI score in Latin America and the Caribbean rose slightly from 55.6 to 55.9 out of 100, implying a modest easing of political risks. For Caribbean nations in particular, political risk is expected to ease due to the expected economic rebound and other, more idiosyncratic factors.

(Source: Fitch Solutions)