|The Bahamas Investor Magazine
January 21, 2014
January 21, 2014
Latin America, like many other regions, has been challenged by recent market conditions. However, the rate of wealth creation across many countries in the region has been sustained and in some cases grown, creating opportunities for international finance centres such as The Bahamas.
This trend in wealth creation was reinforced by the 2013 World Wealth Report published last year and produced by RBC Wealth Management in partnership with Capgemini. The report, which looks at the growth of high-net-worth individuals (HNWIs) across the globe, found that despite the global headwinds, Latin America has seen consistent and robust growth in the investable wealth of HNWIs over recent years, with an annualized growth of 4.1 per cent between 2007 and 2012–the highest rate of all the regions.
The rate of wealth accumulation in the Latin American region did slow slightly in 2012, owing to wider market conditions, such as lower prices for commodities and slow economic growth in Brazil–the region’s largest economy–as well as the contraction in the Brazilian and Argentinian equity markets. Despite this, the HNWI population and wealth expanded by 4.4 per cent and 6.7 per cent respectively across the region. These are both encouraging figures, but remain lower than the overall global growth rates of 9.2 per cent and 10.0 per cent.
Mexico was among the stronger performers, with consistent gross domestic product (GDP) growth and strong equity market performance leading to 6.6 per cent growth in its HNWI population. Another bright spot in 2012 was Chile, which had consistent gross domestic product (GDP) growth, low inflation, a strengthened Chilean peso, positive real-estate performance, successful economic reforms and recovering equity markets. Chile’s strong ties to Asia also helped it withstand the financial market instability that pervaded Europe in 2012.
With respect to investor sentiment within the market, a large number of Latin American investors were risk averse with 43.9 per cent of HNWIs surveyed primarily focused on wealth preservation (compared to 32.7 per cent globally), while 37.7 per cent were more focused on wealth growth (compared to 26.3 per cent globally).
Looking to the future, despite the continued macroeconomic challenges around the globe, 92.5 per cent of Latin American HNWIs are confident in their ability to generate wealth in the near future. This confidence comes alongside an increasing level of trust in wealth managers despite declining trust in regulators. In fact, 79.7 per cent of Latin American HNWIs surveyed for the report said they have a high level of trust and confidence in their wealth managers, up from 76.5 per cent the previous year.
Meanwhile, trust in the financial markets remained the same as last year (around 64 per cent), while trust in regulatory bodies decreased by one percentage point from 2012 levels to 63.5 per cent although this is still much higher than the 39.6 per cent global average.
The World Wealth Report forecasts that global wealth will grow by 6.5 per cent annually over the next three years, and all signs point to Latin America following this trend. This presents attractive opportunities for financial services advisors in The Bahamas who can help increasingly sophisticated Latin American investors navigate the uncertain global market environment.