Fitch’s qualified praise for Latin America

After Moody’s delivered a thumbs down to European transport yesterday, fellow ratings agency Fitch has today given a thumbs up to Latin American infrastructure, hailing its stability and resilience. But it could still be derailed by the global economy, financial volatility or government interference.

Resilience to global economic stresses, fiscal and monetary discipline in most countries, population growth and a burgeoning middle class – these are the features identified by ratings agency Fitch Ratings in a report as having created “favourable demand dynamics” for Latin American infrastructure.

The report says that, while US and European banks have been limiting long-term financing in the region, Latin American governments have been filling the void and “promoting infrastructure financing via alternative funding sources”.

Unlike the bleak picture in Europe’s road sector, in Latin America “moderate gains” in traffic volumes are supporting “steady” toll road performance. Airports also remain stable, according to the report, with increased passenger traffic, “adequate” revenue generation and revenue growth “outpacing” operating costs.

Fitch points out that governments in the region are facilitating the completion of wind farm projects to increase electricity reliability and diversify energy sources.

Existing availability-based infrastructure ratings, Fitch says, are performing in line with credit expectations underpinned by the credit quaity of off-takers, established demand and a “conducive” regulatory environment.

However, the report also points out that the stable outlook for the region could be adversely affected by a weaker than expected global economy, financial volatility and government intervention.