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Global Credit Research - 02 Aug 2012
New York, August 02, 2012 -- A protracted recession in the eurozone (EU) would have a direct negative
impact on Latin American exporters, particularly commodity producers,
says Moody's Investors Service in a new special comment, "EU
Recession Presents Risk for Commodities Producers."
Additionally, the recession in Europe would exacerbate the slowdown
in China and have a twofold impact on Latin American corporates,
says Moody's. That's because China is both a major
exporter to the EU and a significant importer from Latin America,
which would face a reduction in demand from both markets.
Those that export more to the EU than to comparatively stronger China
would be more vulnerable, while companies entirely focused on the
Latin American market or that limit most of their trade to the Americas
would be less vulnerable, says Moody's.
Moody's notes that commodities producers would be the most vulnerable
to weakness in the EU, as they are most exposed to short-term
price declines arising from reduced demand. But not all commodities
producers will be affected equally, says Moody's. However,
some commodity producers may benefit from their status as intrinsically
low cost producers compared to their peers. That competitive advantage
may shield them slightly from the downturn, says Moody's.
Moody's expects that the steel and paper and pulp industries would
be particularly exposed due to their exposure to price swings, while
producers of finished goods would be more resilient. Companies
with the most revenue exposure to Europe include Fibria Celulose S.A.
(Ba1 stable), Magnesita Refratarios S.A. (B1 stable)
and Camposol S.A. (B3 stable). Those with significant
China exposure include Corporacion Nacional del Cobre de Chile (A1 stable)
, Corporacion Pesquera Inca S.A.C. (B2 positive)
and Asociación de Cooperativas Argentinas (B2 stable), says
the report.
Still, in the long-term, Latin American commodities
producers are well-positioned to benefit from their exposure to
China, which, despite the recent slowdown, remains a
dynamic and fast-growing economy, says Moody's.
Moody's research subscribers can access this report at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_144442
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Moody's: Latin American commodity producers risk fallout from EU recession
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