Mergers and acquisitions in Latin America will fall by 14.4% in 2020, from 90 billion dollars a year to 77 billion, due to global economic uncertainty, revealed this Monday a report by consultants Baker McKenzie and Oxford Economics.
“Transactional activity will continue in crisis at a global level in 2020 as a result of the current global economic uncertainty and the risk of economic recession,” according to the fifth Global Transaction Forecast.
In 2019, Latin America recorded 27.312 billion dollars in domestic transactions and 62.680 billion dollars in cross-border transactions.
By 2020, the report forecasts US$25.23 billion in domestic transactions and US$52.095 billion in cross-border transactions.
Globally, the drop will mean 25% in M&A activity, from $2.8 trillion in 2019 to $2.1 trillion in 2020.
“Transactions are happening, but the current slowdown is inevitable given the continuing uncertainty surrounding international trade and regulatory controls,” said Baker McKenzie Global Transaction Group leader Ai Ai Wong, according to a company statement.
Mergers and acquisitions will fall from US$3.537 billion to US$2.065 billion in Argentina, from US$40.359 billion to US$36.971 billion in Brazil and from US$8.866 billion to US$7.785 billion in Chile.
While in Mexico it will be reduced from 7.322 million dollars to 4.881 million, in Peru from 3.357 million dollars to 2.768 million and will only increase in Colombia, going from 1.335 million dollars to 1.569 million.
“Argentina is forecast to experience the biggest drop in domestic M&A activity in 2020, due to the current economic crisis and political uncertainty in the country, although this figure is expected to recover slightly by 2021,” states the statement.
It also states that “Chile, Peru and Mexico have the most favorable conditions for conducting transactions in the region, although a decline in the activity of mergers and acquisitions in the three markets is expected next year”.
“Although political volatility in Latin America has contributed to the decline in regional M&A activity, once equilibrium is reached after the 2018 and 2019 election results, we can expect an economic upturn,” said Jaime Trujillo, Baker McKenzie’s president for Latin America.