Key View

• In our global power Risk and Rewards Index (RRI) Latin America remains an underperforming region, with regional averages falling below the global averages. This is largely attributed to a slight drop in performance for the region’s Rewards profile.
• Latin America’s best scoring pillar continues to be its Industry Rewards, which are strongly supported by electricity generation growth across markets.
• The region's Country Risks pillar scores the worst across its RRI profile, significantly weighed down by a poor operational and political environment.
• That said, across Latin America, there are more markets with a better Rewards profile than the Risks profile, reflecting the large development in the power sector taking place.

Main Regional Features And Latest Updates

• Latin America’s average RRI score has dropped slightly this quarter. This is largely attributed to a slight drop in performance for the region’s Rewards profile. This quarter, only six out of 19 markets in the region are above the global average as opposed to eight in the previous quarter.
• Despite the Industry Rewards pillar being the region’s best, its score falls slightly below the global average this quarter. As for the Country Rewards pillar, Latin America also lies under the global average, mainly weighed down by high labour risk in the region, with only three out of 19 markets performing above the global average.
• Industry Risks weigh heavily on the region's overall scores with the legal risks indicator, relating to operations and investor protection, scoring poorly. Additionally, high transmission and distribution losses, reflecting unreliable and inefficient grids across markets in the region, present a risky environment for power project developments.
• Chile’s RRI score has dropped this quarter, causing a significant drop from 16 to 30 in its global ranking. This is largely attributed to a drop in real GDP growth. However, the market will maintain its rank as the region’s top performer, with a strongly scoring Risks profile.
• Venezuela has experienced an improvement in its Rewards profile following growth forecasts for its power market and real GDP growth. This has resulted in a rise of the market's regional and global RRI rank by three and six this quarter. However, Venezuela's business environment remains high in risks, with poor short- and long-term economic outlooks, and a significantly risky legal environment.

Region's RRI Score Weighted Toward Rewards Profile

For this quarter, 13 out of 19 Latin American markets have a better performing Rewards profile score than a Risks profile score. Prominent markets that have a better Rewards than Risks profile include Brazil, Colombia, Mexico and Argentina. Supporting their strong Rewards profile, which these four markets score higher than the global average, are their large power markets with significant growth for the coming years. We expect Latin America's RRI profile to continue having a higher regional average score for Rewards than Risks, as power capacity and generation growth continue with power mix diversification efforts in hydropower-dependent markets.

Additionally, the region also contains a number of markets with high risks to business operations. Transmission and distribution losses run high in the region, with 13 out of 19 performing lower than the global average for this indicator. Ageing infrastructure and lack of investments to upgrade the electricity grid have been key factors in the persistent inefficiencies of the transmission and distribution networks in the region. Outside the power market, legal and operational risks remain high in the region, with regional averages significantly lower than the global average. These present a high-risk environment for operations in Latin America.