Portfolio Update

BLACKROCK LATIN AMERICAN INVESTMENT TRUST PLC (LEI: UK9OG5Q0CYUDFGRX4151)
All information is at 31 March 2020 and unaudited.

Performance at month end with net income reinvested 

	One month %	Three months %	One  year %	Three years %	Five years %
Sterling:
Net asset value^	-37.0	-45.8	-40.8	-35.0	-15.9
Share price	-30.8	-40.5	-33.3	-26.1	-6.5
MSCI EM Latin America (Net Return)^^	-32.5	-41.9	-37.8	-33.5	-11.7
US Dollars:
Net asset value^	-38.8	-49.3	-43.7	-35.6	-29.8
Share price	-32.8	-44.3	-36.5	-26.8	-21.9
MSCI EM Latin America (Net Return)^^	-34.5	-45.6	-40.8	-34.1	-26.2

^cum income

^^The Company’s performance benchmark (the MSCI EM Latin America Index) may be calculated on either a Gross or a Net return basis. Net return (NR) indices calculate the reinvestment of dividends net of withholding taxes using the tax rates applicable to non-resident institutional investors, and hence give a lower total return than indices where calculations are on a Gross basis (which assumes that no withholding tax is suffered). As the Company is subject to withholding tax rates for the majority of countries in which it invests, the NR basis is felt to be the most accurate, appropriate, consistent and fair comparison for the Company.

Sources: BlackRock, Standard & Poor’s Micropal

At month end
Net asset value – capital only:	294.38p
Net asset value – cum income:	295.98p
Share price:	285.00p
Total Assets#:	£122.8m
Discount (share price to cum income NAV):	3.7%
Average discount* over the month – cum income:	9.7%
Net gearing at month end**:	6.6%
Gearing range (as a % of net assets):	0-25%
Net yield##:	8.5%
Ordinary shares in issue (excluding 2,181,662 shares held in treasury):	39,259,620
Ongoing charges***:	1.1%

#Total assets include current year revenue.

##The yield of 8.7% is calculated based on total dividends declared in the last 12 months as at the date of this announcement as set out below (totalling 30.92 cents per share) and using a share price of 353.38 US cents per share (equivalent to the sterling price of 285.00 pence per share translated in to US cents at the rate prevailing at 31 March 2020 of $1.2399 dollars to £1.00).

2019 Q2 interim dividend of 9.15 cents per share (paid on 16 August 2019).

2019 Q3 interim dividend of 8.03 cents per share (paid on 8 November 2019).

2019 Q4 Final dividend of 9.15 cents per share (paid on 06 February 2020).

2020 Q1 interim dividend of 4.59 cents per share (payable on 20 May 2020).

*The discount is calculated using the cum income NAV (expressed in sterling terms).

**Net cash/net gearing is calculated using debt at par, less cash and cash equivalents and fixed interest investments as a percentage of net assets.

*** Calculated as a percentage of average net assets and using expenses, excluding interest costs for the year ended 31 December 2019.

Geographic Exposure	% of Total Assets^	% of Equity Portfolio *		MSCI EM Latin America Index
Brazil	65.0	64.6		60.6
Mexico	24.2	24.0		23.6
Argentina	4.6	4.6		1.6
Colombia	3.0	3.0		2.9
Chile	1.6	1.5		7.8
Peru	1.3	1.3		3.5
Panama	1.0	1.0
Net current liabilities (inc. fixed interest)	-0.7	0.0		0.0
	-----	-----		-----
Total	100.0	100.0		100.0
	-----	-----		-----

^Total assets for the purposes of these calculations exclude bank overdrafts, and the net current assets figure shown in the table above therefore excludes bank overdrafts equivalent to 5.7% of the Company’s net asset value.

Sector	% of Equity Portfolio *	% of Benchmark
Financials	31.6	29.6
Consumer Staples	12.8	17.1
Consumer Discretionary	11.4	5.5
Materials	11.1	14.9
Energy	9.2	7.8
Communication Services	5.7	8.2
Utilities	5.6	6.2
Industrials	4.3	6.3
Real Estate	3.9	1.3
Health Care	3.6	2.1
Information Technology	0.8	1.0
	-----	-----
Total	100.0	100.0
	-----	-----

*excluding net current assets & fixed interest
 

Ten Largest Equity Investments (in percentage order)

Company	Country of Risk	% of Equity Portfolio	% of Benchmark
Banco Bradesco	Brazil	7.5	5.3
America Movil	Mexico	5.7	5.2
Vale	Brazil	5.7	6.8
Itau Unibanco	Brazil	5.3	5.6
Walmart de Mexico y Centroamerica	Mexico	4.6	3.2
B3	Brazil	4.5	3.7
Petrobras - ADR	Brazil	4.4	5.6
Banco do Brasil	Brazil	3.5	1.2
Ternium	Argentina	3.5
Lojas Renner	Brazil	2.7	1.3

Commenting on the markets, Ed Kuczma and Sam Vecht, representing the Investment Manager noted;

For the month of March 2020, the Company’s NAV returned -37.0%¹ with the share price moving -30.8%¹. The Company’s benchmark, the MSCI EM Latin America Index, returned -32.5%¹ on a net basis (all performance figures are in sterling terms with dividends reinvested).

The weak performance of Latin America was driven by the ongoing concerns about COVID-19, its impacts on the regional economies and weaker commodity prices, which put pressure on local currencies. All countries in the region declined double digit percentage points over the period. Colombia and Brazil were hit worst by heightened COVID-19 concerns and severe oil price declines following Saudi Arabia’s price war with Russia.

Stock selection in Brazil detracted from relative performance returns the most over the period. An off-benchmark position in a Brazilian low-cost airline, GOL Linhas Aéreas Inteligente, detracted most from relative returns as travel stocks declined given the COVID-19 outbreak and fears of a global recession. In addition, an overweight position in Banco do Brasil detracted from relative performance during the month as the stock declined on the back of interest rate cuts in March and fears of increasing delinquency amongst borrowers as the Brazilian economy faces pressure from the global pandemic. On the other hand, not holding IRB Brazil, a reinsurance company, was the top contributor on a relative basis as the stock declined following the resignation of the company’s chairman and market discussions regarding company's accounting practices. The portfolio’s overweight position in Grupo Pão de Açcar, a Brazilian food retailer, contributed positively to returns on a relative basis as the defensive nature of the stock helped it to be more resilient versus the rest of the market.

Over the month, we added to the Company’s position in the Brazilian stock exchange, B3 Brasil Bolsa, as we expect accelerating volumes traded on exchange, positive operational execution during period of stress and strong cash flow generation to benefit the stock. We initiated a position in Lojas Renner, the largest Brazilian department stores clothing company, as we are compelled by the company’s history of high returns on invested capital, attractive valuation and ability to emerge out of the current crisis with a stronger share of market.  We funded these purchases by reducing exposure to Mexican food retailer, Walmart de Mexico and regional telecommunications operator, America Movil, as these stocks had been strong relative outperformers year-to-date thanks to their resilient business models.  The Company ended the month being overweight to Brazil, Argentina and Mexico, while being underweight to Chile, Peru, and Colombia. At the sector level, we are overweight to consumer discretionary and financials. We are underweight to consumer staples and materials.

At the start of March, global equity markets sold-off aggressively on the back of further nervousness on global economy fears, given the rising COVID-19 concerns and a significant drop in oil prices. Metals and commodities have been hit hard, which we believe means the market is already pricing for significantly lower global growth over the next few quarters. Our base case is that COVID-19 will be under control within the next few months and that China will launch significant stimulus to reverse the negative impact on the economy. During times of elevated volatility and market stress, we find it important to focus on the long-term investment horizon, adhere to disciplined fundamental analysis from a bottom-up perspective and be ready to respond to dislocations in the market as opportunities present themselves. Our constructive long-term thesis for Brazilian equities remains and is based on three pillars: i) a gradual local economic recovery; ii) low interest rates; and iii) structural reforms. On the economic recovery, our expectations have been readjusted downwards amid the global economic slowdown. Low interest rates could be a silver lining, as the Brazilian Central Bank has taken steps to counter the effects of the coronavirus epidemic on the domestic economy. On the structural reforms, we look for progress in administrative and tax reforms, yet growing tensions between the executive and legislative branches have raised concerns about the likelihood of a positive short-term outcome. However, if the reform agenda gets back onto centre stage, Brazil could outperform its emerging market peers. We expect the Colombian index performance to continue fluctuating in tandem with oil prices over the medium term. However, compared with the oil shock in the second half or 2014, Colombian stocks have been trading at lower valuations before the correction started (14x trailing P/E (price to earnings ratio) versus 17x by mid-2014) which, in our view, may mitigate the downside from current levels. From a top-down standpoint, the Colombian government is less dependent on oil, but has limited room to manoeuvre. Oil represents ~8.5% of Colombian government revenue (1.4% of GDP (Gross Domestic Product) in 2019), down from almost 20% in 2013. This transition has come at the cost of increased debt levels (51.6% debt/GDP in 2019 versus 37.1% in 2013), which in our view limits the government’s ability to implement countercyclical policies if the oil shock persists. In Mexico, falling oil prices have tightened the government’s fiscal rope even further, making it hard for it not to contemplate a higher deficit in 2020. Pemex, the state-owned petroleum company, losses could be offset with government savings, but given the expected weakness in the economy, it’s increasingly likely the government will have to increase the deficit through spending. Despite the impact from lower oil prices on the economy, we believe Mexico could be viewed as a defensive market in the current environment, given that the companies listed in Mexico have a low level of financial leverage and the market was already trading at relatively inexpensive valuations heading into the current volatility, which can limit the downside as external conditions remain challenging.

¹Source: BlackRock, as of 31 March 2020.

23 April 2020

ENDS

Latest information is available by typing www.blackrock.co.uk/brla on the internet, "BLRKINDEX" on Reuters, "BLRK" on Bloomberg or "8800" on Topic 3 (ICV terminal).  Neither the contents of the Manager’s website nor the contents of any website accessible from hyperlinks on the Manager’s website (or any other website) is incorporated into, or forms part of, this announcement.