Portfolio Update

The information contained in this release was correct as at 31 August 2023.  Information on the Company’s up to date net asset values can be found on the London Stock Exchange Website at

https://www.londonstockexchange.com/exchange/news/market-news/market-news-home.html. 

BLACKROCK LATIN AMERICAN INVESTMENT TRUST PLC (LEI - UK9OG5Q0CYUDFGRX4151)

All information is at 31 August 2023 and unaudited.
 

Performance at month end with net income reinvested
 

	One month %	Three months %	One year %	Three years %	Five years %
Sterling:
Net asset value^	-7.6	7.0	14.2	52.1	29.6
Share price	-7.5	9.8	14.5	56.2	39.2
MSCI EM Latin America (Net Return)^^	-5.9	6.8	8.5	56.3	26.2
US Dollars:
Net asset value^	-9.0	9.4	24.4	44.6	26.4
Share price	-8.9	12.3	24.7	48.5	35.7
MSCI EM Latin America (Net Return)^^	-7.3	9.2	18.2	48.0	23.1

^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:	449.13p
Net asset value - including income:	455.95p
Share price:	402.00p
Total assets#:	£139.2m
Discount (share price to cum income NAV):	11.8%
Average discount* over the month – cum income:	10.7%
Net Gearing at month end**:	4.2%
Gearing range (as a % of net assets):	0-25%
Net yield##:	7.7%
Ordinary shares in issue(excluding 2,181,662 shares held in treasury):	29,448,641
Ongoing charges***:	1.13%

#Total assets include current year revenue.

##The yield of 7.7% is calculated based on total dividends declared in the last 12 months as at the date of this announcement as set out below (totalling 39.12 cents per share) and using a share price of 509.39 US cents per share (equivalent to the sterling price of 402.00 pence per share translated in to US cents at the rate prevailing at 31 July 2023 of $1.267 dollars to £1.00).

2022 Q3 Interim dividend of 6.08 cents per share (paid on 9 November 2022).

2022 Q4 Interim dividend of 6.29 cents per share plus a Special Dividend of 13.00 cents per share (paid on 12 January 2023).

2023 Q1 Interim dividend of 6.21 cents per share (Paid on 16 May 2023)

2023 Q2 Interim dividend of 7.54 cents per share (Paid on 11 August 2023)

*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.

*** The Company’s ongoing charges are calculated as a percentage of average daily net assets and using the management fee and all other operating expenses excluding finance costs, direct transaction costs, custody transaction charges, VAT recovered, taxation and certain non-recurring items for the year ended 31 December 2022.

Geographic Exposure	% of Total Assets	% of Equity Portfolio *	MSCI EM Latin America Index
Brazil	57.3	57.0	58.9
Mexico	27.8	27.6	31.1
Chile	6.0	6.0	5.8
Colombia	4.0	4.0	1.1
Argentina	3.7	3.7	0.0
Panama	1.7	1.7	0.0
Peru	0.0	0.0	3.1
Net current Liabilities (inc. fixed interest)	-0.5	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 3.7% of the Company’s net asset value.

Sector	% of Equity Portfolio*	% of Benchmark*
Financials	24.3	24.7
Materials	18.3	17.9
Consumer Staples	17.4	16.7
Energy	12.2	12.3
Industrials	9.8	10.5
Consumer Discretionary	7.0	1.9
Health Care	3.7	1.9
Real Estate	2.7	0.6
Information Technology	2.4	0.5
Communication Services	2.2	6.6
Utilites	0.0	6.4
	-----	-----
Total	100.0	100.0
	=====	=====

*excluding net current assets & fixed interest

Company	Country of Risk	% of Equity Portfolio	% of Benchmark
Petrobrás – ADR:	Brazil
Equity		5.8	4.3
Preference Shares		3.4	5.1
Vale – ADS	Brazil	9.2	7.5
Banco Bradesco – ADR:	Brazil
Equity		4.2	0.7
Preference Shares		1.6	2.7
Grupo Financiero Banorte	Mexico	5.6	3.7
FEMSA - ADR	Mexico	5.0	3.7
AmBev – ADR	Brazil	4.5	2.2
B3	Brazil	4.2	2.5
Grupo Aeroportuario del Pacifico – ADS	Mexico	4.0	0.9
Walmart de México y Centroamérica	Mexico	3.5	3.5
Itaú Unibanco – ADR	Brazil	3.2	4.5

Commenting on the markets, Sam Vecht and Christoph Brinkmann, representing the Investment Manager noted;

The Company’s NAV was down 7.6% in August, underperforming the benchmark, MSCI EM Latin America Index, which returned -5.9% on a net basis over the same period. All performance figures are in sterling terms with dividends reinvested.1

After a few strong months the MSCI EM Latin America Index(-7.3%) gave back some recent gains, partially driven by strong US economic data resulting in a strong US dollar and conversely weaker Latin American currencies.

Colombia was down -15.4% as growth continues to decelerate resulting in lower forward expectations for 2023/2024. Brazil (-8.3%) pulled back after a couple strong months as it became clear that the government was trying to raise corporate taxes in order to meet its fiscal targets, which may put pressure on corporate earnings. Mexico declined -4.5% but still outperformed its peers.

Top contributors from a country lens were Argentina and Colombia, driven by our off-benchmark names in each country; Globant, a software developer in Argentina, and Ecopetrol, an oil company in Colombia. Brazil was the main underperformer led by holdings in the consumer and financial sectors. Chile also contributed small negative returns.

On an issuer level Globant was the top contributor to performance during the month.  Other outperformers were Fibra Uno, a real estate company in Mexico and FEMSA, a beverage company in Mexico. Globant has outperformed on the back of strong earnings results, with revenues growing 16% year-on-year and full year guidance slightly increased, outperforming most of its global industry peers. Fibra Uno continues to benefit from the nearshoring theme, i.e. increased foreign investment and demand for industrial properties. A lack of exposure to WEG, a Brazilian electric equipment company, also contributed to relative returns. The company has performed poorly due to margin pressure and a slowdown in solar demand in Brazil is impacting the company’s outlook. 

Top detractors during the quarter were mainly Brazilian companies exposed to the domestic economy. Soma, a fashion retailer, Pagseguro, a digital payments company, Arezzo, a shoe retailer and Assai, a food retailer all detracted from performance during the month. This was due to a general weakness in the equity market in Brazil due to renewed concerns around fiscal targets and tax reforms. While some of the fiscal measurements may be negative for earnings, we believe it will be compensated by the positive outcome of having a sustainable fiscal position. It should also be noted that this underperformance of domestic stocks in Brazil comes after a few months of very strong returns.

During the month we added to our position in Bancolombia reflecting our conviction in the name as we have seen more signs of orthodoxy than initially expected by the Colombian government. We have also increased the portfolio’s position weight in Mag Silver, as we believe there is a high probability of US rates peaking, which should be supportive for precious metals’ prices.

In Brazil we switched our position in Gerdau, a steel producer to Vale, an iron ore producer on a relative performance basis, i.e. we have taken profit on Gerdau and fully exited the position and rotated the capital to Vale which has lagged. We have exited our position in XP, the company has done very well and we have locked in the gains and redeployed the capital . We initiated a new position in Alpargatas, a footwear manufacturer in Brazil. The company is trading at attractive valuations and their working capital is improving. We believe the margins will also improve into next year due to lower input costs. We trimmed our holding in Tenaris, a steel pipe exporter, on strong relative performance.

The portfolio is most overweight in Argentina (with two off-benchmark names) and Colombia. We are most underweight to Peru and Brazil. Our largest overweight from a sector lens is in consumer discretionary and industrials and the portfolio is most underweight to utilities and communication services.

Outlook

The central bank in Brazil cut the policy rate in early August by 50bps, a rate cut that has been highly anticipated by the market. While we have taken profit and reduced our weight in Brazil on the back of the strength we have seen in the past few months, we remain overweight to domestic Brazil and expect further upside to the equity market in the next 12-18 months as local capital start flowing into the market. Local equity flows have lagged foreign capital that has been flowing into Brazil in recent months. The local flows have remained negative year-to-date as the equity market has struggled to compete with a risk-free rate of return close to 14%.

We continue to be positive on the outlook for the Mexican economy as it is a key beneficiary from the re-shoring of global supply chains. Mexico remains defensive as both fiscal and the current accounts are in order. While our view remains positive, we have taken profits after a strong relative performance, solely because we see even more upside in other Latin American markets such as Brazil. In addition, we believe that the Mexican economy will be relatively more sensitive to a potential slowdown in economic activity in the United States in response to rising interest rates there.

We believe that the economic situation in Argentina will remain challenging and difficult, irrespective of who will form the next government in the upcoming elections in October 2023. The strong rally has come to a halt in August on the back of far-right Javier Milei taking the lead in the primary election held this month. The market had rallied strongly as the opposition was expected to win, and Milei taking the lead was unexpected and has been received negatively by market participants. Primary elections in Argentina are obligatory and held as a pre-election where candidates need to receive votes over a certain threshold to advance to the general election. They are a good indicator of who can be expected to win in the main election. We currently have no positions with exposure to domestic Argentina, the two names we hold are global exporters.

In a global context, we remain optimistic about Latin America as a whole. Central banks have been proactive in increasing interest rates to help control inflation, which has started to fall across most countries in the region. With inflation at the lower range, we have started to see central banks beginning to lower interest rates, which should support both economic activity and asset prices. In addition to this normal economic cycle, the whole region is benefitting from being relatively isolated from global geopolitical conflicts. We believe that this will lead to both an increase in foreign direct investment and an increase in allocation from investors across the region.

1Source: BlackRock as of 31 August 2023.

29 September 2023

ENDS

Latest information is available by typing www.blackrock.com/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.

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