OREANDA-NEWS. December 23, 2015. Fitch Ratings has published its Latin America 2016 Outlook Compendium report. This report provides highlights of Fitch's outlook for corporates in Brazil, Chile, Colombia, Mexico and Peru, as well as 20 different industries in the region. The compendium report also includes credit statistics by rating category, as well as by country.

"Corporates in Latin America will remain under intense pressure in 2016," said Joe Bormann, a Managing Director at Fitch. "The outlook remains overwhelmingly negative for corporates in Brazil and Peru. In Brazil, Fitch projects that downgrades will outpace upgrades by a ratio of 10 to one, while in Peru the ratio should be five to one."

The combination of declining demand, increasing unemployment, persistent high inflation and interest rates, depressed commodity prices, foreign exchange volatility and tight credit markets has created a nightmare scenario for Brazilian corporates. Political turmoil remains a negative headwind that will drag down the prospects of consumer and business confidence improving.

In Peru, the sluggish economy, low metal prices and the presidential elections will make 2016 more challenging for corporates. The depreciation of the currency has led to a rise in household debt and a weakening of consumer purchasing power. Fitch currently projects that GDP growth will be 3.8% in 2016. If the impact of El Nino is substantial, this figure will likely be revised downward.

Across the region, corporates have responded to the negative headwinds by slashing capex and cutting dividends. The median free cash flow measure improved in every rating category during the first six months and is now positive for the 'BB', 'BBB' and 'A' rating categories. The most notable improvements were witnessed in Brazil and Peru. In Colombia, capex levels continue to be elevated due to favorable economic conditions, and free cash flow for corporates remains highly negative.