COVID-19 and Its Impact on the Latin American Retail Forex Landscape

Latin America is a region of interest for many retail forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term brokers worldwide who want to settle their business in a zone that keeps gathering pace in terms of popularity. The metrics speak by themselves, and European brokers, for example, have started establishing offices across LatAm.

Although it is not bigger than Australia or other continents, Latin America is a promising region that keeps catching the attention of businesses in the retail forex sphere. According to metrics extracted by the Finance Magnates’ Intelligence Team via cPattern, the monthly deposit average in Peru is the biggest one in the region, with $12,957.9 approximately, per data for January 2022.

Such a number is followed by Brazil with $9,258.8 and then by Argentina with $7,200.5, despite that country is facing higher inflation rates and restrictive measures when dealing with foreign exchange transactions.

Emerging Trends and Covid-19

But, how can these trends be contextualized in the Latin American landscape? Amanda Bazán, the Business Development Manager for Latin America at Axi, explained the average profile of the retail forex investor in the region: “Today, more people in Latin America are looking to invest their money in financial products other than traditional banking. This is directly related to the diversity of investment options that exist, such as the over-the-counter market and forex, which promise greater profitability without requiring significant capital and bureaucratic complications.”

Bazán then elaborated on the Covid-19 contingency and how it affected such a trend: “This trend was reflected in an increase during the year 2020, in the framework of a time of great uncertainty generated by the COVID-19 pandemic, making it impossible to consider a traditional business as an investment. In this way, this was the turning point for investments in Latin America, as a powerful change in financial behavior was set in motion associated with the inclusion of people in the digital economy for the first time. It is mainly for this reason that trading in a fully decentralized market was presented as a more attractive option since foreign markets are more stable and profitable to invest in.”

According to the broker’s metrics, the Business Development Manager for Latin America at Axi added that such a trend became more defined in the second quarter of 2020 when many brokers tripled their volume of clients and daily transactions.

Metrics from the Finance Magnates’ Intelligence Team noted that Uruguay has the biggest average number of transactions made by an average trader in the region, with 269, followed by Brazil with 199 and then by Argentina with 185.3 on a monthly basis. When it comes to the average size of a single deposit made to an FX/CFD account, in this case, during January 2022, Peru had the biggest share in Latin America with $1,825.1, followed by Brazil with $1,262.6 and then by Chile with $1,214.3.

Growth Potential

Jarek Duque, the Business Development Officer for Latin America at Global GT, aligns with the Covid-19 contingency affecting the retail forex investing trends in the region and talked about the emergence of crypto’s CFDs.

“Since Covid-19, we have seen a ‘boom’ in cryptocurrencies Cryptocurrencies By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw By using cryptography, virtual currencies, known as cryptocurrencies, are nearly counterfeit-proof digital currencies that are built on blockchain technology. Comprised of decentralized networks, blockchain technology is not overseen by a central authority.Therefore, cryptocurrencies function in a decentralized nature which theoretically makes them immune to government interference. The term, cryptocurrency derives from the origin of the encryption techniques that are employed to secure the netw Read this Term which awakened an important competitor for Forex Brokers. Many are totally static about the situation and don’t know how to adapt to this moment; others are just beginning to incorporate crypto CFDs but are still distant from this ‘boom.’ So, we decided to connect the best of both worlds to face this new environment allowing people to fund their accounts with crypto and operate the markets as if they were dollars or euros for the finest trading experience,” he said.

In addition, he elaborated on the potential for growth that this market has in Latin America: “What’s also worth noting is the enormous potential we see in mature markets, where people who have invested in the financial markets now reach the 70% of the economically active population, a percentage that in Latin America does not even exceed the 5% with education being the only barrier to that. Despite this, let’s not forget to highlight the evolution of the market since before the Covid, it reached only 1%, so the numbers tell us that the industry is growing. Therefore, it allows further development of the market in first-world countries.”