Latin America (LATAM) has long remained an undiscovered region in the Contracts for Difference (CFD) industry, presenting both significant potential and a host of risks and obstacles. In the latest Intelligence Report for Q3, Finance Magnates explores two of the most compelling destinations in this dynamic region.
Retail FX/CFD, initially taking root in Europe, quickly spread to the US, Australia and Japan. However, these markets have largely reached saturation. A decade ago, retail brokers began scouting for new territories, and one region that consistently drew interest was LATAM. Yet, the CFD industry hasn’t quite achieved the success that everyone expected. Today, another wave of interest is emerging, with Brazil and Mexcio appearing prominently on the radar of retail FX/CFD brokers.
In the ever-evolving global financial arena, Brazil and Mexico stand as pivotal players, wielding substantial influence on both regional and international scales. These two economic powerhouses have emerged as key drivers of growth and stability in Latin America, a region characterized by its dynamic and diverse markets. Their strategic geographical locations, large consumer bases, and robust economic infrastructures have solidified their positions as integral contributors to the global economy.
Why Brazil and Mexico?
Both Brazil and Mexico have large populations: 204 million and 131 million in 2023, respectively, according to the IMF. This fact alone creates unbelievable potential for business success. The only obstacles are regulations, or, to be specific, the lack thereof. However, the absence of proper CFD regulations does not necessarily mean a lack of business opportunities. With proper regulations in place, doing business would be both easier and more challenging due to the restrictions, controls, and growing competition from local and international brokers.
Let's do the math. In the UK, which has the oldest and most stable CFD market in the world, there were about 67 million people as of 2022. According to many sources, the UK CFD market has around 150,000 active accounts, depending on the period of the year. That means that around 0.2% of the population are active CFD traders. When we apply 0.2% to a population of 131 million in Mexico and 204 million in Brazil, we get 290,000 and 450,000 active accounts, respectively.
In reality, replicating the UK's robust CFD market success is not straightforward. The UK market's size is attributed to a combination of its extensive history, the high level of financial literacy among its traders, stringent regulations, and a supportive business environment that's bolstered by the residents' higher income levels. Conversely, Brazil, along with other nations, confronts numerous hurdles, including regulatory gaps, limited financial education, and stringent controls on money and payments.
As Nader Nurmohamed, the COO at Hantec Markets Group, noticed: "CFDs are still a relatively new product to the region and that comes with its own set of challenges. Awareness is only starting to grow, retail confidence is still recovering from past scandals, and regulatory frameworks are in the very early stages of evolution. So, while there is intense competition in this region, the path ahead is still being laid out compared to other more mature industries.”
To get the full article and the bigger picture on the future of the FX/CFD industry in Brazil and Mexico, get our Latest Quarterly Intelligence Report
