While Brazil’s president-elect Lula reaffirmed his pledge to crack down on illegal deforestation in the Amazon at the COP27 conference this week, his comments on fiscal policy and his transition team’s fight against the spending cap kept Brazilian assets on the backfoot. Officials have since tried to reassure investors, but the developments support our view that Brazil’s fiscal dynamics will worsen and Copom will be slow to cut interest rates. Elsewhere, there are mounting signs that consumption booms in Colombia and Chile are coming to an end which feeds into our below-consensus growth forecasts for both economies.
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