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The blowout in Mexico’s budget deficit to its largest level since the 1980s last year means that the government has little scope to offset the hit to the economy from US tariffs. There’ll probably be some slippage on the government’s plans to rein in the …
31st March 2025
The US would have to exert a lot of pressure to coerce most major countries into putting large tariffs on goods from China . Curtailing trade with China would have an economic cost and even countries that have closer economic ties with the US would still …
In a further escalation of his trade war, US President Trump on Wednesday announced a 25% tariff on assembled motor vehicles and some key components: engines and engine parts, transmissions and powertrain parts, and electrical components. (See our initial …
28th March 2025
Door is open for another 50bp cut in May The statement accompanying the Mexican central bank’s (Banxico’s) decision to lower its policy rate by another 50bp cut, to 9.00%, today suggests that growth concerns are rapidly overtaking inflation concerns. …
27th March 2025
In this Update, we answer several key questions about how the announced 25% tariffs on US imports of autos and parts might affect the global economy and the US itself. Mexico, Slovakia and Korea are most exposed with up to 1.6% of GDP at risk. But the …
Inflation rises again, more rate cuts on the cards The further rise in Brazil’s headline inflation rate to 5.3% y/y in the first half of March means that, with Copom shrugging off the weakness of the latest activity data and inflation likely to rise …
The protectionist shift in the US will weigh heavily on Mexico’s economy, which at best might just eke out positive growth this year. The rest of the region is less exposed to tariffs, but tight policy and worsening terms of trade will weigh on growth, …
26th March 2025
It is becoming clear that President Trump’s actions are driven by both his fixation on reducing the US trade deficit and his transactional approach to dealing with other countries. So, even though the Trump administration’s ideas to transform the entire …
25th March 2025
The further easing of core services inflation in Mexico in the first half of March combined with recent weak activity data paves the way for Banxico to deliver another 50bp cut at its meeting on Thursday. The headline rate was unchanged from the first …
24th March 2025
Colombia: public finance risks back to the fore The resignation of Colombia’s finance minister Diego Guevara after just over three months in office has thrown the Andean nation into renewed disarray and raises big questions about the outlook for the …
21st March 2025
Overview – Mexico is one of the most vulnerable countries to US import tariffs and, at best, the economy will just about eke out positive growth this year. More sweeping tariffs than we have embedded in our forecasts could easily tip the economy into …
20th March 2025
Brazil’s inflation outlook appears increasingly worrying, and the headline rate is likely to hit around 6% y/y by year-end, which is a bit higher than most expect. That’s likely to trigger a few more rate hikes in the coming months, taking the Selic rate …
Copom shrugs off growth concerns and flags another hike The Brazilian central bank made clear in the statement accompanying today’s 100bp interest rate hike (to 14.25%) that it’s far more concerned about high inflation than weakness in the economy. We now …
19th March 2025
China’s presence in Latin America is increasingly seen as a strategic threat by the US. This Focus uses interactive charts to map out economic, financial and institutional linkages between China and Latin America. While ties have expanded dramatically …
Growth in Chile’s economy slowed to 0.4% q/q in Q4, but more timely monthly activity data suggest that the economy headed into 2025 with more momentum. This, combined with above-target inflation, means that the central bank is likely to stand pat at its …
18th March 2025
Peru’s economy grew strongly in 2024 but we think that a combination of domestic and external headwinds will cause growth to slow by more than most expect over the coming years. But it is still likely to outperform most other major Latin American …
17th March 2025
Will high inflation or weak growth win out? Brazil’s central bank is all but certain to follow through with a clearly-signalled 100bp hike in the Selic rate to 14.25% next week, so all attention will be on the statement: whether it includes forward …
14th March 2025
The vote on Brazil’s 2025 budget (likely next week) will put renewed attention on whether the primary deficit will be kept low enough to comply with the government’s fiscal rules. But the key point is that Brazil’s weak public debt dynamics owe more to …
13th March 2025
Inflation jump keeps door open for more rate hikes The sharp rise in Brazilian inflation to 5.1% y/y in February is likely to be followed by further increases in the coming months. Our base case is that next week’s Copom meeting will see the final (100bp) …
12th March 2025
The announcement by Brazil’s government that it will cut import tariff rates to zero for several food products underscores the government’s concerns about rising inflation and its own falling popularity. While we doubt the measures will do much to stop …
10th March 2025
Mexico may have received a (belated) reprieve from US tariffs this week, but some goods will still be subject to US duties now and there’s still the lingering uncertainty about whether Mexico will face tariffs on 2 nd April. Assuming Mexico faces a tariff …
7th March 2025
Period of strong growth comes to an abrupt end The sharp slowdown in Brazil’s GDP growth, to just 0.2% q/q, in the final quarter of last year confirms that the economy’s recent period of strong growth has come to an abrupt end. We now think the economy …
Another 50bp cut on the cards The rise in Mexico’s headline inflation rate, to 3.8% y/y in February was entirely driven by non-core inflation and therefore won’t be a major concern for the central bank. Indeed, we think that the weakness in the economy …
President Donald Trump's decision to grant a one-month exemption to the Big Three Automakers (Ford, GM & Stellantis) is something of a disappointment given the earlier heavy hints from his Commerce Secretary Howard Lutnick that more widespread relief was …
5th March 2025
The 25% tariff on all US imports from Mexico that came into force today will, if it stays in place, knock Mexico’s economy into recession in the coming quarters. A contraction in GDP this year of 1% would be plausible. And unlike Canada and China (also …
4th March 2025
The events of the past two weeks have called into question whether the US is severing ties not just with adversaries such as China but also allies, including Canada, Mexico and the European Union. This would radically alter the shape of the fractured …
President Donald Trump’s has claimed that there is “no room left’ for Canada and Mexico to avoid the imposition of 25% across-the-board tariffs at midnight tonight and he has reportedly signed a separate Executive Order raising the tariff rate on Chinese …
3rd March 2025
Mexico: tariffs loom (again) The coming days looks set to be dominated by tariffs, with President Trump (after some confusion around the timing) confirmed that the 25% tariff on Mexico (as well as Canada) will “indeed go into effect as scheduled” on …
28th February 2025
Argentina’s President Javier Milei has pledged to remove capital controls but we think that a major change in Argentina’s exchange rate setting before the mid-term elections in October is unlikely. And even then, our sense is that the removal of capital …
26th February 2025
Inflation jumps, Copom to deliver more tightening The jump in Brazil’s headline inflation rate to 5.0% y/y in the first half of February means Copom will almost certainly press ahead with another 100bp hike in the Selic rate to, 14.25%, at its March …
25th February 2025
Odds shifting in favour of another 50bp cut The fall in core inflation in Mexico in the first half of February combined with weak economic activity, means that Banxico is likely to press ahead with another 50bp cut at its meeting next month. The outturn …
24th February 2025
Colombia: lacklustre investment outlook GDP data from Colombia this week confirmed that 2024 was another very weak year for the economy. Growth came in at just 1.7% last year, far below the pre-pandemic average of 3+%. The one bright spot in the Q4 data …
21st February 2025
The decision by the US and Russia to “lay the groundwork” to end the war in Ukraine marks a potentially significant turning point after three years of conflict. Negotiations will take time and the macroeconomic implications will depend on the features of …
18th February 2025
Colombia’s economy strengthened at the end of last year, with GDP expanding at its fastest pace in more than two years. But the combination of tight fiscal and monetary policy, alongside lower oil prices, means that growth is likely to disappoint in 2025. …
Some major Latin American economies are among the most exposed to the steel and aluminium tariffs (Mexico and Brazil) and reciprocal tariffs (Argentina and Brazil) announced recently by US President Trump. But neither Brazil nor Argentina are heavily …
17th February 2025
Chile: BCCh turns hawkish The minutes to Chile’s monetary policy meeting in January published this week, at which interest rates were left unchanged at 5.0%, were surprisingly hawkish. Policymakers made very clear that they’re concerned that inflation …
14th February 2025
Fall in inflation won’t stop Copom from hiking again in March The fall in Brazil’s headline inflation rate in January, to 4.6% y/y, was mainly due a drop in housing inflation and is unlikely to prevent the central bank from delivering another 100bp hike …
11th February 2025
Mexico dodges tariffs… for now The world was convulsed at the start of the week by President’s Trump’s tariff threats on Canada and Mexico, which were postponed for 30 days through last minute deals whereby both countries pledged to beef up border …
7th February 2025
Argentina's President Javier Milei has made impressive progress in turning the economy around, but the key question now is whether these achievements can be sustained. Our EM team held this online briefing to discuss the work Milei still needs to do and …
6th March 2025
Banxico steps up easing as it adopts a more dovish tone Mexico’s central bank stepped up the pace of monetary easing to 50bp at today’s meeting, lowering the policy rate to 9.50%, and the overall communications were dovish. While a tariff-induced drop in …
6th February 2025
Ecuador’s presidential election on Sunday is set to be a tight race, with a second round run-off in April likely to be needed to separate the two leading candidates. Among the next government’s multiple challenges are improving the security situation and …
President Donald Trump’s eleventh-hour decision to delay the 25% tariffs he had threatened to impose on Canada and Mexico is a good reminder of his unpredictable nature. We don’t think Trump’s U-turn necessarily means he’s bluffing about other tariffs – …
5th February 2025
Trump hits Canada, China & Mexico with tariffs President Donald Trump’s decision to impose 25% tariffs on Canada and Mexico and an additional 10% tariff on China from this coming Tuesday, (with the only partial exemption for Canadian energy imports that …
2nd February 2025
Something’s coming… Latin America has been at the forefront of President Trump’s tariff latest threats. These included a (short-lived) announcement that he would slap punitive measures on Colombia, reports that the US will press ahead with a 25% import …
31st January 2025
GDP collapse argues for larger 50bp cut The much larger-than-expected 0.6% q/q drop in Mexico’s GDP in Q4 is likely to strengthen the argument for a 50bp interest rate cut, to 9.50%, at next week’s Banxico meeting. That now looks like the most likely …
30th January 2025
Copom sticks to its promise Brazil’s central bank delivered on its pledge to deliver another 100bp hike to the Selic rate, to 13.25%, and another 100bp increase at March’s Copom meeting is all but certain. For now, we are sticking with our view that that …
29th January 2025
Donald Trump’s return to the White House has sent jitters across the region, with Mexico most vulnerable to his tariff threats while Central American economies could be heavily impacted by his migration plans. Elsewhere in the region, the main impact will …
27th January 2025
This Update answers some key questions about the likely implications of the US imposing 25% tariffs against Canada and Mexico. Our current forecasts are based on the assumption of a 10% universal tariff and hence growing speculation about more aggressive …
The Trump administration’s first week has given policymakers in Latin America – and Mexico in particular – plenty to fret about. Unsurprisingly, migration has been a major focus for President Trump so far. His inauguration speech mentioned “returning …
24th January 2025
Inflation eases, but Copom still set to deliver 100bp hike next week Brazil’s headline inflation rate eased to 4.5% y/y in the first half of January, but signs that underlying price pressures continued to build mean that Copom will press ahead with …
