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The latest data suggest that current account deficits in the region’s major economies narrowed towards the end of last year, which is particularly good news for Colombia and Chile. Both were running alarmingly large shortfalls last year which helps to …
22nd February 2023
Colombia: here comes the state Concerns about the direction of policymaking under President Petro have once again lead to a sharp sell-off in Colombia’s financial markets this week. The catalyst this time was the government’s health reform bill, which was …
17th February 2023
The Mexican peso’s outperformance since the start of 2022 has pushed up its valuation substantially, and we think that this leaves it vulnerable to sharp falls against the US dollar if, as we expect, the US economy falls into recession later this year. …
16th February 2023
Inflation across most of Latin America has peaked, but this is mainly an energy story – core price pressures are proving much more persistent. And underlying price pressures are likely to ease only gradually over the coming months, which will keep …
Strong 2022 to give way to a disappointing 2023 The stronger-than-expected 0.7% q/q expansion in Colombia’s GDP in Q4 confirms that the economy was a regional outperformer over 2022 as a whole. But the expenditure breakdown suggests that the economy …
15th February 2023
Anecdotal reports and high frequency data suggest that ongoing civil unrest in Peru is beginning to choke off activity at key copper mines. But, if recent history is anything to go by, output can rebound rapidly so long as any closures are brief. The …
Core inflation worries prompt hawkish response This week’s central bank communications suggest that worries about strong underlying price pressures are putting policymakers in a more hawkish mood than we had anticipated. Admittedly, Peru is something of …
10th February 2023
Banxico hikes by 50bp, and flags another increase Mexico’s central bank delivered a larger-than-expected 50bp interest rate hike, to 11.00%, today most probably because the recent uptick in services inflation spooked the Board. Another rate hike (probably …
9th February 2023
Rise in Mexican inflation paves the way for 25bp rate hike later today Mexico’s headline inflation rate edged up to 7.9% y/y in January, setting the scene for Banxico to raise interest rates by 25bp, to 10.75%, later today. We think that this will mark …
Brazil’s president Lula seems to be on the warpath in his quest for lower interest rates and now has the central bank’s (BCB’s) independence in his sights. Were Lula to get his way, the experience from Brazil in the early 2010s and elsewhere in the …
8th February 2023
The newly-appointed head of the Brazilian development bank, BNDES, takes charge today and is likely to be under pressure to increase lending. But the experience from the 2000s suggests that credit provided by BNDES will do little to alleviate the …
6th February 2023
Survey data point to weak start to 2023 Data published this week provided the first signs of how the region’s economies fared at the start of this year. And it’s not good news. In Brazil, the FGV confidence indicators all dropped back in January, with …
3rd February 2023
Industry leads Brazil’s slowdown The stagnation in Brazilian industrial production in December is consistent with a 0.5% q/q fall in output over Q4 as whole, indicating that the sector was a drag on the economy. And the early signs are that January was no …
The suggestion by Brazil’s President Lula that the central bank’s inflation target should be raised is likely to be a bigger concern for the second half of his presidential term (2025-26) than the first half (2023-24). While Lula seems to be motivated by …
2nd February 2023
The statement accompanying yesterday’s Brazilian central bank meeting, at which the Selic rate was left at 13.75%, hinted that interest rates may need to stay at their current high level into next year. We recently pushed back the timing of the first rate …
The slowdown that we expect in Brazil’s economy should take some steam out of the labour market, but it looks like it won’t be enough to stop wages from rising at a rapid pace. This appears to be a bigger risk to the inflation outlook than the fiscal …
1st February 2023
The minutes to the Colombian central bank meeting last Friday revealed that worries about the growth outlook will bring the tightening cycle to a close soon. We expect the central bank to deliver one final 50bp hike, to 13.25%, at the next meeting in …
Economy now in a slowdown The 0.4% q/q rise in Mexican GDP in Q4 suggests that the economy held up better than its Latin American peers towards the end of last year. But even so, the economy in the midst of a slowdown, which we expect to worsen in the …
31st January 2023
The outlook for Latin America has turned more positive at the start of the year as China has shifted away from its zero-Covid policy and commodity prices have rallied. But this comes against a backdrop in which regional growth is showing clearer signs …
30th January 2023
Common currency talk highlights dollar concerns The week kicked off with the surprise news that Argentina and Brazil are looking at establishing a common currency to facilitate trade between the two countries. Further reports have clarified that, rather …
27th January 2023
China’s rapid move away from zero-Covid and the resulting rally in commodity prices present upside risks to our GDP forecasts, but we remain of the view that 2023 will be a challenging year for Latin American economies and that growth will slow sharply. …
26th January 2023
Persistent price pressures may prompt more tightening from Banxico The small rise in Mexico’s headline inflation rate, to 7.9% y/y, in the first two weeks of January means that there is a growing risk that Banxico delivers a bit more tightening beyond the …
24th January 2023
Brazil: watch the labour market Lula has continued to spook investors in Brazil. This week he once again disparaged the focus on fiscal responsibility and also questioned the benefits of central bank independence. And more market-friendly words from his …
20th January 2023
Widespread unrest across several regions in Peru could make the central bank’s job of reducing above-target inflation even more difficult while also threating to hamper activity in some of the country’s key industries, such as mining and tourism. Peru’s …
16th January 2023
Brazil riots: reflecting on the fallout The riots in Brasília last Sunday thankfully ended quickly. And the country’s financial markets, after losing ground on Monday, have rebounded over the course of this week. Investors have been buoyed by the fact …
13th January 2023
Industry stagnated towards end of last year, 2023 to be tough Mexico’s industrial sector stagnated in November as higher construction and utilities output offset a slump in manufacturing and mining. More timely survey indicators have continued to hold up …
11th January 2023
Inflation still too high for Copom to breathe easily The higher-than-expected Brazilian inflation reading of 5.8% y/y last month, coming alongside growing fiscal concerns, will give Copom more cause to delay the start of its easing cycle. The outturn was …
10th January 2023
Inflation falls again, Banxico to end tightening cycle in February Mexico’s headline inflation rate was unchanged at 7.8% y/y in December but policymakers at the central bank will have taken comfort from the fact that core price pressures are finally …
9th January 2023
The implications of the invasion of Brazil’s congress by protestors yesterday are mainly political. But the riots could result in a long-lasting risk premium on the country’s financial assets, particularly if they prompt President Lula to double down on …
A worrying first week of Lula’s presidency The biggest event in the region this week was the inauguration of Brazil’s president Lula on 1 st January. And his first actions (and those of some of his cabinet) provide reasons for investors to be concerned …
6th January 2023
Industry stuck in the doldrums The 0.1% m/m fall in Brazilian industrial production in November and the weak surveys for December provide further evidence that the economy is in the midst of a slowdown. But the central bank will wait for further signs of …
5th January 2023
A year to write home about 2022 was in many ways a memorable year for Latin America. With Argentina’s World Cup victory the trophy returned to Latin America for the first time in 20 years. And it’s been a good year off the pitch too. GDP growth has …
23rd December 2022
Big falls in inflation now behind us The Brazilian mid-month inflation figure for December was unchanged from the November full-month figure of 5.9% y/y, which provides an early sign that the big falls in inflation have now happened and it will be a much …
Fall in inflation paves the way for end of tightening cycle The second consecutive fall in Mexico’s mid-month inflation, to 7.8% y/y in December, confirms that inflation is now on a downward trajectory. This will allow Banxico to draw its tightening cycle …
22nd December 2022
Chile’s constitutional re-write: Attempt number two After three months of intense negotiations, Chile’s government and opposition parties agreed on a new process to re-write the constitution. This differs from the previous one (which led to a draft …
16th December 2022
Banxico delivers smaller 50bp dose of tightening, end of cycle close Mexico’s central bank slowed down the pace of tightening with a 50bp interest rate hike, to 10.50%, today and the accompanying statement made clear that the tightening cycle will soon …
15th December 2022
This is part of a series of reports outlining our key macro and market calls for 2023. Click here to view the full series. Our latest EM Outlook can be found here . EMs will experience one of the broadest slowdowns in GDP growth in 2023 since the 1990s. …
Peru ’s newly-inaugurated President Boluarte’s call to bring forward the next general election to 2024 has failed to pacify protesters who took to the streets following the impeachment of President Castillo last week. The unrest is already causing …
14th December 2022
Industry to struggle as US enters recession Mexico’s industrial sector posted a solid 0.4% m/m rise in output in October but the big picture is that industry has stagnated since the middle of this year. And while more timely survey indicators have held up …
12th December 2022
Political chaos rattles Peru It’s been a tumultuous week in Peru that culminated in the ousting of left-wing President Pedro Castillo on Wednesday after he attempted to stage a “self-coup”. He was arrested on charges of rebellion and conspiracy (and …
9th December 2022
Inflation eases further, but Copom’s eyes are on fiscal risks The further fall in Brazilian inflation, to 5.9% y/y, last month will help to ease the squeeze on household incomes. But with the prices of many core goods and services still rising rapidly …
Inflation drops back, but stronger core rate to prompt a bit more tightening Mexico’s headline inflation rate continued to drop back to 7.8% y/y in November but this was driven by weaker non-core inflation; core inflation actually strengthened further. We …
8th December 2022
The impeachment of Peru’s controversial (former) left-wing President Pedro Castillo might bring short-term relief to investors, but it does not solve Peru’s governability issues. With policy paralysis here to stay, business confidence and investment are …
The statement accompanying the Brazilian central bank’s meeting yesterday, at which the Selic rate was left at 13.75%, made clear that policymakers are increasingly concerned about fiscal loosening when president-elect Lula takes power. This reinforces …
Overview – The recent resilience of economic activity in Latin America will not last and we think that growth will slow by more than most expect in 2023. Having been among the first to tighten monetary policy last year and with interest rates well above …
7th December 2022
President-elect Lula’s plans to increase spending could raise Brazil’s public debt ratio by an additional 10% of GDP by the end of his presidential term in 2026. And while it seems likely that these plans will get diluted in congress, they still …
6th December 2022
Venezuela: a baby step towards boosting oil output A meeting between the Venezuelan government and the opposition last weekend prompted the US to take the first steps towards easing sanctions. But there’s still a long way to go before sanctions are …
2nd December 2022
A fleeting recovery The better-than-expected 0.3% m/m rise in Brazilian industrial production in October only partly reversed the falls in output in the previous few months. And surveys suggest that the sector fared much worse in November. This supports …
Slowdown now underway The weaker-than-expected Brazilian Q3 GDP growth figure, of 0.4% q/q, highlights that the weakening global economy and higher interest rates are bringing the recent period of strong growth to an end. And leading indicators suggest …
1st December 2022
Banxico tightening debate set to heat up Data and developments this week suggest that the debate at Banxico over when to end the tightening cycle is set to heat up. The risks are tilting towards rates rising a bit more than we currently expect. …
25th November 2022
