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A threatened strike at Chile’s copper giant, Codelco, could knock as much as 0.3%-pts off quarterly GDP growth for every week that workers are on strike and worsen the country’s balance of payments strains. What’s more, it may not even be enough to give a …
21st June 2022
Left-wing Gustavo Petro’s win in the second round of Colombia’s presidential election is likely to spook investors and trigger a sell-off in the country’s financial markets. We suspect that Petro will still pursue moderate fiscal austerity, but not enough …
20th June 2022
Banxico set to follow the Fed Given the Fed’s hawkish shift and the recent sell-off in the Mexican peso, we now think that Banxico will step up the pace of tightening with a 75bp rate hike next week, to 7.75%. We argued a few weeks ago that the upcoming …
17th June 2022
While the Brazilian central bank’s tightening cycle is drawing to a close, the statement accompanying yesterday’s 50bp increase in the Selic rate (to 13.25%) left the door open to additional hikes. With Copom sounding a little more worried about inflation …
16th June 2022
Chile is likely to run a current account deficit of 7% of GDP this year, the widest since 1985. Worryingly, this deficit is being increasingly funded by volatile portfolio inflows, making the economy (and currency) particularly vulnerable to swings in …
13th June 2022
Argentina-IMF: inflationary elephant in the room The staff-level agreement between the IMF and Argentina, for the first review of its $44bn deal, gave little assurance that the Fund will knuckle down on the country’s growing inflation and currency issues. …
10th June 2022
Inflation falling but Copom’s tightening cycle has further to run The fall in Brazilian inflation to 11.7% y/y in May suggests that Copom will continue to slow the pace of tightening with a 50bp Selic rate hike, to 13.25%, next week. But with inflation …
9th June 2022
Inflation stabilising points to another 50bp hike Mexico’s inflation rate stabilised at 7.7% y/y in May and we expect that it will trend lower in the coming months. This may temper some of the hawkish sentiment at Banxico. We think that it will stick to …
The guidance in the Monetary Policy Report released by Chile’s central bank today, following on from its 75bp rate hike to 9.00% yesterday, suggests that the tightening cycle has a little further to run. We think that double digit inflation alongside …
8th June 2022
The solid 1.0% q/q rise in Brazil’s GDP in Q1, alongside the strength of the recent survey data, reinforce our view that the economy will fare better than most expect this year. However, we still think that Brazil’s growth prospects remain weaker than …
6th June 2022
Colombia election: may be too early to cheer Populist Rodolfo Hernández is now the favourite to become Colombia’s next president and this has buoyed local financial markets this week. But we think that the scope for a further rally is limited. To recap, …
1st June 2022
The first round of Colombia’s presidential election has set up a close race between left-wing Gustavo Petro and populist Rodolfo Hernández in the second round vote on 19 th June. The vote was a major repudiation of the pro-business governments that have …
30th May 2022
Another Petrobras CEO gone The news this week that Brazil’s President Bolsonaro sacked the CEO of oil giant Petrobras, José Mauro Coelho, provides a worrying sign about the direction of policymaking in the run-up to October’s elections. Mr. Coelho became …
27th May 2022
Colombia’s upcoming presidential election could result in the country’s first left-wing government in recent decades, headed by Gustavo Petro. While he is unlikely to be as radical as many expect, Petro’s policies would lead to higher public debt, higher …
26th May 2022
Copom’s tightening cycle has a little further to run The further rise in Brazilian inflation, to 12.2% y/y in the middle of May, supports our view that there will be another 75pb of hikes in the current tightening cycle (to 13.50%). Investors seem to have …
24th May 2022
Inflation stabilising While Mexico’s headline inflation edged down to 7.6% y/y in the first two weeks of May, this will provide little comfort to the central bank as price pressures remain stubbornly strong. The risks are still skewed towards Banxico …
Chile: moving towards a bigger state Some of the doubts over Chile’s political system have eased after the Constitutional Convention completed a draft of the new charter. But political risks remain high for now, which may keep the Chilean peso on the …
20th May 2022
Q1 contraction and headwinds building The 0.8% q/q contraction in Chile’s GDP in Q1 suggests the economy is coming back down to earth after a stellar 2021, and there is a growing chance of a recession this year. Meanwhile, the current account deficit …
18th May 2022
The solid 1.0% q/q rise in Colombia’s GDP in Q1 suggests the economy came through the Omicron virus wave in good shape and, given the recent surge in oil prices, we expect above-consensus growth of 6.0% this year. That said, a possible victory for …
17th May 2022
Banxico gearing up for more aggressive moves? The hawkish tilt by Mexico’s central bank at its meeting yesterday, when it raised its policy rate by 50bp (to 7.00%), suggests Banxico may soon shift its tightening cycle into a higher gear. The decision to …
13th May 2022
Brazil’s central bank has undertaken the most aggressive tightening cycle of any major economy over the past year, but there has been surprisingly little impact on bank lending. And while we do expect credit growth to weaken, we doubt that it will …
12th May 2022
Inflation hits highest rate since 2003 The jump in Brazilian inflation to 12.1% y/y in April was driven by a broad based increase in price pressures and supports our view that the central bank’s tightening cycle has further to run. We still expect an …
11th May 2022
Broad-based inflationary pressures The rise in Mexico’s headline and core inflation in April, to 7.7% y/y and 7.2% y/y respectively, has a bit further to run in the near term. This will prompt Banxico to deliver another 50bp rate hike this week, to 7.00%, …
9th May 2022
Inflation at multi-decade highs The past week has shone the spotlight on the region’s inflation problem. April CPI figures showed that inflation rose to its highest level since 2000 in Colombia, since 1998 in Peru and since 1994 in Chile. Data out of …
6th May 2022
The communications following the Brazilian central bank meeting yesterday, at which the Selic rate was hiked by 100bp (to 12.75%), confirm that the tightening cycle is nearing an end. But even so, with inflation set to remain firmly in double digits over …
5th May 2022
Signs of life in Brazilian industry The 0.3% m/m increase in Brazilian industrial production in March suggests that the sector made a stronger contribution to GDP growth in Q1 than in Q4, and there are signs of further improvement in April. This supports …
3rd May 2022
An early preview of Colombia’s election Left-wing Gustavo Petro continues to lead in the polls ahead of Colombia’s presidential election next month, and will probably face the conservative Federico Gutiérrez in a run-off vote in June. Both candidates had …
29th April 2022
Solid Q1 but growth to slow sharply in Q2 The pick-up in Mexico’s GDP growth to 0.9% q/q last quarter was largely a result of a strong carryover from late 2021, and the economy was weakening sharply heading into Q2. As the headwinds from high inflation …
Inflation continues to march higher in Latin America, most recently driven by surging food prices owing to poor domestic weather conditions and rising global agricultural prices. This has led to unrest in Peru, and there is growing political pressure to …
27th April 2022
Inflation jump to keep Copom tightening The jump in Brazilian inflation to 12.0% y/y in the middle of April, coming alongside the recent fall in the real, means Copom will almost certainly raise the Selic rate by another 100bp (to 12.75%) when it meets …
Brazil’s election race starts to narrow While Brazil’s presidential election is some way off, the race has taken centre stage in the past week. Former president Lula of the left-wing Workers’ Party has been the front-runner in opinion polls for around a …
22nd April 2022
Price pressures intensifying The rise in Mexico’s inflation to 7.7% y/y in the first two weeks of April was driven by a broad based strengthening of price pressures, which will be a concern for the central bank. This, alongside the increasingly hawkish US …
Overview – The surge in commodity prices will drive stronger regional growth than the consensus expects this year, but not all economies in Latin America will benefit. While Brazil and Colombia will see a terms of trade windfall – we expect GDP growth in …
21st April 2022
Chilean pensions withdraws: here we go again… The political fight over a fresh round of pension withdrawals in Chile underlines the government’s struggle to wean the economy off accommodative policies. This will heap more pressure on the central bank to …
14th April 2022
The sharp rally in the Brazilian real against the US dollar since the start of the year has shown tentative signs of ending, and we think that it will weaken a bit through the end of 2022. The Brazilian real has appreciated by nearly 19% against the US …
Depending on which activity survey you look at, Brazil’s economy either staged a rapid recovery in March or slowed. A comprehensive look at the latest figures suggests that the latter is more likely. One clearer message is that price pressures remain very …
12th April 2022
Industrial recovery stalling The disappointing 1.0% m/m fall in Mexico’s industrial production in February was partly because a temporary boost to mining output at the start of the year reversed course. But there were broader signs of weakness in industry …
11th April 2022
Peru: protests & political peril? The mass protests this week in Peru, triggered by rising inflation, are likely to lead to a further shift towards looser fiscal policy and a larger political risk premium on local financial assets. The demonstrations were …
8th April 2022
Inflation spikes to keep central banks in tightening mode The larger-than-expected rises in inflation in both Chile and Brazil last month (to 9.4% and 11.3%, respectively) support our view that their central banks will raise interest rates by more than …
Inflation has not yet peaked The rise in Mexico’s headline and core inflation in March, to 7.45% y/y and 6.8% y/y respectively, has further to run in the near term as food and energy inflation edges higher. Broader price pressures will also remain strong, …
7th April 2022
Mexican President López Obrador is likely to remain in power after a recall referendum on his position this Sunday, which may embolden him to double down on his interventionist agenda. While a radical shift in policymaking is unlikely, the prospect of …
5th April 2022
Brazil: high inflation raises wage spiral, strike risks The start of a general strike by workers at Brazil’s central bank today to push for an inflation-busting 26.3% pay rise has mainly been a matter of concern for analysts because of the practical …
1st April 2022
Industry still a weak point in the recovery The better-than-expected 0.7% m/m rise in Brazilian industrial production in February was supported by a rebound in mining, which is likely to prove temporary. And surveys point to renewed weakness last month. …
High commodity prices caused by the war in Ukraine have driven a rally in Latin American currencies and equities this month, and are causing exports to surge. Weekly trade figures from Brazil and Chile show that exports were up by 25-40% y/y in early …
31st March 2022
One issue the IMF seems to be glossing over in its latest deal with Argentina (the 22 nd in the country’s history) is that the currency looks overvalued. But the adjustment needed to improve the external position and foster stronger growth will aggravate …
30th March 2022
The Monetary Policy Report released by Chile’s central bank today, following on from its 150bp rate increase to 7.00%, suggests that its tightening cycle is winding down to a close. However, we think that high inflation alongside Chile’s growing external …
Amlo threatens Mexico’s institutions again Yesterday’s comment by Mexican President López Obrador (Amlo) that Banxico would raise its policy rate by 50bp , four hours before the official decision, is not a big deal in itself. But it adds to the sense that …
25th March 2022
Inflation set to jump, Copom to continue hiking The stronger-than-expected Brazilian inflation reading for the first half of March, of 10.8% y/y, will be followed by a jump to 11.5-12.0% in the near term as recent fuel price hikes filter through. While …
Yesterday’s unanimous vote by Mexico’s central bank to raise the policy rate by 50bp, to 6.50%, came as no surprise since it had already been revealed by President López Obrador (Amlo) earlier in the day. While we wouldn’t go as far as to say the central …
Core inflation continues to march higher While Mexico’s headline inflation stabilised at 7.3% y/y in the first half of March, the further rise in the core rate to 6.6% y/y suggests that the central bank is still struggling to keep a lid on price …
24th March 2022
