Filtered by Subscriptions: Latin America Economics Use setting Latin America Economics
Easing core inflation and peso recovery leave 25bp cut in play The larger-than-expected rise in Mexico’s headline inflation rate, to 4.8% y/y in October, was driven entirely by a jump in agricultural price inflation. Core inflation edged down last month …
7th November 2024
Copom hikes again Brazil’s central bank hiked the Selic rate for a second consecutive meeting, by 50bp to 11.25%, today but this has more to do with the domestic macro backdrop and shoring up monetary policy credibility than a response to the market …
6th November 2024
The rise in Brazilian local currency government bond yields this year is now on a scale similar to that seen during its fiscal crisis in 2015. Back then, bond yields only started to fall back when wholesale political change was on the horizon. That’s not …
4th November 2024
Mexico in the firing line The US election race is heading into the final stretch. All our analysis on what it means for EMs can be found on our dedicated webpage here . For Latin America, the implications for Mexico are largest. Both Harris and Trump …
1st November 2024
November rate cut hinges on US election The stronger-than-expected 1.0% q/q expansion in Mexico’s economy in Q3 confirms that the economy pulled out of the slump seen in the first half of the year last quarter. We still think the conditions are …
30th October 2024
Latin American financial assets have come under pressure amid the recent rise in US Treasury yields and a Trump victory in next week’s US election would probably result in a further sell-off. Policymakers’ reaction would depend on how sharp the currency …
All our analysis on how the US election could affect emerging market economies can be found on our dedicated webpage . A key risk for Mexico from the US election is that a Trump administration could withdraw from the USMCA free-trade agreement. In a …
29th October 2024
Investor sentiment towards Argentina has improved significantly in the past few months and it now looks like the government will probably be able to make the sovereign debt repayments that are due next year. But there are still no real signs that the …
28th October 2024
Brazil: fiscal dominance on the cards? Policymakers at Brazil’s central bank have sounded increasingly alarmed in recent media comments. Part of that reflects concerns that the economy may be overheating. We looked at that in detail in a piece earlier …
25th October 2024
Banxico’s space to cut hinges on US election The fall in Mexican core services inflation in the first half of October in principle gives Banxico space to press ahead with another 25bp rate cut next month, but much will hinge on the outcome of the US …
24th October 2024
A victory for Donald Trump in the US election would probably result in higher US Treasury yields and a stronger dollar. That’s an environment in which central banks in EMs with strained balance sheets (notably Turkey) could hike rates and others that are …
Recent threats by Donald Trump to impose tariffs on Mexico’s vehicle sector could just be pre-election bluster or an attempt to get concessions from Mexico. But if implemented, they would deal a big blow to Mexico’s economy – a 0.6% drop in real GDP for …
23rd October 2024
Uruguay‘s election on Sunday is unlikely to change the path of economic policy but will have big implications for relations with China. Arguably more important than the election itself is the outcome of the pension referendum taking place at the same time …
Concerns that Brazil’s economy is overheating are justified – to an extent. But the economy looks very different now compared with the last bout of overheating in the early 2010s. As a result, while inflation pressures are likely to remain uncomfortably …
21st October 2024
Brazil: trying to tighten the purse strings (again) A proposed “spending review” in Brazil would, if approved by President Lula, ease fears about the state of the public finances and reduce the chances of aggressive rate hikes by the BCB. There are three …
18th October 2024
Several EMs have reached provisional agreements with creditors to restructure their sovereign debts in recent months, including Zambia, Ukraine, Sri Lanka and Ghana. In principle, restructurings should pave the way for improved fiscal positions, stronger …
17th October 2024
Latin America has played an important role in absorbing China’s export surge, which is generating concern among local policymakers. But the response is likely to vary across the region. Governments in Mexico and some smaller Central American countries …
15th October 2024
Worrying developments in Mexico There had been a lot of debate about what to expect from Claudia Sheinbaum ahead of her inauguration as Mexico’s (first female) president and her first two weeks in office have provided the first insights into where her …
11th October 2024
Brazil inflation rises, more Selic hikes incoming The rise in Brazil’s headline inflation rate to 4.4% y/y in September was mainly due to drought-related effects on food and electricity prices but, even so, it will reinforce the hawkishness of Copom and …
9th October 2024
Fiscal risks cloud the outlook for rates in Colombia The decision by Colombia’s central bank (BanRep) this week to maintain the pace of easing with a 50bp cut, to 10.25%, rather than deliver a larger 75bp cut suggests that officials are increasingly …
4th October 2024
Drought conditions across parts of Brazil are not yet at the stage where there is a threat of major disruptions to electricity supply, but it has already prompted electricity prices to be hiked and there may be upward pressure on food inflation if …
3rd October 2024
We held a Drop-In yesterday to discuss what investors should expect as Claudia Sheinbaum takes over the presidency in Mexico. A recording of the event can be found here . This Update answers some of the questions that we received, including several that …
2nd October 2024
Trump lashes out at Mexico Comments from Donald Trump this week highlight how big a threat his return to the White House would pose to Mexico’s free trade relationship with the US. Earlier this week, Trump threatened to hit John Deere with a 200% tariff …
27th September 2024
Inflation and growth backdrop supports further easing Mexico’s central bank delivered another 25bp interest rate cut at today’s meeting, to 10.50%, and the communications suggest that it will continue to ease policy over the coming months. We expect the …
26th September 2024
Growth across Latin America is likely to be weaker than most expect in the next couple of years amid tight policy and worsening terms of trade. Even so, inflation is likely to stay above central banks’ targets in many countries. This means that monetary …
25th September 2024
Inflation falls, but Copom still on course to deliver further rate hikes The larger-than-expected decline in Brazil’s headline inflation rate, to 4.1% y/y, in the first half of September is unlikely to prevent Copom from raising interest rates further …
Fall in inflation paves the way for another rate cut The larger-than-expected fall in Mexican inflation in the first half of September, to 4.7% y/y, supports our view that Banxico will continue its easing cycle with another 25bp cut on Thursday. The …
24th September 2024
Milei’s ‘zero deficit’ budget The cornerstone of Argentine President Milei’s draft 2025 budget is a continuation of his ‘zero deficit’ policy, which implies a primary surplus of 1.3% of GDP in 2025 (versus 1.5% this year). But this looks optimistic, for a …
20th September 2024
Overview – Tight policy and deteriorating terms of trade will keep growth across Latin America subdued and we think that the region will underperform other parts of the emerging world – as well as consensus expectations – over the next couple of years. …
19th September 2024
Copom hikes, leaves door open to more Just four months after last lowering interest rates and hours after the US Federal Reserve started its easing cycle with a bang, Brazil’s central bank delivered a 25bp hike to the Selic rate, to 10.75%, as officials …
18th September 2024
Despite the peso’s recent rebound, we suspect that an unstable political and economic outlook means that it, and Mexican financial assets more generally, will perform poorly over the next year or so. Since early April, when the MXN/USD rate hit its lowest …
17th September 2024
Mexico: judicial reform clears final major obstacle Outgoing Mexican President Amlo’s controversial judicial reform passed the final major hurdle this week with approval in the senate. This has contributed to a sharp fall in the peso – the currency is …
13th September 2024
The Fed’s upcoming monetary easing cycle will probably provide less of a tailwind to EMs than is widely thought. While it’s likely to give some central banks (such as in the Gulf, Mexico and Indonesia) a green light to lower interest rates, EM rate …
12th September 2024
The swearing in of a new congress next month gives Mexico’s outgoing president, Amlo, a one month window to re-start plans to pass controversial planned constitutional amendments. At the very least, some form of judicial reform seems quite likely which …
11th September 2024
Further rise in services inflation seals the deal on a rate hike Brazil’s headline inflation dropped back to 4.2% y/y in August, but there was yet another increase in underlying services inflation which sets the stage for an interest rate hike at next …
10th September 2024
The larger-than-expected fall in Mexico’s headline inflation rate, to 5.0% y/y in August, alongside the likelihood of a Fed rate cut next week, mean that Banxico is on track to lower its policy rate by another 25bp at its meeting later this month. The …
9th September 2024
The strength of Brazil’s economy in Q2 means the central bank (BCB) now looks set to raise interest rates, having cut rates as recently as May. Still, monetary tightening is likely to be modest, of around 150bp (to 12.00%), and will end early next year. …
6th September 2024
The tightening of Brazil’s labour market and pick-up in wage growth over the first half of the year has supported a consumer boom. We expect conditions to cool over the coming quarters but, for now, the buoyant labour market is adding to the central …
5th September 2024
Bumper growth in Q2 tilts odds towards rate hike The much stronger-than-expected Brazilian GDP figure for Q2, of 1.4% q/q, means that the economy now appears to be on course to expand by 3% over the year as a whole. The flip side is that it will heighten …
3rd September 2024
Lula taps Galípolo In a move that had been long signalled, Brazil’s President Lula announced this week that Gabriel Galípolo is his nominee to take over at the helm of the central bank when the term of current governor Roberto Campos Neto finishes at the …
30th August 2024
Most Latin American economies appear to have headed into Q3 with little momentum and regional growth is likely to remain sub-2% this year and next. With inflation set to remain above target for a while yet, easing cycles in many countries will be …
28th August 2024
The small fall in Brazil’s headline inflation rate, to 4.35% y/y in the first half of August, alongside the prospects of a Fed rate cut next month, means that Copom is most likely to leave rates unchanged (rather than hike) at its meeting next month. The …
27th August 2024
Mexico: likelihood of September cut increasing The inflation and activity data out of Mexico this week, alongside the minutes to the central bank’s August meeting, mean that Banxico is likely to continue its easing cycle with a 25bp cut, to 10.50%, at its …
23rd August 2024
You can find all our research on Mexico's election on a dedicated webpage . The swearing in of a new congress next month gives Mexico’s outgoing president, Amlo, a one month window to re-start plans to pass controversial planned constitutional …
22nd August 2024
The fall in Mexican inflation in the first half of August, to 5.2% y/y, alongside clear signals from the Fed that it will start loosening monetary policy next month, supports our view that Banxico will continue its easing cycle with another 25bp cut in …
The prevailing view that, over the medium term, Colombia will maintain its position as Latin America’s fastest-growing major economy looks overly optimistic in light of the collapse in its savings and investment rates. GDP growth is more likely to come in …
20th August 2024
Brazilian assets have generally underperformed other EMs so far this year, but measures of risk premia still appear low to us, especially given concerns over public finances. While bonds may offer large gains by end-2025, our downbeat view on commodity …
The 0.6% q/q fall in Chilean GDP in Q2 is mainly payback for a strong Q1, and we expect a return to positive growth in Q3. Still, the Q2 figures should the central bank confidence to deliver a couple of more cuts this year. The outturn was in line with …
19th August 2024
Winds of change in Venezuela? Hopes for a regime change in Venezuela have risen after leftwing governments in Brazil and Colombia made several suggestions to overcome Venezuela’s impasse, including holding fresh elections or forming a transitional …
16th August 2024
Strong domestic demand means BanRep likely to maintain the pace of easing The Colombian economy isn’t nearly as weak as the meagre 0.1% q/q rise in headline GDP in Q2 would suggest; there was a large drag from net trade while domestic demand remained very …
15th August 2024
