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The decision by Argentina’s central bank to limit the extent to which the nominal exchange rate will be allowed to weaken this year raises the risk that the peso becomes overvalued. Meanwhile, the announcement of price controls expected later today adds …
17th April 2019
Jair Bolsonaro’s government has put forward an impressive set of plans to reform Brazil’s economy, but souring relations with congress reinforce our view that these will be diluted. Perhaps of more immediate concern, the economy has stalled and government …
12th April 2019
The decent 0.3% m/m rise in Mexican industrial production in February suggests that the sector made a small positive contribution to growth in Q1, having exerted a drag of about 0.3%-pts in Q4. This supports our view that the Mexican economy will post …
11th April 2019
The Argentine central bank’s pledges to keep monetary policy tighter for longer have helped to stave off a run on the currency in recent weeks. But by keeping the economy weak ahead of October’s election, the measures will weigh on President Macri’s …
10th April 2019
The larger-than-expected increase in Brazilian inflation, to 4.6%y/y in March, was driven by a rise in food and petrol inflation, both of which should prove temporary. Copom is likely to look through this and we continue to expect the Selic rate to remain …
The small rise in Mexican inflation last month, to 4.0% y/y, is likely to keep Banxico hawkish in the very near term. But the headline rate should resume its decline in H2, paving the way for interest rate cuts. … Mexico Consumer Prices …
9th April 2019
Chilean inflation picked up from 1.7% y/y in February to 2.0% y/y in March, but we still think that the central bank is unlikely to restart its tightening cycle until 2021. … Chile Consumer Prices …
8th April 2019
President Trump’s renewed threats to a) place a 25% tariff on vehicle imports from Mexico and b) close the southern border would, if acted on, deal a substantial hit to Mexican GDP. But we think they probably largely reflect pre-election bluster. And with …
5th April 2019
GDP growth in Latin America probably reached a trough in Q1, but the pace of recovery will be slower than most expect. The prices of most of the region’s commodity exports will either fall or remain low. At the same time, global growth is set to stay …
4th April 2019
The best that Mexico’s state-owned oil company, Pemex, can hope for in the coming years is a slower pace of decline in crude production. Many of its shallow oil fields are maturing and the government seems more intent on ploughing money into a new …
2nd April 2019
The 0.7% m/m rise in Brazilian industrial production in February confirms that industry is recovering from a very weak period that was affected by one-off drags in the auto and petroleum refining sectors. But the pace of economic growth is still extremely …
The statement accompanying the Chilean central bank’s decision to hold its policy rate at 3.00% on Friday night signalled that rates are likely to stay on hold for longer than they had previously anticipated. Our forecast for rates to remain unchanged …
1st April 2019
Expectations for reforms from the Bolsonaro government came crashing back to earth this week and there is now a risk premium on the Brazilian real and dollar bonds that could increase further unless pension reform gets back on track. In contrast, the …
29th March 2019
Part of the recent weakness in Brazilian industry can be pinned on softer external demand, particularly from Argentina. But the sector has also been affected by temporary factors which have probably now started to unwind. So the incoming data should show …
28th March 2019
The rise in Brazilian inflation to 4.2% y/y in the middle of March is unlikely to trouble Copom. Inflation should begin to decline again in Q2. And we still expect the Selic rate to remain unchanged at its current historic low of 6.50% both this year and …
26th March 2019
Robust GDP growth in the Andes over the past year or so has been a rare piece of good news in Latin America, but in Chile and Colombia’s case, this has come alongside growing external vulnerabilities. Recently-released figures show that current account …
25th March 2019
Swings in Brazil’s equity and currency markets this week suggest that investors are coming to terms with the idea that pension reform will be diluted. But there are much greater concerns about disputes between the Bolsonaro administration and his fragile …
22nd March 2019
Mexican inflation remained above target, at 4.0% y/y, in the first half of March and will probably stay around this rate in Q2. But we expect that the headline rate will decline during the second half of the year, paving the way for monetary loosening. We …
The wording of last night’s Brazilian monetary policy statement provides further evidence that the appointment of new governor Roberto Campos Neto won’t cause much of a change to monetary policy. With this in mind, we think the financial market’s current …
21st March 2019
Brazil’s new central bank governor, Roberto Campos Neto, inherits a benign inflation environment and we now think the Selic rate will be left unchanged at its current historic low of 6.5% until at least end-2020. In contrast, the markets are pricing in …
19th March 2019
Colombia’s current account deficit is widening, making the recovery vulnerable to a deterioration in global risk appetite that we expect later this year. The country’s weak external position is likely to put the peso under pressure, push up headline …
18th March 2019
The pick-up in Chilean GDP growth from 2.6% y/y in Q3 to 3.6% y/y in Q4 was driven in large part by stronger domestic demand, but this has also caused the current account deficit to widen rapidly. While the consensus expects a very modest slowdown from …
Measures announced by Argentina’s central bank last night appear to have supported the peso today, but the currency will remain vulnerable to large falls, particularly as October’s presidential election approaches. Meanwhile, signs of discord between …
15th March 2019
The stronger-than-expected expansion in Mexican industrial production in January, of 0.6% m/m, is an early sign that the huge drag the sector exerted on Q4 GDP won’t be repeated in Q1. We still hold an above-consensus view for GDP growth over this year as …
13th March 2019
The much larger-than-expected fall in Brazilian industrial production in January, of 0.8% m/m, suggests that the economy is being buffeted by global headwinds. If anything, the risks to our below-consensus growth forecast of 2.0% this year are starting to …
The slightly higher-than-expected Brazilian inflation figure for February, of 3.9% y/y, was driven by a spike in prices in a few food products which should prove temporary. Copom will probably stick to its recent dovish line when it meets next week. … …
12th March 2019
Venezuela’s oil exports have dropped sharply following the imposition of US sanctions on PDVSA last month, and further falls are likely in the coming months. This will make it increasingly difficult for President Maduro to keep the top brass in the …
11th March 2019
The sharp falls in the Argentine peso and Brazilian real in the second half of the week reflected both worsening global risk appetite and domestic political concerns. A few weeks ago it had felt that we were out on a limb in forecasting chunky falls in …
8th March 2019
The weaker-than-expected Chilean inflation data for February of 1.7% y/y (down from 1.8% y/y in January), means that we are increasingly comfortable with our forecast for rates to be left on hold at 3.00% until next year. In contrast, the markets …
Sunday marks Andrés Manuel López’s Obrador’s (Amlo’s) first 100 days as Mexico’s president, and some of his unorthodox policies appear to have resulted in a 50-60bp risk premium on sovereign debt. That said, Amlo has kept the core tenets of fiscal and …
7th March 2019
The further large fall in Mexican inflation, from 4.4% y/y in January to 3.9% y/y in February, combined with another dip in core inflation, strengthens the case for rate cuts later this year. We are increasingly comfortable with our forecast for 75bp of …
The Mexican central bank’s recently released Q1 Inflation Report reiterated concerns about sticky core inflation. But we think these worries are overdone, and core inflation should fall back in the coming quarters. As such, we remain comfortable with our …
5th March 2019
Noises from Brazilian lawmakers this week hinted that parts of the government’s pension reform plan could be diluted. But so far, the core components of the bill do not appear to have come up against significant resistance. Elsewhere, Mexican local …
1st March 2019
Colombian GDP growth edged up from 2.7% y/y in Q3 to 2.8% y/y in Q4, but while the consensus expects growth to be stronger this year, we expect it to slow. … Colombia GDP …
28th February 2019
The meagre 0.1% q/q rise in Brazilian GDP in Q4 confirmed that, despite the surge in business and consumer confidence, there has been no Bolsonaro boost for the real economy yet. This supports our view that the economic recovery over the coming quarters …
Inflation has fallen across the region at the start of this year, and is likely to stay relatively soft in the coming months. One common driver of weaker inflation has been lower fuel inflation. But core inflation has also edged down in Mexico, Chile and …
27th February 2019
A partial sale of Colombia’s state-owned oil company, Ecopetrol, now appears likely and should limit the scale of fiscal austerity, particularly in 2020. But Colombia is yet to fully adjust to low oil prices and fiscal policy will remain tight in the …
26th February 2019
Brazil would be the biggest loser if China increases its imports of US soybeans as part of a trade deal. But the overall impact on Brazil’s export revenues and overall GDP growth would probably be modest. … Brazil, soybeans and the trade …
25th February 2019
The slump in Mexican industry late last year largely reflects domestic problems, particularly in the mining sector. But with the US economy now coming off the boil, the external environment will be an added headwind to Mexican industry this year. The …
Ecuador’s IMF deal announced this week will help to anchor President Lenín Moreno’s austerity drive and sustain the rally in sovereign bonds. Meanwhile, the Argentine peso has come under renewed pressure over the course of this week, and we think that it …
22nd February 2019
The larger-than-expected fall in Mexican inflation in the first half of February, to 3.9% y/y, brings the headline rate back into the central bank’s 2-4% target range for the first time in almost two-and-a-half years and strengthens the case for interest …
The continued softness of Brazilian inflation up to mid-February, combined with the ambitious pension reform presented to Congress yesterday, will keep interest rate hikes off the table in the coming months. … Brazil IPCA-15 …
21st February 2019
The Mexican government’s bailout for Pemex last week is unlikely to solve the company’s fundamental issues, which stem from an extremely heavy tax burden and chronically low productivity. In the absence of broad fiscal and labour reform, which is not on …
20th February 2019
The Brazilian government’s pension reform plan unveiled today lives up to high hopes and is likely to sustain the rally in local markets over the coming weeks. But history suggests that the legislative process could take time, and will ultimately result …
Rumours about the shape of the Brazilian government’s pension reform that will be presented to congress on Wednesday suggest that it is ambitious and would, if implemented in full, stabilise the public debt ratio. But historically congress has watered …
19th February 2019
The weakness of the latest inflation and economic activity data in Chile means we now think that the central bank will pause its tightening cycle until next year (previously we expected 50bp of hikes this year). But, we still expect interest rate hikes in …
18th February 2019
The bailout package announced earlier today by Mexico’s president for the ailing state-owned oil company Pemex is unlikely to arrest the alarming decline in oil output and prevent yields on Pemex debt from rising this year. Meanwhile, rumours that …
15th February 2019
Views are polarised about size of the losses Venezuelan bondholders might face in an eventual debt restructuring, with some suggesting only modest debt relief is needed and others suggesting a large write-down is inevitable. Historically, we find that the …
12th February 2019
The surprise contraction in Mexican industrial production in December means that the sector was weaker over Q4 as a whole than we (and probably the statistics office) thought. As a result, there’s a good chance that the preliminary Q4 GDP growth figure of …
11th February 2019
Details of Brazilian Finance Minister Paulo Guedes’ pension reform unveiled this week are impressive, but political realities could yet scupper these plans. Elsewhere, despite the hawkish statement accompanying this week’s interest rate decision by …
8th February 2019
