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The slowdown in Chilean GDP growth from 5.3% y/y in Q2 to 2.8% y/y in Q3 was driven in large part by a drop in export growth, but there are also signs that domestic demand is losing some steam. While the consensus expects GDP growth to pick up from here, …
19th November 2018
Argentina’s Senate this week passed the government’s IMF-endorsed austerity budget for next year, but bond markets are starting to share our concerns over mounting political risks surrounding October’s elections. Elsewhere, the appointment of ex-finance …
16th November 2018
In the 16 cases of hyperinflation since 1980, countries have either a) implemented “shock therapy”, b) dollarised or c) adopted a currency board in order to stabilise the economy, all of which seem unlikely in Venezuela under President Maduro. That said, …
Colombian GDP growth edged down from 2.8% y/y in Q2 to 2.7% y/y in Q3, and while the consensus expects growth to be stronger next year, we expect it to slow further in 2019. … Colombia GDP (Q3 …
15th November 2018
The tax reform introduced to Colombia’s congress is unlikely to pass in its current form, but even a diluted version would result in tighter fiscal policy, higher inflation and, ultimately, more interest rate hikes in the coming tightening cycle. In this …
12th November 2018
A bill to make Brazil’s central bank formally independent, which has been rumoured this week, would boost market optimism about Jair Bolsonaro’s reform promise and have positive long-term economic effects. Elsewhere, markets are pricing in an interest …
9th November 2018
The larger-than-expected gain in Mexican industrial production in September chimes with the strong preliminary GDP data for Q3 released late last month, and supports our view that economic growth as a whole will be better than most anticipate in the …
The fall in Mexican inflation in October confirms that September’s rise was just a blip, and we expect the headline rate to decline further in the coming quarters. Today’s data won’t be enough to bring interest rate cuts onto the table yet, but we do …
8th November 2018
Chilean inflation decline from 3.1% to 2.9% y/y in October, but with the headline rate likely to resume its upward trend this month and recent labour market data improving, we still think that another interest rate hike in December is more likely than …
The slightly smaller-than-expected increase in Brazilian inflation last month, to 4.6% y/y, reinforces our view that Copom will hold off from starting a tightening cycle for a few more months. … Brazil IPCA …
7th November 2018
The recent uptick in Chilean unemployment has prompted some analysts to suggest that interest rates may not rise much further. But the central bank doesn’t seem too concerned and we think that any weakness that does exist in the labour market will soon …
6th November 2018
Concerns that “super minister” Paulo Guedes’ plan to reduce the Brazilian government’s interest payments by selling FX reserves would increase external vulnerabilities look overdone. However, the plan would only make a minor dent in the country’s fiscal …
5th November 2018
The decision by Mexican president-elect Andrés Manuel López Obrador (Amlo) to cancel the Texcoco airport construction spooked local markets, and upcoming decisions on the 2019 budget and oil field sales should give a clearer sign of whether he will tack …
2nd November 2018
The sharper-than-expected 1.8% m/m contraction in Brazilian industrial production in September won’t prevent the economy as a whole from strengthening in Q3. But it reinforces concerns about the scale of the challenge facing president-elect Jair Bolsonaro …
1st November 2018
The Brazilian Central Bank’s (BCB’s) statement from last night’s meeting hints that Copom is waiting to see if president-elect Jair Bolsonaro can deliver on his reform promise when he takes office at the start of 2019. We now expect the Selic rate to stay …
President-elect Jair Bolsonaro has touched on all the right areas needed to get Brazil’s public debt ratio off its current unsustainable trajectory. In this Focus , we answer five questions in order to get a sense of the scale of the problem and what …
31st October 2018
The stronger-than-expected rebound in Mexican GDP in Q3, following its contraction in Q2, supports our view that growth will be better than most are anticipating in the coming quarters. Our forecast for GDP to expand by 3% next year lies above the …
30th October 2018
The direct impact on Mexico’s economy resulting from president-elect Andrés Manuel López Obrador’s decision to scrap the Texcoco airport project will be small, but it is the clearest sign yet that policymaking will be more interventionist and …
Comments from Brazil’s president-elect suggesting that the central bank should target the exchange rate have made headlines today but his post-election comments otherwise point to orthodox macroeconomic policy. More importantly, the extent of Mr. …
29th October 2018
The growing optimism in Brazil’s markets about a likely victory for Jair Bolsonaro in the presidential election this Sunday is increasingly difficult to square with events on the ground. In Mexico, the populist tone on energy policy struck by …
26th October 2018
The sharp rallies in the Argentine peso and Brazilian real reflect growing optimism that economic policymaking will improve in both countries, but markets seem to be looking through the political hurdles to reform that are building. While Argentina’s IMF …
25th October 2018
The Colombian peso has fallen by more than other Latin American currencies since August, and we expect a further underperformance over the next two years as oil prices fall, balance sheet vulnerabilities come to the fore, and the central bank ends its …
24th October 2018
Growth in Latin America as a whole is likely to strengthen over the coming quarters, but with monetary and fiscal policy tightening in most countries, it will be weaker than most expect. We’re relatively upbeat on the near-term outlook for Mexico, the one …
22nd October 2018
The plans outlined by Brazil’s likely next president, Jair Bolsonaro, to tackle some of the causes of Brazil’s productivity problem should be welcomed. But his apparent waning commitment to fiscal and welfare reforms suggests that the chances of a …
19th October 2018
The statement accompanying the Chilean central bank’s decision to increase its policy rate by 25bp last night to 2.75%, suggested that a gradual tightening cycle would lie in store over the next 12-18 months. But we think that tightening will come more …
The platform of Mexico’s president-elect Andrés Manuel López Obrador (Amlo) has become clearer in recent weeks and a sudden lurch to the left when he takes office in December seems unlikely. One consequence is that the peso should hold up well, paving the …
18th October 2018
The falls in most Latin American currencies this year have improved competiveness, but the conditions don’t seem to be in place for this to translate into a significant increase in net exports. … Weaker currencies to provide only a modest …
16th October 2018
Business friendly candidate Jair Bolsonaro looks on course to win the second round of Brazil’s presidential election later this month, but recent noises from the campaign trail have called into question his commitment to market-friendly reforms. …
12th October 2018
The surprise contraction in Mexican industrial production in August puts paid to a strong rebound in overall GDP growth in Q3. But the drop was due in large part to a slump in construction. And with business and consumer confidence indicators still …
The further rise in Mexican inflation in September will provide yet more ammunition to the hawks within Banxico. But with inflation now likely to have peaked, we still expect the next move in interest rates to be down – although this is unlikely to come …
9th October 2018
The sizeable rise in Chilean inflation to 3.1% y/y in September, taken together with hawkish comments from policymakers, supports our view that rates will begin to rise at the central bank’s meeting next Thursday. We’ve pencilled in a 25bp rise in the …
8th October 2018
The strong showing for Jair Bolsonaro and his party in yesterday’s general election in Brazil has increased the chances of pro-market reform. This is likely to prompt an initial rally in local markets – we think the real might rise by another 3-5% against …
The sharp rally in Brazilian asset prices this week appears to reflect growing expectations that right-wing candidate Jair Bolsonaro will win the presidential election, the first round of which is on Sunday, but we think the markets are getting ahead of …
5th October 2018
The rise in Brazilian inflation, to 4.5% y/y in September, has already exceeded the BCB’s newly-published forecasts. And, taken together with comments from policymakers that hint at the start of a tightening cycle, it’s looking most likely that the first …
The rally in Brazilian markets this week on polls showing a rise in support for right-wing presidential candidate Jair Bolsonaro suggests that the political risk premium being priced in has declined sharply. Given how tight the presidential race is and …
4th October 2018
The timing of the Brazilian central bank’s first interest rate hike is likely to be determined by politics as much as economics. There’s a lot of uncertainty related to the outcome of the Presidential election. But, as things stand, it seems most likely …
3rd October 2018
The surprisingly large 0.3% m/m fall in Brazilian industrial production in August seems to be due to a temporary halt in production at one of the country’s petroleum refineries, which should have unwound last month. Even so, surveys suggest that …
2nd October 2018
The announcement of a trilateral trade deal with the US and Canada removes one major source of uncertainty surrounding Mexico’s outlook. The focus will increasingly shift onto the policies of president-elect Andrés Manuel López Obrador, and the evidence …
1st October 2018
The market reaction to Argentina’s revamped IMF deal suggests that, while investors believe that sovereign default risks over the next year or so have receded, they remain elevated further out. Meanwhile, the latest budget data from Brazil underline the …
28th September 2018
The slowdown in Brazilian retail sales growth in the last few months looks alarming, but there are reasons to think that any weakness in overall consumer spending will be more modest. … How bad is Brazil’s consumer …
27th September 2018
The larger-than-expected increase in the size of Argentina’s revamped IMF credit line reduces debt rollover risks and is likely to lead to a rally in local markets when they open later today. The central bank’s revamp of its monetary and currency policy …
With Argentina reportedly set to announce a new and improved IMF credit line later today, in this Update we outline what investors should look out for in the deal. … What to look for in Argentina’s new IMF …
26th September 2018
The surprise resignation of Argentina’s central bank governor, Luis Caputo, and nationwide strikes – in protest against President Macri’s austerity plan – underscore the difficulty of fixing the country’s economic mess. Mr. Caputo reportedly clashed with …
25th September 2018
Today’s softer-than-expected inflation data from Mexico, which showed that price pressures were unchanged in the first half of this month, supports our view that the headline rate will resume its downwards trend in Q4. In contrast to the market, we expect …
24th September 2018
Support for Fernando Haddad, the presidential candidate of Brazil’s Workers’ Party, has risen over the past week and recent comments suggest that he is trying to distance himself from the party’s left-wing platform. That said, regardless of who wins …
21st September 2018
The statement that accompanied the Brazilian Central Bank’s meeting last night provided the first clear sign that it is preparing to tighten monetary conditions, with the first rate hike likely to come before the end of 2018. But the tightening cycle is …
20th September 2018
Argentina’s 2019 federal budget presented to Congress last night contains a large fiscal squeeze and, if implemented in full, would stabilise the public debt ratio. However, some key IMF requests have been sidestepped, and fiscal slippage is likely ahead …
18th September 2018
Argentina’s 2019 budget will reportedly contain some much-needed spending cuts, but key IMF requests are conspicuous by their absence. Meanwhile, Brazil’s election race is beginning to heat up, but the chances of major economic reform after the vote seem …
14th September 2018
Brazil’s presidential race is still very open, but the scale of the challenge the victor will face means that even a market-friendly president won’t be able to stabilise the public finances and boost potential growth significantly. Markets don’t appear to …
11th September 2018
The larger-than-expected 0.2% m/m gain in Mexican industrial production in July is an early sign that the slump in the sector in Q2 will reverse in Q3. This supports our view that Mexican GDP growth over the next 12 months or so will be stronger than most …
