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The prudent 2019 budget presented by Mexican President Andrés Manuel López Obrador (Amlo) at the weekend is probably an attempt to try to get investors back onside after a series of policy moves which have spooked markets. It adds to the impression that, …
17th December 2018
Mexico’s 2019 budget that will be presented to Congress on Saturday looks set to (unrealistically) target a primary budget surplus. But, more importantly, if spending is projected to rise by much more than the 7-8% most expect, the peso and bonds would …
14th December 2018
The Brazilian Central Bank’s (BCB’s) statement from last night’s meeting suggests that interest rates will be left unchanged over the next few months at least. We think a tightening cycle will start next year, probably in Q2, as some of the optimism …
13th December 2018
The larger-than-expected contraction in Mexican industrial production in October was driven partly by a collapse in mining output, but other parts of industry also struggled. October’s disappointing data provide early evidence that GDP growth in Q4 is …
12th December 2018
Mexican President Andres Manuel Lopez Obrador’s announcement that he will postpone oil auctions adds to a series of populist moves that have rattled local markets, and we reckon this has resulted in a political risk premium of 40-50bp on sovereign debt. …
7th December 2018
The further decline in Mexican inflation in November is unlikely to cause Banxico to soften its hawkish stance. Another 25bp rate hike, to 8.25%, at this month’s meeting still seems more likely than not. … Mexico Consumer Prices …
The larger-than-expected drop in Brazilian inflation in November, to 4.1% y/y (from 4.6% y/y in October), reinforces our view that Copom won’t rush to tighten policy. We expect the Selic rate to be left unchanged at Wednesday’s meeting, and have pencilled …
Mexican economic growth has weakened after all but one presidential election since 1950, and there have been growing suggestions that the recent change of government could cause growth to weaken next year. But we don’t think this will be the case and are …
6th December 2018
The decision by Andrés Manuel López Obrador (Amlo) to seemingly postpone Mexico’s deep water oil auctions for three years is unlikely to have a major bearing on oil production in the near term. But it is the clearest sign yet that Amlo intends to stop the …
5th December 2018
The statement accompanying the Chilean central bank’s decision to hold its policy rate at 2.75% last night suggested that this was only a brief pause in its tightening cycle. We continue to think that tightening over the next year will be more rapid than …
Brazil’s incoming government has given little detail about its proposed (and much-needed) reforms to the country’s pension system. But stabilising the public debt ratio would require reform at the more ambitious end of the policies under consideration – …
4th December 2018
Weaker-than-expected Brazilian industrial growth in October, of 0.2% m/m, provides early evidence that GDP growth in Q4 is likely to be weaker than Q3’s outturn of 0.8% q/q. … Brazil Industrial Production …
Oil prices are up today, but the recent decline means that inflation will rise more slowly in Latin America over the next few months than we had previously thought. We still expect a majority of central banks to hike rates in the coming months, although …
3rd December 2018
The minutes to Banxico’s latest interest rate meeting send a clear message that the recent policy shift under Andrés Manuel López Obrador’s (Amlo’s) will result in further rate hikes. Elsewhere, commodity prices seem to have re-asserted themselves as key …
30th November 2018
The robust 0.8% q/q expansion in Brazilian GDP in Q3 was flattered by the recovery from disruptions caused by the truck drivers’ strike in May. That said, the improvement in the latest survey data suggest that underlying momentum in the economy has …
Having struck a business-friendly tone after his election, Mexico’s president elect Andrés Manuel López Obrador has more recently begun to unnerve investors. Ahead of his inauguration on Saturday, this Update highlights five things that would suggest his …
29th November 2018
The drop in oil prices this month is clearly bad news for the region’s large net energy exporters, Colombia and Venezuela; a fiscal squeeze in on the cards in the former and the latter’s crisis will get even worse. But for the rest of the region, lower …
28th November 2018
A range of factors, including a fall in soybean prices, expectations of central bank intervention and political risk, appears to best explain the recent drop in the Argentine peso against the dollar. Our base case is that the peso continues to fall, …
27th November 2018
The market reaction to the incoming Mexican government’s public consultation is unlikely to be as bad as the last one, which voted to scrap a flagship airport project. Even so, it provides more evidence that Andrés Manuel López Obrador (Amlo) is shifting …
23rd November 2018
The decline in Mexican inflation in the first half of November, which was in line with expectations, is unlikely to cause Banxico to soften its hawkish stance. Another 25bp interest rate hike (to 8.25%) at next month’s meeting still seems more likely than …
22nd November 2018
Having already hit the IMF’s primary deficit target for this year, Argentine policymakers have made impressive progress on fiscal tightening. But the squeeze so far accounts for only a third of the total effort requested by the IMF over the course of the …
The slowdown in Peruvian GDP growth from 5.4% y/y in Q2 to 2.3% y/y in Q3 is likely to be a blip, and growth should be stronger in Q4. Even so, growth is likely to be weaker than most expect over 2019. … Peru GDP (Q3 …
21st November 2018
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
