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The victory for Nicolás Maduro in Venezuela’s presidential election paves the way for an escalation of US sanctions – possibly on the oil sector – and a messy sovereign debt default and restructuring. The government and PDVSA’s debt repayment schedule …
21st May 2018
Centre-right candidate Iván Duque looks set to win the first round of Colombia’s presidential election next week, and if he also prevails in the second round – as seems likely – he will inherit an economy slowly emerging from a downturn. His fiscal …
18th May 2018
The stronger-than-expected increase in Chilean GDP growth in Q1 was broad based and we expect the recovery to continue over the next year or so. Today’s data support our above-consensus forecast for GDP growth of 3.5% for this year. … Chile GDP …
The lesson from EMs that have been forced to turn to the IMF for financial support in the past is that Argentina will need a combination of front-loaded fiscal tightening, reforms at the central bank, high real interest rates and a weak currency to …
Following its near-20% drop so far this year, Argentina’s real effective exchange rate looks pretty close to its ‘fair’ value – we estimate that it probably needs to fall by a modest 5% or so from here. But high inflation relative to its trading partners …
17th May 2018
Colombian GDP growth picked up from 1.8% y/y in Q4 to 2.2% y/y in Q1, and we think the recovery will strengthen by more than the consensus expects this year. … Colombia GDP …
15th May 2018
There are some similarities between Argentina’s current crisis and 2001/02 crisis. But there are also critical differences, not least the fact that the peso is now free-floating and the authorities have control over their own monetary policy. As such, …
The recent weakness of Brazilian inflation appears to be due in part to persistently weak food inflation, but more importantly it looks like the large output gap in the economy has dragged down core inflation. As a result, while the headline rate will …
11th May 2018
March’s better-than-expected industrial production data from Mexico, which were the result of a surge in manufacturing output, support our view that GDP growth this year will be stronger than most expect. … Mexico Industrial Production …
The news that Argentina has started talks with the IMF over a full-blown bailout has masked the fact that – deal or no deal – the economy is likely to fall into recession this year. We now expect GDP to contract by 0.5% this year (vs. growth of 2.5% …
10th May 2018
Brazilian inflation ticked up to 2.8% y/y in April, but underlying price pressures are still subdued. Taking that together with softer economic activity figures, we think COPOM will cut the Selic rate again when it meets later this month. The markets now …
The further drop in Mexican inflation last month reinforces our view that the tightening cycle is over and that the next move in interest rates will be down. In contrast, the markets have responded to the recent drop in the peso by pricing in a fresh …
9th May 2018
The announcement yesterday that Argentina will seek an IMF deal has brought some relief to the peso, but it’s far from guaranteed that an agreement will be reached. More generally, talk of an IMF deal highlights something that we have been arguing for …
Today’s 675bp interest rate hike by the Argentine central bank, the third emergency hike in a week, finally seems to have brought some support to the currency. Evidence from other EM central banks that have been forced to hike rates when faced with …
4th May 2018
The small fall in Brazilian industrial production in March suggests that, over Q1 as a whole, the sector stagnated, adding to the evidence that GDP growth in Q1 was quite soft. But there are a number of reasons to think that growth – both in industry and …
3rd May 2018
Following intensive talks last month, a preliminary new Nafta deal appears to be within reach. While it could still struggle to pass through legislatures in each country, the deal that looks to be on the table is, from Mexico’s perspective, at the more …
The Argentine central bank’s interest rate hike at an unscheduled meeting on Friday has provided little relief for the peso, which is down by another 2.5% against the dollar today. Against a backdrop of growing economic vulnerabilities, the currency is …
2nd May 2018
Brazil’s economy has been losing momentum for several quarters, but it’s premature to think that the recovery is now over. Indeed, the conditions seem to be in place for growth to strengthen again in the coming months and our forecasts for 2018-19 sit …
The outlook for Mexico’s economy is, despite worries over Nafta renegotiations and an Andrés Manuel López Obrador presidency, brighter than many seem to think. We’ve revised up our forecasts and now expect GDP to grow by 3.0% this year and 2.8% next …
1st May 2018
The stronger-than-expected 1.1% q/q expansion in Mexican GDP in Q1 partly reflects the unwinding of some earthquake-related effects, but there are also signs of a broader rebound in activity. Today’s data mean the risks to our above-consensus forecast for …
30th April 2018
The decision by Colombia’s central bank to cut its policy interest rate on Friday night by 25bp (to 4.25%) probably marks the last move in the easing cycle. We expect the policy rate to be left unchanged over the rest of this year before being raised in …
The latest activity data suggest that Latin America’s economic recovery paused for breath in the first quarter of 2018. Our GDP Tracker points to growth of 2.5% y/y, unchanged from Q4. Activity data from Brazil have been soft, and Argentina’s economy …
27th April 2018
The sharp drop in the Brazilian real over the past month has, in our view, been driven more by local developments – including growing uncertainty over the outcome of October’s elections – than it has by a general deterioration in global risk appetite that …
25th April 2018
Argentina’s central bank left its policy interest rate unchanged at 27.25% last night, but the statement accompanying the decision struck a notably more hawkish tone and suggested that the easing cycle could reverse. We think policymakers will refrain …
The larger-than-expected drop in Mexican inflation in the first half of this month reinforces our view that the next move in interest rates will be down. That said, the recent slide in the peso – if sustained – will keep policymakers in hawkish mood for …
24th April 2018
The weak Brazilian mid-month inflation figure for April, coming alongside the stabilisation of the real in the past few days, means COPOM is likely to go ahead with another 25bp reduction in the Selic rate next month. However, this is likely to mark the …
20th April 2018
Left-wing populist Andrés Manuel López Obrador (AMLO) appears to have made headway in allaying investors’ fears of a dramatic shift in policy if he wins Mexico’s presidential election in July. But some of his proposals, particularly on the fiscal side, …
17th April 2018
There are still plenty of twists and turns that have yet to play out ahead of elections in Mexico and Brazil later this year. But developments over the past month mean we are becoming less concerned about the potential economic fallout in Mexico – and …
16th April 2018
Peru’s central bank left its policy interest rate unchanged at 2.75% last night and, while the statement gave little away regarding future moves, we think the easing cycle is probably over. … Peru rates on hold, easing cycle probably …
13th April 2018
The raft of activity data released across Latin America in recent weeks suggests that the region’s economic recovery stalled in Q1. However, there are reasons to expect it to resume over the remainder of this year. … A disappointing Q1, but things should …
11th April 2018
Mexican industrial production returned to growth in February, and the data showed that the sector is continuing to benefit from a jump in construction and utilities output in the aftermath of September’s earthquakes. However, the beleaguered mining sector …
Brazilian inflation dipped again in March but our sense is that policymakers will start to focus less on the incoming inflation data and more on rising political risks and the associated drop in the real when setting policy. Our base case remains that …
10th April 2018
The fall in Mexican inflation in March was broad-based, and we expect it to continue easing over the course of this year. The data support our view – which the markets have now come round to – that the central bank will leave interest rates unchanged …
9th April 2018
The larger-than-expected decline in Chilean inflation, from 2.0% y/y in February to 1.8% y/y in March, is unlikely to convince the central bank to restart its easing cycle. We expect inflation to rise over the rest of this year, and still think the next …
6th April 2018
Colombia’s economic recovery has been held back by weak investment which appears to be a result of the recent slump in the property market. But this property downturn now seems to have passed its trough. As a result, we expect investment growth to …
5th April 2018
The ruling by Brazil’s Supreme Court to imprison left-wing populist Luiz Inácio Lula da Silva (Lula) all but ends his bid for the presidency and throws the election race wide open. While markets are likely to welcome the news when they open later today, …
Mexican presidential candidate Andrés Manuel López Obrador’s (AMLO’s) goal to stop importing refined oil within three years might be a vote winner, but the large investment into domestic refining needed to achieve this would put pressure on the fiscal …
3rd April 2018
February’s weaker-than-expected Brazilian industrial production figure confirmed that the sector made a very weak start to the year and, barring a surge in output in March, industry probably dragged on GDP growth in Q1. … Brazil Industrial Production …
Brazil’s central bank appears to have been spooked by the weakness of the recent inflation data, but we think that the conduct of fiscal policy will ultimately have a much greater bearing on how interest rates are set over the next 12-18 months. … Fiscal …
29th March 2018
Despite the clashes between the US and China on trade, some more hopeful news on Nafta talks this month has supported the Mexican peso and local currency government bonds – particularly at the long end of the curve. However, Mexican equities have taken …
28th March 2018
The escalating rhetoric over trade protectionism has largely bypassed the economies of Latin America. Indeed, the focus on US actions on steel and aluminium, as well as alleged intellectual property abuses by China, has distracted from more hopeful news …
27th March 2018
The further fall in Mexican inflation in the first half of March was broad-based, and we expect it to continue easing over the course of this year. The data support our view – which the markets appear to be coming round to – that policymakers will leave …
22nd March 2018
The resignation of Peruvian president Pedro Pablo Kuczynski (PPK) is likely to be followed by a smooth and swift transition of power to Vice President Martín Vizcarra. And with financial conditions continuing to loosen, the political upheaval is unlikely …
Recently-released Q4 GDP data confirms that economic growth in Argentina softened at the end of last year, and we expect the economy to slow further over the course of 2018 as tighter fiscal policy weighs on domestic demand and a drought depresses …
Colombia’s central bank left its policy rate unchanged at 4.50% last night, but the accompanying statement left the door open for further easing in the near term. Meanwhile, Chile’s central bank kept rates on hold at 2.50% and we expect them to remain …
21st March 2018
The stronger-than-expected increase in Chilean GDP growth in Q4 was driven by a pick-up in domestic demand, and we expect the recovery to continue over the next year or so. Today’s data support our above-consensus forecast for GDP growth of 3.5% for this …
19th March 2018
We expect growth in most countries in Latin America to accelerate over the course of this year as the region’s cyclical recovery gathers pace. Inflation is now bottoming out and in most places it will drift higher over the coming quarters. As a result, …
16th March 2018
Mexican industrial production stagnated in m/m terms in January, but this was partly payback for a strong 1.0% m/m increase in December. The breakdown reveals that the disruption to industry from September’s earthquakes may finally be over. … Mexico …
13th March 2018
Chile’s new president Sebastián Piñera is inheriting an economy with some cyclical momentum and we expect the recovery to continue over the course of this year. That said, growth over his four-year term is likely to average just 3%, which would be well …
12th March 2018
Right and centre-right parties secured the most seats in yesterday’s legislative elections in Colombia, bolstering the chances of an Iván Duque presidency and dealing a blow to left-wing candidates – including the populist, Gustavo Petro. Markets are …
