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We think the Mexican peso could initially fall to as far as 23/$ in the event that Nafta collapses. What happens to the currency beyond the initial sell-off would depend upon several factors, most notably whether Trump pulls out of the WTO too. But …
18th October 2017
Peru’s central bank left its policy interest rate unchanged at 3.50% last night, and while there could be scope to ease policy a little further in the next 3-6 months, as things stand we expect rates to remain unchanged over the next year. … Peru’s …
13th October 2017
The immediate effects of a collapse in Nafta on Mexico’s economy might be smaller than many expect – we would probably nudge down our GDP forecast for 2018 by something like 0.5-1.0%-pts. The effects over a 3-5 year horizon are more uncertain, but would …
12th October 2017
The 0.3% m/m rise in Mexican industrial production in August is encouraging but the data predate the earthquakes that hit the country last month. The disruption caused by the quakes mean that the industrial sector is likely to have contracted over Q3 as a …
We estimate that a fall in mining output shaved about 0.4%-pts off annual GDP growth in Mexico in Q3. Mining output should stabilise over the coming year, but we doubt that reforms to the sector will result in a significant recovery in production anytime …
11th October 2017
The deflation of Brazil’s property bubble appears in most regions to be happening via a stagnation in (nominal) prices, thus allowing prices and incomes in the rest of the economy catch up. This has helped to limit the damage to the financial sector, but …
10th October 2017
The drop in Mexican inflation last month is likely to be the start of a rapid downwards trend and we expect the headline rate to fall back into the central bank’s target range by the middle of next year. Even so, interest rate cuts are unlikely to come …
9th October 2017
September’s data confirm that the sharp drop in inflation in Brazil is bottoming out. This supports the view that Copom is likely to slow the pace of easing at this month’s policy meeting. … Brazil & Chile Consumer Prices …
6th October 2017
Latin America’s economic recovery is strengthening but a series of elections over the coming months has added some uncertainty to the outlook. The immediate focus will be on upcoming votes in Argentina and Chile. Our central scenario remains that …
5th October 2017
The larger-than-expected 0.8% m/m drop in Brazilian industrial production in August more than offset July’s 0.7% m/m gain, but this was due in large part to a decline in notoriously-volatile food production. There is little reason to think that this is …
3rd October 2017
The broad picture to emerge from September’s business surveys is that the economic recovery in Latin America is continuing. The latest surveys do not fully capture the disruption caused by last month’s earthquakes in Mexico, but we expect the economic …
2nd October 2017
Latin America’s financial markets have come under a bit of pressure over the past week or so but the bigger picture is that they have had a strong Q3 overall, comfortably outperforming markets in other emerging economies. Brazilian financial markets …
28th September 2017
The past month has brought further evidence that the recovery in Latin America is picking up pace. Our GDP Tracker suggests that regional growth is now running at a three-year high of 3% y/y. The rebound has been widespread. In Brazil, a combination of …
27th September 2017
A string of better-than-expected activity data from Brazil has pushed consensus GDP forecasts for 2017 and 2018 towards our own, more bullish, view. While some of the tailwinds that have helped the early stages of recovery will fade over the coming …
25th September 2017
Data to the middle of September showed that Mexican inflation fell for the first time in almost eighteen months, suggesting that the headline rate may now have peaked. We expect inflation to fall rapidly over the next 6-9 months as the impact of tax hikes …
22nd September 2017
Recently-released GDP data confirmed that Argentina’s economic recovery continued in Q2, with economy growing at its fastest pace in two years. However, the drivers of growth are looking unbalanced. … Argentina’s economic recovery looking …
The slight increase in Brazilian inflation in the first half of this month, to 2.6% y/y from 2.5% y/y in August, is the first real sign that the headline rate may have now bottomed out, and reinforces COPOM’s message that the easing cycle is nearing an …
21st September 2017
The sizeable fiscal squeeze unveiled in Argentina’s draft 2018 budget is a step in the right direction, but it would only reverse this year’s loosening of fiscal policy ahead of October’s legislative elections. The budget deficit will remain uncomfortably …
18th September 2017
Peru’s central bank cut its policy interest rate by 25bp last night, to 3.50%, and confirmed our view that rates are unlikely to fall further. What’s more, the surprise decision by Congress to dismiss the president’s cabinet is likely to trigger a …
15th September 2017
US financial sanctions on Venezuela have caused markets to price in a higher probability of default before year-end. While our sense is that the government will be able to stump up enough oil revenues to avoid default this year, it will be a close call …
11th September 2017
Mexico’s industrial sector got off to a weak start in Q3, with output contracting by 1.0% m/m in July. And there is a good chance that it will act as a drag on GDP growth over the quarter as whole, which reinforces our view that the economy is likely to …
Chilean inflation rose in August and, with the central bank continuing to talk down the possibility of further policy easing, we expect the benchmark interest rate to be left unchanged at 2.50% at next week’s meeting. … Chile Consumer Prices …
8th September 2017
Mexican inflation rose to an 18-year high in August, but the latest increase was driven by another jump in food inflation, rather than a rise in broader price pressures. As such, it is unlikely to cause the central bank to restart its tightening cycle. … …
7th September 2017
The Brazilian central bank cut its benchmark Selic interest rate by 100bp, to 8.25%, last night and confirmed our view that the end of the easing cycle is not far off. As things stand, our forecast is for an additional 75bp cut in the policy rate, to …
The fall in Brazilian inflation to a fresh eighteen-year low in August clears the way for another 100bp cut in the benchmark Selic interest rate, to 8.25%, later today. That said, we suspect the headline inflation rate will soon start to bottom out. … …
6th September 2017
Brazil’s government should continue to make headway in reforming a number of areas of the economy, but we think that the prospects of meaningful reform to the country’s pension system is now no more than 50:50. That would leave the bulk of the work in …
5th September 2017
The 0.8% m/m rise in Brazilian industrial production in July suggests that, after softening in Q2, the economy got off to a decent start in Q3. Meanwhile, economic activity data for Chile add to the evidence that the recovery there continued to strengthen …
Growth in Brazil slowed in the second quarter of this year, but this was always likely given the weak carryover from the end of the first quarter. The big picture here is that there is no sign that the latest political crisis has derailed the recovery and …
1st September 2017
The past month has brought some signs that the continuing political crisis in Brazil is starting to weigh on the more ambitious elements of the government’s reform programme. While President Temer’s administration has already passed labour reforms and …
30th August 2017
Financial markets in Brazil had already had a good month, but this week’s news that the government plans to privatise a host of state-controlled enterprises has helped to push the equity market to a near-record high. Argentine stocks have also recorded …
25th August 2017
Mexican inflation continued to rise in the first half of August, but this was largely the result of another jump in food inflation. As such, it’s unlikely to change the central bank’s view that inflation will soon peak. … Mexico Bi-Weekly CPI …
24th August 2017
After a torrid couple of years, the economies of Latin America have turned a corner and we expect growth to strengthen over the rest of 2017 and into 2018. Inflation has fallen in most countries and should remain low, allowing central banks across the …
23rd August 2017
Data to mid-August suggest that inflation in Brazil is starting to bottom out. That being said, it’s likely to remain well below the central bank’s target over the remainder of this year. … Brazil IPCA-15 …
The pick-up in Chilean GDP growth in Q2 was mainly due to a rebound in mining production following a strike, and there are continued signs of weakness elsewhere in the economy. This adds to the case for a further easing of monetary policy. Meanwhile, the …
18th August 2017
Chile’s central bank left its policy interest rate unchanged at 2.50% for the third consecutive month and, while the accompanying statement gave no hints that rate cuts are being considered, we suspect policymakers remain divided over the need for …
The uptick in Colombian GDP growth in Q2 suggests that the economy is probably over the worst. Even so, the recovery in the second half of the year is likely to be weak and we remain comfortable with our below consensus forecast for the economy to expand …
15th August 2017
With most of the votes in Argentina’s primary legislative elections now counted, it appears that support for President Macri’s ruling coalition has held up better-than-expected, and the peso is likely to rally when markets open later today. But even if …
14th August 2017
Mexican industrial production grew by a below-consensus 0.1% m/m in June, confirming that the sector broadly stagnated over Q2 as a whole. As such, it shouldn’t trigger any major revisions to the provisional estimate of Q2 GDP growth. … Mexico Industrial …
11th August 2017
Peru’s central bank left its policy interest rate unchanged at 3.75% last night, but used the accompanying statement to signal that further easing is on the way. As such, we continue to expect one further 25bp cut in the policy rate, to 3.50%, over the …
Talks to renegotiate Nafta are set to begin on 16th August and look increasingly unlikely to result in major changes that would disrupt Mexico-US trade. Even so, there are still a number of potential sticking points. In this Update we answer five key …
10th August 2017
Mexican inflation nudged up to a fresh eight-year high in July, but this is unlikely to be enough to change the central bank’s view that its tightening cycle is over. As such, we continue to expect the policy interest rate to be left on hold at tomorrow’s …
9th August 2017
Brazilian inflation fell to a fresh decade-low in July but is now close to bottoming out. As such, while it’s a close call, our base case remains that Copom will cut interest rates by 75bps (rather than 100bp) at its next policy meeting in September. … …
Chilean inflation remained below the central bank’s target range in July and the data provided further evidence that underlying price pressure are subdued. Against this backdrop, we continue to expect more interest rate cuts over the coming months. … …
8th August 2017
Chilean economic activity data for June all but confirm that GDP growth rebounded in Q2. And there are tentative signs that a recovery is starting to build outside of the volatile mining sector. … Chile IMACEC …
7th August 2017
The decision by the US Treasury to sanction Venezuelan president Nicholas Maduro was on the more benign end of the spectrum of options reportedly under consideration and is unlikely to have much impact in either coercing regime change or restoring …
2nd August 2017
The fact that Brazilian industry stagnated in month-on-month terms in June is partly payback for strong outturns in April and May. What’s more, industry still expanded by 0.5% q/q in the second quarter, adding to evidence that the latest political crisis …
1st August 2017
Mexico’s economy posted another quarter of solid growth in Q2 and, while the activity is likely to cool in the second half of this year, we remain comfortable with our above-consensus forecast for GDP to expand by 2.2% over 2017 as a whole. … Mexico GDP …
31st July 2017
With the likelihood of major disruption to Mexico-US trade as a result of the renegotiation of NAFTA receding, we’re revising up our forecast for the Mexican peso and now expect it to end the year at 17/$ (previously 19/$). Elsewhere, we’re retaining our …
28th July 2017
The statement accompanying the Colombian central bank’s decision to slow the pace of interest rate cuts to 25bp (from 50bp previously) suggests that policy might not be loosened as aggressively in the upcoming meetings as we had initially expected. …
Inflation has continued to fall across Latin America – our measure of regional inflation (excluding Argentina and Venezuela) dropped below 4% y/y for the first time since 2010 last month. This is due largely to the collapse in Brazilian inflation, which …
26th July 2017
