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The meagre 0.1% q/q increase in Brazil GDP in Q3 is not as bad as it looks at first sight. The big hit came from a contraction in agricultural production, which is volatile from quarter to quarter, with other sectors posting stronger growth. … Brazil GDP …
1st December 2017
The collapse in Chile’s equity market following a smaller-than-expected victory for business-friendly candidate Sebastián Piñera in the first round of this month’s presidential election has not been matched by similar falls in other asset classes in the …
29th November 2017
Alejandro Diaz de León, who has been named as the next Governor of the Central Bank of Mexico, is very much a continuity appointment that is unlikely to have a major impact on either financial markets or the immediate direction of monetary policy. …
Monetary policy easing cycles across Latin America are getting close to an end, but the evidence of the past month suggests that central banks think they still have a bit more work to do. Policymakers in Colombia and Peru surprised the markets this month …
The unexpected rise in Mexican inflation in the first half of November has increased the chances that the central bank will restart its tightening cycle in the next few months. However, we still think that the next move in interest rates will be down. … …
23rd November 2017
The further increase in Brazilian inflation in the first half of November, which was in line with expectations, is unlikely to alter the thinking of COPOM, and we continue to expect a 50bp cut in the Selic interest rate (to 7.00%) at its next meeting on …
We expect economic growth in most countries in Latin America to accelerate further in 2018. Of the region’s major economies, we anticipate a pick-up in growth next year in Brazil, Mexico, Colombia, Chile and Peru. Argentina is the only major economy where …
22nd November 2017
The pick-up in Peruvian GDP growth in Q3 was due entirely to a surge in domestic demand, with net trade dragging on growth. While we expect the economic recovery to continue over the coming quarters, it is likely to be weaker than most analysts expect. … …
21st November 2017
GDP growth in Chile picked up strongly in Q3 and we expect the recovery to continue over the next year or so. The outcome of the elections is unlikely to have a major bearing on the economic outlook. … Chile GDP & Current Account …
20th November 2017
Centre-right ex-president Sebastián Piñera won yesterday’s election in Chile but by a smaller margin than expected and will now face Alejandro Guillier in a second-round run-off on 17th December. While our base case remains that Mr. Piñera will prevail, a …
The narrowing in Brazil’s current account deficit over the past couple of years has been driven almost entirely by a recession-induced collapse in imports. As a result, the deficit is likely to widen once again as the economy recovers. This supports our …
17th November 2017
Colombian GDP growth picked up from 1.2% y/y in Q2 to 2.0% y/y in Q3, and we expect the economy to continue to recover in 2018 as oil output returns to growth and the drag from fiscal austerity eases. … Colombia GDP …
15th November 2017
The rise in Brazilian inflation from 2.5% y/y in September to 2.7% y/y in October, is likely to be the start of a gradual upwards trend. Nevertheless, we expect inflation to remain below the central bank’s target over the next year. … Brazil Consumer …
10th November 2017
The decision by Peru’s central bank to cut its policy interest rate – by 25bp to 3.25% – caught most by surprise but was in line with our forecast, and we expect further easing over the coming months. With inflation set to fall sharply, our forecast is …
With Venezuela’s state-owned oil company having reportedly failed to make a principal payment on a bond that has now matured, credit default swaps are likely to be triggered on Friday. This is sure to grab the headlines, but we are still a few steps away …
9th November 2017
The pick-up in Mexican inflation last month appears to be due in large part to temporary factors relating to September’s earthquakes. Nevertheless, the data strengthen the case for delaying interest rate cuts until the second half of next year. …
The stronger-than-expected pick-up in Chilean inflation in October is likely to ease fears among the central bank’s Board that below-target inflation is becoming entrenched. Even so, with inflation likely to remain below target over the next 6-9 months, …
8th November 2017
The decision by Argentina’s central bank to follow up last month’s surprise interest rate hike with another increase last night reinforces the view that policymakers are getting tough on inflation. We expect another 50bp hike (to 29.25%) in the coming …
As markets digest conflicting statements by Venezuelan policymakers about their plans for debt servicing, one point to emphasise is that both PDVSA and the government could fall into default by the end of the week unless they settle recently missed coupon …
6th November 2017
The announcement by President Maduro that Venezuela’s government plans to restructure its external debt essentially amounts to admitting that it will default in the coming weeks. While the exact approach remains unclear, the one certainty at the moment is …
3rd November 2017
The planned changes to the way that Brazil’s state development bank, BNDES, will set interest rates on its loans have passed under the radar but the macroeconomic effects could be significant. We estimate that, all other things being equal, the reforms …
2nd November 2017
The return to growth of Brazilian industrial production in September was due entirely to a rebound in intermediate goods production, which was payback for a collapse in August. Even so, it looks like the industrial sector made a solid contribution to GDP …
1st November 2017
The 0.2% q/q fall in Mexican GDP in Q3 was weaker than expected but the data are provisional and are perhaps more likely than usual to be revised given the disruption caused by the twin earthquakes that struck in September. … Mexico GDP (Q3, …
31st October 2017
Most currencies in Latin America have weakened against the dollar over the past month, but the Brazilian real and Mexican peso have suffered particularly large falls as the political mood in both countries has soured. The peso will continue to ebb and …
30th October 2017
Financial markets in Brazil have come under pressure over the past week as a split in President Temer’s ruling coalition has cast doubt over important parts of his reform agenda. The trigger for the latest sell-off has been a fresh vote in the lower house …
27th October 2017
The performance of President Macri’s Cambiemos coalition in last weekend’s legislative elections has given a boost to reform hopes, but we can’t escape the feeling that investors are glossing over the steady deterioration in Argentina’s balance sheet. …
26th October 2017
The decision by Argentina’s central bank to hike its policy interest rate, when most analysts had been expecting the next move to be a cut, is an encouraging sign that policymakers are serious about bringing inflation down. With balance sheet …
25th October 2017
Data showing that Mexican inflation was unchanged in the first half of October compared to September as a whole, combined with the recent deprecation of the peso against the dollar, mean that policymakers will continue to strike a cautious tone in regards …
24th October 2017
The strong showing by President Macri’s Cambiemos coalition in yesterday’s legislative elections is likely to give a boost to local financial markets when they open later today. However, attention will now shift to whether the president can kick-start his …
23rd October 2017
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 …
