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The Central Reserve Bank of Peru’s decision to cut its policy interest rate by 25bp, to 4.00%, took most analysts by surprise, but not us. We expect one further 25bp cut, to 3.75%, over the coming months, although we don’t think that this marks that start …
12th May 2017
The collapse in Brazilian inflation to a decade-low of 4.1% y/y in April paves the way for another 100bp cut in the Selic rate (to 10.25%) at the next COPOM meeting on 31 st May. … Brazil Consumer Prices …
10th May 2017
President Macri has made solid progress in tackling Argentina’s economic vulnerabilities over the past eighteen months but reform momentum more recently has slowed. With legislative elections scheduled for October, we suspect that progress on two key …
9th May 2017
Mexican inflation continued to rise in April and, with inflation expectations starting to tick up again, we think the central bank is likely to opt for another 25bp hike in its policy interest rate, to 6.75%, at its meeting later this month. … Mexico …
Chilean inflation remained weak at 2.7% y/y in April, but even so, with the economy finally showing tentative signs of picking up, the central bank is likely to pause its easing cycle at next week’s policy meeting. … Chile Consumer Prices …
8th May 2017
Chilean economic activity data for March suggest that the economy avoided entering a technical recession in Q1, albeit only by the smallest of margins. And there are tentative signs that the economy may finally be turning the corner. … Chile IMACEC …
5th May 2017
Despite mounting public opposition, President Temer’s reform agenda is inching ahead in Brazil. Labour market reforms have passed the lower house, but the real test lies ahead with pension reform. The pension bill is now out of committee but the race is …
4th May 2017
April’s survey data point to a continued improvement in Brazil’s economy at the start of Q2, while in Mexico they suggest conditions have deteriorated further. But with provisional Q1 GDP data for Mexico defying the dire survey data and revealing that …
3rd May 2017
March’s industrial production data from Brazil were ugly, but according to our estimates the sector still made a positive contribution to GDP growth over Q1 as a whole. … Brazil Industrial Production …
There is now broad agreement in financial markets that interest rates in Brazil will fall into single digits this year, but keeping them there will require the “neutral” or “structural” level of interest rates in the economy to fall. This in turn will …
2nd May 2017
First quarter GDP data from Mexico confirmed what we have long suspected – that the survey data have been overstating the weakness in the real economy. In fact, the economy grew at a reasonably healthy rate in Q1 and, despite the lingering risks on NAFTA, …
28th April 2017
Latin America’s economy has strengthened in the early months of this year – in fact, our GDP Tracker suggests that year-on-year growth returned to positive territory in Q1 for the first time since mid-2015. However, the recovery has so far been uneven. …
26th April 2017
Moves in Latin America’s currency and equity markets this month have been relatively small but the divergent paths of government bond yields have been more eye-catching. While short-term local currency yields have fallen in Brazil, Chile and Colombia as …
24th April 2017
Mexican inflation continued to rise in the first half of April, hitting a fresh seven-year high of 5.6% y/y. That being said, the stability of the peso over recent weeks means it’s probably close to peaking. Meanwhile, economic activity data for February …
Our latest Banking Heat Map shows that, while Latin America’s credit bubbles have continued to deflate, this doesn’t yet appear to have triggered widespread problems in the region’s banking sectors. Non-performing loans remain low and have even started to …
20th April 2017
Data to mid-April showed that Brazilian inflation has fallen below the BCB’s central target for the first time in almost seven years. We expect it to fall further over the coming months, before bottoming out in July/August. … Brazil IPCA-15 …
Rising food inflation is likely to dissuade Peru’s central bank from cutting its policy interest rate for the time being. But with the economy slowing and core price pressure low, an easing of monetary policy is likely when the impact of recent floods on …
18th April 2017
February’s industrial production data from Mexico were soft by most standards, but there is still no sign of the outright collapse that has been suggested by the recent business surveys. Indeed, as things stand, industry looks likely to make a small …
11th April 2017
The collapse in Mexico’s main business surveys and a number of confidence indices since President Trump’s election victory in November has been alarming, but it hasn’t yet been accompanied by a weakening in the hard data. As such, while we think the …
10th April 2017
Brazilian export growth looks set to rebound this year as the impact of last year’s drought on agricultural shipments fades. This should help to finally pull the economy out of recession. That being said, the substantial rally in the real over the past …
Mexican inflation hit a fresh seven-year high of 5.4% y/y in March, up from 4.9% y/y in February, but the recent rebound in the peso means that it is probably now close to peaking. Much still depends on the currency, but assuming that it remains broadly …
7th April 2017
The latest drop in Brazilian inflation leaves it only a whisker above the BCB’s central target and probably seals the deal on a larger 100bp cut in interest rates at next week’s Copom meeting. … Brazil & Chile Consumer Prices …
Peru’s central bank kept its policy interest rate on hold at 4.25% and, while the accompanying statement struck a dovish tone, the risk of a surge in inflation means rate cuts are unlikely. That said, with the economy likely to have weakened further in …
Venezuela has hit the headlines for all the wrong reasons over the past week, with the Supreme Court first annulling the National Assembly before then partly reversing its decision. However, a change in the so-called “Hydrocarbons Law” has slipped under …
6th April 2017
The contraction in Chilean economic activity in February largely reflects a strike at the country’s largest copper mine, which has now come to an end. But the rest of the economy also weakened and today’s data all but confirm the economy entered a …
5th April 2017
Brazil’s beleaguered government will have to fight major challenges on at least three fronts over the coming months. As things stand, there appears to be a way forward for the government on each of them and our central scenario remains that it muddles …
The latest batch of survey data suggests that Brazil’s economy continued to recover in March, while in Mexico the recent slump in the IMEF business surveys is starting to reverse. … March survey data strike more positive tone in Brazil and …
4th April 2017
The 0.1% m/m rise in Brazilian industrial production in February was smaller than expected but still leaves the sector on course to make a positive contribution to GDP over Q1 as a whole. … Brazil Industrial Production …
Opinion polls suggest that the outcome of Ecuador’s presidential election on Sunday is still too close to call. A victory for government candidate Lenin Moreno would mean more of the same leftist economic policies as under current president Rafael Correa. …
31st March 2017
A leaked copy of a notification letter from the Trump administration to Congress suggests that its plans for renegotiating NAFTA are more consistent with the idea of creating a “North American manufacturing powerhouse” than they are with imposing severe …
The scandal over Brazil’s meat sector, which at one point appeared to threaten the country’s economic recovery, seems to have faded just as quickly as it escalated. The crisis exploded following the revelation earlier this month that the authorities had …
28th March 2017
The proposed spending cap on Argentina’s provincial governments is a positive step and could in theory narrow the overall public sector budget deficit by almost 1% of GDP by 2019. However, it’s not clear how the spending cap will be enforced. More …
23rd March 2017
Mexican inflation rose to a fresh seven-year high of 5.3% y/y in the first half of March but the details of the data contained some signs that the upward pressure on prices is easing. Nonetheless, we suspect Banxico will remain cautious and hike its …
Data to mid-March showed another dip in Brazilian inflation and probably give enough cover for policymakers to accelerate interest rate cuts at next month’s Copom meeting. In practice, however, any decision to increase the pace of easing will depend less …
22nd March 2017
The Mexican central bank’s new programme of auctioning currency hedges marks a significant departure from its previous FX intervention policy, but is currently small in scale. As such, we doubt it would prevent a renewed drop in the peso if sentiment took …
21st March 2017
It’s too soon to say exactly how events will play out, but at face value the developing scandal over Brazil’s meat exports could plausibly derail the country’s economic recovery. … Meat scandal could be the latest threat to Brazil’s …
20th March 2017
Revised Chilean GDP data confirmed that annual growth slowed to a seven-year low in Q4. They also revealed that the economy contracted from the previous quarter. With a strike at the country’s largest copper mine now in its fifth week, we expect GDP to …
Chile’s central bank cut its policy interest rate by 25bp, to 3.00%, and used the accompanying statement to signal that further easing is likely over the coming months. This supports our non-consensus view that the policy rate is set to fall to 2.50% by …
17th March 2017
Argentina’s dollar debt burden as a share of GDP is now one of the largest in the EM world. What’s more, it is concentrated largely in the public sector. This leaves the government vulnerable to rising US interest rates and a weaker peso. For now, the …
16th March 2017
Peru’s economy rebounded strongly in January due largely to a pick-up in the mining sector. But with a strike underway at the country’s largest copper mine, we suspect the improvement in GDP growth over Q1 as a whole will be more modest. … Peru Economic …
15th March 2017
The various forecasts circulating of the GDP growth rate needed to stabilize unemployment in Brazil tend to miss the important point that productivity growth is typically faster in the early stages of an economic recovery. Accordingly, even on our more …
We expect economic growth in Latin America to accelerate over the coming years as the effects of the downturn in global commodity prices fade, policy is loosened and financial conditions ease. Having contracted by 1.5% in 2016, we expect the region’s …
14th March 2017
The increase in Mexican industrial production in January was modest, but the fact it grew at all stands in stark contrast to the sharp fall in the business surveys since President Trump has taken office. In fact, the outturn would have been much stronger …
The larger-than-expected drop in Brazilian headline inflation in February, to 4.8% y/y, from 5.4% y/y in January, was broad-based and reinforces the case for further significant monetary easing over the course of this year. We expect the Selic interest …
10th March 2017
Peru’s central bank kept interest rates on hold once again at 4.25% and, while the economic outlook has deteriorated in recent months, stubbornly above-target inflation means the next move in the policy interest rate is still likely to be up. … Peruvian …
Mexican inflation rose to a seven-year high of 4.9% y/y in February, from 4.7% y/y in January, and, despite the recent rally in the peso, we suspect this will be enough to convince the central bank to continue hiking interest rates. We expect another 50bp …
9th March 2017
With legislative elections due in October, progress in narrowing Argentina’s bulging budget deficit will be slow this year and we expect only a modest fiscal squeeze in 2018-19. More fundamentally, fixing the fiscal mess will take us well beyond President …
With Brazil returning from carnival, thoughts are shifting back to President Temer’s domestic policy agenda and, in particular, the prospects for planned pensions reform over the coming months that will make or break his fiscal programme. In this Update …
8th March 2017
The small 0.1% m/m fall in Brazilian industrial production in January is partly payback for a 2.3% m/m surge in December, and we think the recovery should resume over the coming months. Elsewhere, the decline in Chilean inflation in February strengthens …
There is a good chance that a strike at Chile’s largest copper mine will tip the economy into a technical recession in Q1. While growth should return in Q2, the weakness of the non-mining sector means that we expect GDP to expand by just 1.0% in 2017. …
7th March 2017
