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Brazil’s government has started to flesh out plans for a fiscal squeeze, but further measures are likely to be needed if it is to meet its budget targets for this year. According to plans published earlier this month, the government will freeze just under …
28th May 2015
Following a brief recovery last month, Brazilian and Colombian financial markets have sold off in recent weeks, with both equities and currencies coming under pressure. But elsewhere in Latin America this month, the performance of financial markets has …
27th May 2015
The slowdown in Mexican GDP growth in the first quarter of this year was due almost entirely to weakness in industry, which has been affected by problems in the mining sector as well as softer growth in the US. The encouraging news is that the service …
21st May 2015
Brazil’s Economic Activity Indicator was up by 0.5% y/y in March – an improvement on the 4.1% y/y fall registered in February, but still consistent with a contraction in GDP of 1.5% y/y over Q1 as a whole. In quarterly terms, we think GDP contracted by …
Although annual GDP growth in Peru picked up in the first quarter of this year, in q/q terms growth eased a touch. Even so, we're not overly concerned – the quarterly data are volatile and, while the economy may have lost some momentum at the start of …
First quarter GDP data from Mexico, due to be released tomorrow, are likely to show that the economy made a sluggish start to the year, due in large part to continued weakness in the mining sector. Although there is no doubt that the plunge in oil prices …
20th May 2015
First quarter GDP and balance of payments data from Chile add to evidence that the economy is on the mend. Not only did quarterly GDP growth accelerate but the current account also registered a surplus for the first time in almost four years. … Chile …
18th May 2015
The fact that the timetable for rate “lift-off” in the US seems to have been pushed back in recent weeks has relieved pressure on policymakers in both Chile and Peru to follow suit and tighten policy. Our view remains that neither central bank will raise …
15th May 2015
The recovery that appeared to be underway in Latin America at the end of last year has faded in recent months, with several of the region’s economies experiencing renewed downturns. The latest slowdown has been concentrated in Latin America’s oil …
13th May 2015
Industrial production data for March were a bit softer than expected and suggest that Mexico’s economy grew by a disappointing 0.3% q/q or so in the first quarter. There are some signs that weather-related weakness in the US has started to weigh on …
12th May 2015
Brazil inflation edged up again last month but, with the big increases in regulated prices now over, it is probably close to peaking. Meanwhile in Chile, inflation continues to grind lower and should fall further over the coming months. … Brazil & Chile …
8th May 2015
It is, in truth, too soon to expect any improvement in Brazil’s public finances as a result of the belt-tightening measures introduced over the past few months, but the fact that the fiscal position has actually deteriorated underlines the scale of the …
7th May 2015
Annual inflation in Mexico held steady at 3.1% for the second consecutive month in April and the recent stabilisation of the peso against the dollar should help to ease fears that inflation will breach the central bank’s target range later on in the year. …
Brazil’s industrial sector contracted once again in March, meaning that output fell by around 2.3% in the first quarter of this year. Other sectors of the economy have fared slightly better in recent months, but even so it seems that GDP probably …
6th May 2015
The month-on-month fall in Chile’s IMACEC activity indicator in March was due largely to severe floods in the north of the country, which disrupted activity and led to the temporary closure of many mines. This weather-related weakness will prove …
5th May 2015
The recovery that was seemingly underway in most parts of Latin America towards the end of last year appears to have faltered in recent months. Indeed, our proprietary GDP Tracker suggests that the region grew by just 0.5% y/y in the first quarter, down …
30th April 2015
Calling turning points is always tricky but, assuming that the real remains stable over the coming months, we think that last night’s 50bp increase in Brazilian interest rates to 13.25% could be the last in the current tightening cycle. … Brazil hike …
The raft of weak activity data for Chile, while disappointing, are unlikely to have prevented a robust expansion of GDP in Q1. We suspect that much of last month’s weakness can be explained by the severe floods in the north of the country. … Chile …
29th April 2015
Following an extended period of weakness, it appears that Latin America’s currencies have finally started to find their feet. Most have been broadly flat against the dollar so far this month, while the Brazilian real and the Colombian peso have both …
28th April 2015
Some of the structural constraints that have held back manufacturing in Brazil over the past decade now appear to have eased. So while we don’t expect an imminent turnaround in the sector, or an Asian-style industrial boom over the medium-term, there are …
27th April 2015
Interest rates in Colombia were left unchanged at 4.50% on Friday night and above target inflation and a large current account deficit limit the room for monetary easing to counter slowing economic growth. There may be a window for some small rate cuts …
The pick-up in retail sales growth in February suggests that consumer spending in Mexico has strengthened in the early months of this year, even if problems in the mining sector have weighed on wider economic growth. … Mexico Retail Sales …
24th April 2015
Activity data from Mexico for February were a little weaker than expected and leave the economy on course to grow by a relatively sluggish 2.5% y/y in the first quarter of the year. There is better news on the inflation front, however, with data to the …
23rd April 2015
Our Argentina Activity Indicator (AAI) suggests that conditions in the economy have stabilised following sharp falls in output last year, but the best we can say is that GDP is stagnating – there is no sign yet of a return to growth. And while we wouldn’t …
Changes to the methodology that Brazil uses to produce its balance of payments data have resulted in an even larger current account deficit. However, the impact on financial markets – and the currency in particular – is likely to be small. The new data …
22nd April 2015
Despite a recession in the mining sector and an impending fiscal squeeze, we remain upbeat about Mexico. A gradual improvement in the labour market and a likely recovery in the US, after a weak start to this year, provide reasons for optimism. We expect …
21st April 2015
Interest rates in Chile were left unchanged at 3.00% last night and despite the central bank adopting a relatively more hawkish tone than a couple of months ago in its statement accompanying the decision, we do not think that policy tightening is …
17th April 2015
Colombia’s current account deficit widened to its largest level on record last year as exports plummeted following the drop in oil prices. Narrowing the deficit in the absence of a rebound in oil prices will require a cut in imports and tighter policy. …
16th April 2015
Despite falling back a little over the past few weeks, the strength of the US dollar has rekindled fears in Latin America of a re-run of the economic crises that swept across the region in the 1980s and 1990s. For our part, we think that the worst of …
14th April 2015
Mexican industrial production rebounded in February, largely due to an encouraging rise in manufacturing output. However, the bigger picture is that industrial production has had a soft start to the year. Looking ahead though, we are optimistic that a …
10th April 2015
Interest rates in Peru were left unchanged last night and a subtle shift in language in the statement accompanying the decision suggests that policymakers appear to have closed the door to further rate cuts. Inflation is likely to remain close to the …
Inflation in Mexico remained close to the central bank’s 3% target last month and we expect it to remain around there over the next eighteen months. The benign inflation outlook, combined with recent softer activity data, bolsters the case for interest …
9th April 2015
The Brazilian real has come under renewed pressure over the past couple of months as markets have responded to an ugly mix of a stagnant economy and a deepening political crisis that is threatening to paralyse the government. However, while there is not …
8th April 2015
Concerns about the recent strength of inflation in Chile are partly overdone given that it has been elevated by tax hikes which will unwind over the next year. But a relatively buoyant labour market and limited economic slack are reasons to still be wary …
3rd April 2015
The best that can be said about February’s industrial production data from Brazil is that the fall in output was not quite as large as some had feared. Production was affected by a strike in the vehicle sector, but even allowing for this there is still no …
2nd April 2015
Currencies across Latin America have continued to weaken against the dollar over the past month. Concerns that this could trigger a spate of crises in the region seem overdone. However, one consequence of the latest currency sell-off is that further …
1st April 2015
The fall in industrial output in annual terms last month, while disappointing, is unlikely to derail Chile’s incipient economic recovery. The monthly data are volatile, the consumer side of the economy appears to be strengthening and our GDP Tracker …
31st March 2015
The better-than-expected 0.3% q/q increase in Brazilian GDP in Q4 will get the headlines, but an excessive reliance on over-stretched consumers to drive growth remains a concern. Meanwhile, revisions to the methodology used to calculate GDP mean that the …
27th March 2015
Currencies in Latin America have regained some ground over the past week, but have still typically fallen by between 10-20% against the dollar over the past six months. The risk that the slide in currencies triggers a spate of crises across the region is …
26th March 2015
February’s balance of payments data will do little to ease investor’s concerns about Brazil’s current account deficit. Although the 12-month rolling deficit narrowed a touch in dollar terms, it remained unchanged at 4.2% of GDP. Against this backdrop, we …
24th March 2015
We estimate that all of the jump in inflation in Brazil over the past year can be explained by increases in government-regulated prices and a drought-related rise in food costs. Both of these effects should prove temporary, meaning that the spike in …
23rd March 2015
Interest rates in Colombia were left unchanged at 4.50% on Friday and, although the latest sell-off in the peso and above-target inflation has weakened the case for rate cuts in the near-term, we still think that, on balance, the next move in rates will …
The early results from this year’s spring wage negotiations confirm that the tight labour market has boosted wage pressure. However, this year’s overall increase in labour income will likely still fall well short of the level required to reach the Bank of …
20th March 2015
Interest rates in Chile were left unchanged at 3% last night but the accompanying statement revealed a subtle shift in tone from the central bank, which now seems to think that inflation is likely to take longer to return to target than it previously …
GDP growth in Chile accelerated in both quarterly and annual terms in the final quarter of last year, driven by strong government spending and a sharp pick-up in investment. What’s more, the current account deficit narrowed sharply, even on a four-quarter …
18th March 2015
Mexican industry made a disappointing start to the year, but with demand from the US likely to strengthen and a weaker peso set to boost the external competitiveness of exporters, we still expect the sector to perform well in the months ahead. … Mexico …
13th March 2015
Judge Griesa’s ruling that Citibank cannot process interest payments on Argentine government bonds that were issued under local law has dealt another blow to the authorities’ bid to return to international capital markets. The ruling leaves the …
The fact that the Peruvian nuevo sol has been caught up in the latest EM currency sell-off probably convinced policymakers to leave interest rates unchanged at 3.25% last night. But with economic growth still weak and inflation likely to fall further …
All of Latin America’s currencies will probably weaken further against the dollar in the near-term as we approach a first interest rate hike by the Fed. But with most currencies no longer appearing to be fundamentally overvalued, we do not expect exchange …
12th March 2015
The corruption scandal at state-owned oil company, Petrobras, has developed over the past week or so into a full-blown national political crisis that, in our view, is now the biggest headwind facing Brazil’s economy. The immediate casualty has been the …
11th March 2015
