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The Venezuelan government may have gathered enough foreign currency to meet its debt obligations this month, but with the economy crippled by a shortage of foreign currency and oil prices now falling it is only a matter of time before the public finances …
3rd October 2014
No candidate looks set to secure a majority in the first round of voting in Brazil’s presidential election this Sunday, meaning that the race is all but certain to extend to a second round run-off between the two leading candidates on 26 th October. The …
2nd October 2014
The resignation of the Governor of the Argentine central bank (BCRA) opens the door for even more unorthodox economic policy. With no end in sight to the government’s debt dispute, and policymaking heading in the wrong direction, the economy looks set to …
The September manufacturing PMI for Brazil gives little hope that the economy snapped out of recession in the third quarter. Meanwhile, in Mexico, PMI surveys both at home and in the US continue to suggest that the manufacturing sector is on course for a …
1st October 2014
Markets in Latin America have been hit particularly hard in the latest EM sell-off. A combination of factors has been responsible, including falling commodity prices and a renewed focus on the likely effects of policy tightening by the Fed. But in the …
30th September 2014
Interest rates in Colombia were left unchanged at 4.50% on Friday and we do not expect rates to rise in the near term. There may be one more 25bp increase to 4.75% next year if domestic demand remains strong and inflation rises. But the bigger picture is …
29th September 2014
The past month has seen renewed concerns about the growth outlook for much of Latin America. GDP in the region grew by just 1.1% y/y in Q2 and the available data so far point to a similar pace of expansion in Q3. In response, the authorities in several …
26th September 2014
Some commentators have argued that the deterioration in Brazil’s public finances in recent years has raised the risk of a fiscal crisis during the next presidential term, which runs from 2015 to 2019. We’re not so sure. The fiscal position has certainly …
The Argentine economy was extremely weak in the second quarter and, with the government since defaulting on its debt, it seems that the situation will only get worse in the second half of this year. As such, GDP may contract by as much as 2% this year, …
25th September 2014
The latest opinion polls suggest that Brazil’s presidential election is going to go down to the wire, with support for President Rousseff stabilising in recent weeks. From the perspective of the markets, we fear that investors are overplaying the …
24th September 2014
Colombia’s economy has been a rare bright spot in Latin America so far this year but, while we don’t expect growth to collapse, we do expect it to slow over 2015-16. This in turn is likely to mean that interest rates do not rise as far as most currently …
23rd September 2014
Today’s weaker-than-expected Colombian GDP data, which showed that the economy grew by 4.3% y/y in Q2 (from 6.4% y/y in Q1), are likely to tip the balance in favour of interest rates being left on hold at 4.5% at next Friday’s meeting. And with growth …
16th September 2014
The Argentine government has introduced various measures in recent weeks to increase the availability of foreign currency in a bid to stem the depreciation of the peso in both official and unofficial markets. While the measures may give some short term …
15th September 2014
Interest rates were cut by 25bp in both Chile and Peru last night and policymakers have room to reduce rates further if growth continues to slow. With little chance of a significant rebound in growth over the coming years, we expect rates in both …
12th September 2014
Today’s data provide yet further evidence that Mexican industry is turning the corner. With rising demand from the neighbouring US set to boost the manufacturing sector, and the government’s fiscal stimulus likely to feed into stronger construction …
11th September 2014
The economic programme put forward by presidential hopeful Marina Silva is a step in the right direction insofar as it addresses many of the problems that have contributed to a general decline in macroeconomic management over the past couple of years. But …
10th September 2014
Rampant inflation, a weakening currency and falling foreign exchange reserves mean that Venezuela has all of the ingredients for a balance of payments crisis. We expect GDP to contract by a cumulative 5% in 2014-15, but there is a growing risk of a much …
9th September 2014
Economic growth in Latin America slowed further in the first half of 2014 and we see little chance of a strong rebound over the coming quarters. The key props to strong growth in the past decade are crumbling. Rapid credit growth will have to cool, while …
8th September 2014
The Central Bank of Brazil kept interest rates on hold at 11% last night and the accompanying statement gave a strong signal that rates are likely to be left unchanged over the coming months. We don’t expect a big move in rates in 2015 either. … Brazil …
4th September 2014
August’s manufacturing PMI suggests that while conditions in Brazilian industry may have stopped getting worse, there is little evidence to suggest that manufacturers will lead a rapid rebound from the economy’s recession in the first half of this year. …
1st September 2014
Colombian policymakers increased interest rates by 25bp to 4.50% on Friday but we think that the current tightening cycle is drawing to a close. The pace of economic growth is likely to slow over the coming quarters, while inflation is unlikely to breach …
Second quarter GDP data showing that Brazil has fallen back into recession will add to pressure on the central bank to loosen policy in order to support the ailing economy. But we suspect that policy stimulus – either in the form of cuts in reserve …
29th August 2014
The past month has brought signs that Mexico’s economy is finally turning the corner. latest data suggest that the Mexican economy has turned the corner. GDP expanded by a seasonally-adjusted 1.0% q/q in the second quarter, accelerating from +0.4% q/q in …
28th August 2014
The ongoing Argentine debt dispute continues to disrupt local markets, but so far there has been no contagion to the rest of the region. Equities have performed well so far in August, while it has generally been a poor month for the region’s currencies. …
26th August 2014
With hopes of a swift resolution to the Argentine debt dispute fading, capital flight appears to be picking up. As a result, the damage to the real economy is likely to be greater than we had initially anticipated. We now think that the economy will …
22nd August 2014
The fact that the annual rate of Mexican GDP growth slowed to just 1.6% in the second quarter (from 1.9% in Q1) will probably grab the headlines, but the bigger picture is that q/q growth accelerated in Q2 for the second consecutive quarter. With the …
21st August 2014
The Argentine government’s plan to swap exchange bonds into local law, if successful, may enable the authorities to exit the current default and limit any damage to the real economy from the debt crisis. At the same time, however, it makes a settlement …
20th August 2014
The further slowdown in Chilean GDP growth in Q2 adds to the evidence that the economy is set for a prolonged period of weaker growth. We continue to expect GDP growth of just 2.8% this year. … Chile stuck in the slow …
18th August 2014
The death last week of Socialist Party presidential candidate Eduardo Campos and the likelihood that he will be replaced at the top of the party’s ticket by Marina Silva, a former Environment Minister, has changed the dynamics of Brazil’s presidential …
The release of June’s activity data allows us to firm up our estimate of Q2 GDP in Brazil – and the news isn’t good. We think that GDP may have contracted by 0.5% q/q in the second quarter. And with the economy weakening once again, a pre-election …
15th August 2014
Policymakers in Chile cut interest rates by 25bp to 3.50% last night and gave a clear indication that there is more monetary easing to come. If economic growth does not pick up as we expect , the risks to our forecast for just one more 25bp cut to 3.25% …
Negative comments from holdout creditors suggest that a solution to the Argentine debt dispute involving private banks has fallen through. That, along with interest rate cuts and monetisation of the government’s budget deficit, threatens to spark capital …
14th August 2014
Data on vehicle production released over the past month suggest contrasting fortunes for Latin America’s two largest economies. While Mexico seems to be turning a corner and growth over the second half of this year looks set to accelerate, Brazil’s …
13th August 2014
Interest rates in Peru were left on hold at 3.75% last night and we think that above-target inflation and a large current account deficit mean that policymakers are likely to resist aggressive interest rate cuts. For now, we expect rates to remain at …
8th August 2014
Last week’s default by the Argentine government is yet another unwanted headwind for the beleaguered economy. Fears of a re-run of 2002’s economic meltdown are overblown. But the messier that the default becomes, the greater the downside risks to our …
7th August 2014
There are a number of ways in which the winning candidate in October’s presidential elections could help to turn around Brazil’s struggling economy. But efforts will need to be targeted on structural reforms to raise productivity. In contrast, any attempt …
6th August 2014
The pace of private sector lending growth in most parts of Latin America has continued to cool this year, but the credit boom of the past decade means that vulnerabilities persist in a few places. At a country-level, we are most concerned about Brazil, …
5th August 2014
Brazilian industrial production contracted sharply in June and July’s weak manufacturing PMI suggests that there could be more bad news in the pipeline. By contrast, the outlook for Mexican industry continues to improve. … More bad news for Brazilian …
1st August 2014
Policymakers in Colombia hiked interest rates by another 25bp to 4.25% last night but we do not think that the current tightening cycle has much further to run. Inflation is unlikely to pose a problem for the authorities in the foreseeable future, while …
We do not expect Argentina’s default to trigger a prolonged ripple of contagion in the rest of Latin America. There may be some turbulence in the region’s financial markets, but we suspect that the actions of the Fed will continue to have a much larger …
31st July 2014
Confirmation that Argentina has officially fallen into default after failing to agree a deal with holdout creditors is likely to rattle local markets and has the potential to do significant damage to the domestic economy. But we suspect that contagion to …
Chile’s activity data for June point to GDP growth of just 2.3% y/y in Q2, an outturn that would mark the third consecutive quarter of sub-3% growth. With the economic outlook unlikely to improve in the near-term, it seems increasingly likely there will …
30th July 2014
The Argentine government seems increasingly likely to default on sovereign debt repayments due at the end of this month but the reaction in both local markets and markets in the region more generally has so far been limited. Looking ahead, while a default …
28th July 2014
With talks between Buenos Aires and holdout bondholders seemingly having stalled, it appears increasingly likely that Argentina will be prevented from making an interest payment that is due on previously restructured debt later this month – and will thus …
25th July 2014
Judge Griesa’s refusal today to grant the Argentine government a stay in the ongoing debt dispute meansthat it is increasingly likely that the authorities will default on 30th July. Default is another headwind thatwill prevent a quick recovery from the …
22nd July 2014
Data to the middle of this month suggest that inflation in Brazil is likely to breach the upper bound of its target range for July as a whole but, with the pace of monthly price rises now slowing, also provide a glimmer of hope that inflation may be …
Policymakers at the Brazilian central bank (BCB) left interest rates unchanged at 11.0% last night and we do not foresee any rate hikes until after October’s presidential election. But with high inflation still creating headaches for policymakers, we have …
17th July 2014
T he Chilean central bank cut interest rates last night and with policymakers clearly more concerned about weak growth than above-target inflation, we expect more reductions in the coming months. We are revising our forecast and have pencilled in 50bp …
16th July 2014
A lack of progress in negotiations between the Argentine government and the holdouts from the 2001 debt default means that there is an increasing chance that the authorities will be forced back into default on 30 th July. That is likely to quash any hopes …
15th July 2014
Nicolas Maduro has so far failed to reverse any of the damage to the Venezuelan economy caused by his predecessor, Hugo Chavez. Rather than continue to tinker with exchange rate mechanisms, we think that he needs to unveil radical supply-side reforms if …
