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We have been warning for a very long time that the recent period of strong growth in Latin America has been built on shaky foundations. With external vulnerabilities mounting, several countries in the region are now exposed to tighter global monetary …
14th April 2014
Peruvian interest rates were left unchanged at 4% last night and we think that high inflation and a large current account deficit mean that there is little room for aggressive easing this year as growth disappoints. As such, we are sticking to our …
11th April 2014
The latest jump in inflation in Brazil will put pressure on policymakers to raise interest rates further, despite having signalled an end to monetary tightening at last month’s COPOM meeting. In contrast, inflation in Mexico fell last month and is now …
9th April 2014
The Pacific Alliance pact has raised hopes of a boom in intra-regional trade, but the high degree of overlap between the export baskets of the member nations makes that unlikely. Nonetheless, the pursuit of market-friendly reforms by the Pacific Alliance …
Brazil’s central bank raised interest rates last night, but changes to the accompanying statement suggest this could be the final increase in this tightening cycle. Nonetheless, with inflation once again heading in the wrong direction, we think it would …
3rd April 2014
Brazil’s manufacturing PMI picked up a little in March, while Mexico’s manufacturing PMI edged down. But the bigger picture is that Brazil’s manufacturing sector is still barely growing. By contrast, while the PMI survey suggests that conditions facing …
1st April 2014
Inflation in Brazil appears to be accelerating once again, and may have been as high as 6% y/y last month. A combination of droughts and a weaker exchange rate are contributing to the problem. But the underlying issue remains that constraints on the …
It seems unlikely that the next Colombian president will be able to rely on a booming natural resources sector to support economic growth. As such, if Juan Manuel Santos is successful in seeking re-election next year, he must kick-start the reform process …
31st March 2014
Argentina’s new national accounts data add to the impression that the government is cleaning up its act and moving towards more orthodox policymaking. But with the economy in the midst of a slow-burning balance of payments crisis, it will still be a rocky …
28th March 2014
Latin America’s financial markets stabilised in March after a woeful start to the year. In most countries, currencies and equity markets made modest gains. Colombia’s financial markets performed particularly well, with the peso gaining the most of all …
27th March 2014
There have been further signs during the past month that Latin America has entered a new era of sluggish economic growth. With most of the official data for the fourth quarter now released, our calculations show that regional GDP growth slowed to 2.6% y/y …
26th March 2014
The Venezuelan government’s introduction of a new foreign exchange mechanism has been well received by the markets, but with no real efforts to significantly increase the supply of foreign currency we suspect that it is another false dawn in Venezuela’s …
25th March 2014
A depreciation of the Argentine peso has caused Colombia to overtake Argentina as the region’s third largest economy. Meanwhile, with a shortage of hard currency biting and the bolivar weakening, Venezuela has been the key casualty in the recent …
24th March 2014
The world economy is recovering, but we expect growth in Latin America to continue to trudge along at a rate of 2.5-3.0% over the coming years. Sluggish growth will be due in part to less supportive external conditions as Chinese demand for commodities …
21st March 2014
Colombian GDP growth beat expectations in the fourth quarter, but we doubt that the impressiveperformance can be sustained. Lower commodity prices, tighter global monetary conditions and weakercredit growth suggest that GDP growth will slow. We have …
20th March 2014
Chile’s economy slowed dramatically in the fourth quarter of last year and growth looks set to remain weak throughout 2014-15 as the copper boom comes to an end. We are forecasting GDP growth of just 2.8% for this year. But rising inflation, a weakening …
18th March 2014
The central bank of Chile (BCC) last night cut interest rates in response to a pronounced slowdown in economic growth, while Peruvian interest rates were left on hold after a pick-up in activity at the end of last year. Both economies are set for a period …
14th March 2014
The sharp rise in regional inflation over the past year is starting to cause concern in some quarters. But a closer look reveals that the increase has been due to a jump in inflation in just two countries – Argentina and Venezuela. Elsewhere, weakening …
13th March 2014
The past week has seen renewed concern that a slowdown in China will drag on growth in the rest of the emerging world, including Latin America. We think some of these concerns are justified. But while Latin America as a whole is vulnerable to shifts in …
Brazil’s president, Dilma Rousseff, looks set to triumph at elections later this year, despite the fact that economic growth during her time in office has been weaker than under any president since the early 1990s. If Ms. Rousseff is to oversee a pick-up …
11th March 2014
One year after the death of Hugo Chavez, the former Venezuelan President’s legacy of fiscal largesse and rampant inflation has left the economy on the brink of a balance of payments crisis. With social unrest growing, there is an increasing threat that …
6th March 2014
In contrast to several other emerging markets (EMs), Colombian policymakers have continued to refrain from taking steps to prevent the peso from weakening. As such, unless the currency begins to depreciate rapidly, we doubt that the central bank (BANREP) …
4th March 2014
Manufacturing PMIs fell in both Brazil and Mexico last month. But while we expect growth in Brazilian manufacturing to remain sluggish for the foreseeable future, we continue to expect Mexican manufacturers to fare much better over the course of this …
3rd March 2014
Venezuela’s government has responded to the eruption of violent protests in the country over the past month with yet another overhaul of its exchange rate system – the aim being to provide more foreign currency to the economy and thus ease the shortages …
28th February 2014
Fourth quarter growth in Brazil was stronger than even we had expected, but was driven by a rebound in exports that will be difficult to sustain over the coming quarters. We continue to expect the economy to grow by just 2% this year. … Brazil: stronger …
27th February 2014
Following the turmoil experienced during the first few weeks of this year, financial markets across much of Latin America have stabilised over the past month. In most countries, bond yields have fallen and currencies have strengthened. And while the …
25th February 2014
Peru’s economy picked up pace in the final quarter of last year. But the improvement in the headline GDP figure masks concerns about the underlying balance of growth. While domestic demand remains strong, the performance of exports has been very weak and …
24th February 2014
The slowdown in Mexican GDP growth to 0.7% y/y in Q4 means that the economy grew by just 1.1% in 2013 – its weakest performance since 2009, and its second weakest performance since 2002. Nonetheless, while growth in the first quarter of this year is …
21st February 2014
GDP data due to be released tomorrow are likely to show that Mexico grew by just 1.0% y/y in Q4 of last year, and by only 1.2% over 2013 as a whole. Even so, we think that there are still good reasons to believe that it will be Latin America’s shining …
20th February 2014
The Central Bank of Chile (BCC) cut interest rates last night and signalled that further easing is possible in the months ahead. However, with inflation likely to edge up over the coming months, we think the room for further rate cuts is limited. We’ve …
19th February 2014
Concerns about widening current account deficits have been a key factor driving the recent turbulence in financial markets in Latin America. But while the deterioration in the current account positions in some parts of the region is alarming, most …
18th February 2014
Our Argentina Activity Indicator (AAI) suggests that the economy grew by around 3% y/y in the final quarter of last year – broadly unchanged from the pace of growth in Q3. But this pre-dates last month’s sharp devaluation in the official exchange rate. …
17th February 2014
Despite the recent economic slowdown, high inflation and a widening current account deficit mean that the Peruvian Central Bank will probably have to keep monetary conditions tighter than they would like. While some interest rate cuts are possible this …
14th February 2014
The release of retail sales data for December allows us to have a first stab at estimating growth in Brazil the final quarter of last year. We reckon that the economy expanded at an annual rate of just under 2% in Q4, which would be consistent with …
13th February 2014
Despite the recent calm, the continued decline of Argentine foreign exchange reserves suggests that it is only a matter of time before the BCRA is forced to let the peso fall again. We continue to expect it to weaken towards 10/$ over the coming months …
10th February 2014
Inflation was lower-than-expected across much of Latin America last month, which may help to dampen fears that weak currencies will fuel higher inflation. Despite this, another 50bp interest rate hike seems possible in Brazil later this month, while the …
7th February 2014
In contrast to other parts of the emerging world, Colombian policymakers have welcomed the recent depreciation of the peso with open arms. We suspect that a further decline in the peso would be tolerated and that policymakers will only intervene if the …
6th February 2014
Activity data released today suggest that Chile’s economy slowed sharply in the final months of last year. Growth in Q4 as a whole may have slipped to just 2.7% y/y – its slowest rate in almost four years. However, recent currency weakness, against a …
5th February 2014
January’s manufacturing surveys add to the evidence that Mexico will outperform Brazil over the coming months. While Mexican manufacturing growth is on course to accelerate towards 5% y/y, there is unlikely to be much growth in Brazil. … More reasons to …
4th February 2014
Latin America’s financial markets have been among the hardest hit in the storm that has swept through the emerging world since the start of the year. The attention has focused on Argentina, where the authorities have bowed to the inevitable and devalued …
31st January 2014
The recent market turmoil increases the likelihood of another 50bp interest rate hike in Brazil, but policymakers elsewhere in the region are unlikely to tighten monetary policy unless the currency sell-off turns into a rout. The chance of a hike is …
30th January 2014
The parallels between the current economic situations in Argentina and Venezuela only go so far. While both economies have been ravaged by rampant inflation in recent years and haven depleted their foreign exchange reserves in order to defend overvalued …
28th January 2014
27th January 2014
Latin American financial markets have had a soft start to 2014, with currencies continuing to fall against the US dollar, benchmark equities declining and the regional EMBI bond yields rising. Looking ahead, whilst we think that the bulk of the fall has …
23rd January 2014
The decline in Mexican industrial production in November will test the patience of even the biggest Mexico bulls. Nonetheless, with US demand going from strength-to-strength, in this Watch we explain why we remain upbeat on the prospects for Mexican …
22nd January 2014
Rising inflation and a large current account deficit suggest that Chilean interest rates will not be cut as aggressively as the market anticipates this year. We continue to expect 50bp of rate cuts to 4%. … Chile: rate cuts to be less aggressive than …
17th January 2014
The decision by Brazil’s central bank to raise interest rates by 50bp to 10.5% was in line with our forecast but against the consensus, which had expected a smaller 25bp increase. As it happens, the accompanying statement to the decision hints that …
16th January 2014
The Peruvian Central Bank (BCRP) left interest rates on hold last night, but with growth now settling at slower rates we think that policy will be eased this year. Concerns over the strength of domestic demand, and a widening current account deficit, mean …
10th January 2014
The contrasting performances of the automotive sectors in Brazil and Mexico last year give an indication of the outlook for the region’s two largest economies. Booming vehicle sales in Mexico suggest that the economy is on course for a much stronger …
9th January 2014
The Venezuelan government’s re-introduction of SICAD foreign exchange auctions amounts to yet another devaluation of the bolivar. But with the authorities unlikely to present a lasting solution to the economy’s fundamental lack of hard currency, shortages …
7th January 2014
