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There are two aspects of the recent deterioration in Brazil's fiscal position that are especially worrying. First, it has occurred despite the fact that the economy is operating at full employment. Second, much of the deterioration in the fiscal accounts …
6th January 2014
Financial markets in Latin America have for the most part shrugged off the Fed's decision to taper its asset purchases under QE3. Currencies have dipped a little following the decision, but the declines have been modest in the context of the moves seen …
20th December 2013
Latin America's financial markets have stabilised during the past month, but are likely to come under pressure again in 2014 as global monetary conditions tighten and commodity prices fall. We expect currencies to weaken by 5-10% against the dollar next …
18th December 2013
The landmark reform to open up the Mexican oil industry to private sector investment should alleviate concerns that the government’s ambitious reform programme has stalled before it has got off the ground. Moreover, it should support the outperformance of …
13th December 2013
Policymakers in both Chile and Peru left interest rates unchanged last night, but we continue to expect monetary policy to be loosened next year as economic growth slows. We have pencilled in 50bp of cuts to 4% in Chile, while in Peru rates may be cut by …
The election calendar in Latin America is fairly quiet next year and even the two standout events - presidential elections in Colombia (in May) and Brazil (in October) - are likely to be relatively dull affairs. In each case, it seems likely that the …
12th December 2013
After a golden decade during which annual GDP expanded by an average of more than 4%, Latin America is now entering a new era of weaker growth. We expect GDP growth to average 2.5-3.0% during 2014-15. We are most bearish on Venezuela and Argentina, both …
11th December 2013
The minutes to last month’s COPOM meeting, released this morning, will dash hopes that Brazilian policymakers might call a halt to interest rate hikes at their next meeting in January. … Brazil’s central bank dashes hopes that hiking cycle may be …
5th December 2013
Brazilian GDP growth was weaker than expected in Q3, while the breakdown dashed hopes that the economy is rebalancing away from consumption and towards investment. With the economy reaching the limits of its consumer-led growth model, GDP growth will …
3rd December 2013
November’s PMI surveys add to the evidence that the outlook for Mexican manufacturing has improved markedly in recent months. By contrast, Brazilian manufacturing appears to be entering a prolonged period of stagnation. … Mexican industry moves further …
2nd December 2013
Following the Colombian central bank’s decision to leave interest rates on hold on Friday, we think that the Colombian economy will have to deteriorate significantly to trigger additional rate cuts. But while further monetary easing seems unlikely, the …
Credit in Brazil has expanded to such an extent over the past decade that it now poses a serious risk to financial stability. The tightening of monetary policy over the past six months should help to cool lending and may mean that Brazil manages to avoid …
29th November 2013
The slight alteration to the Brazilian monetary policy committee’s (COPOM) statement suggests that we are now nearing the end of the current tightening cycle. But while there are unlikely to be further significant rate hikes from here, the Selic looks set …
28th November 2013
The ongoing dollar drought is starting to have severe repercussions for the Venezuelan economy. We continue to expect GDP to contract next year, while the risk of a debt default is increasing by the day. … Dollar drought beginning to bite in …
27th November 2013
After staging a brief recovery in Q2, the Latin American economy appears to have suffered a relapse in the third quarter. Our calculations show that regional growth slowed to just 2.5% y/y in Q3, from 2.7% y/y in Q2. With external conditions set to become …
A highly favourable external backdrop has transformed Peru into one of the region’s undoubted growth stars over the course of the past decade, but the latest GDP data suggest that the tide has now turned. In contrast to the consensus, we expect the recent …
25th November 2013
We expect Mexico’s poor performance in the third quarter to be the low point for the economy. While GDP growth will struggle to top 1.2% this year, it remains on course to accelerate to over 4% during 2014-15 making it one of Latin America’s relative …
21st November 2013
We remain sceptical about the ability of the Venezuelan government to service its mounting foreign currency debt over the medium term. Default remains a clear risk, especially if oil prices fall. … Default remains a genuine concern in …
Several high profile changes to Argentina's cabinet have reawakened speculation that the country is on the brink of formalising a multiple exchange rate system. If the experience of Venezuela is anything to go by, changes of this nature will do little to …
20th November 2013
Chile’s central bank (BCC) lowered its policy rate by a further 25bps last night in response to fresh signs that domestic demand is cooling. With growth and inflation set to remain weak for the foreseeable future, additional easing is probable. We expect …
Chilean Q3 GDP data were stronger than expected, but this was largely driven by a rebound in mining exports which is unlikely to be sustained. With investment weakening and the current account deficit uncomfortably wide, Michelle Bachelet – who won the …
18th November 2013
Latin American currencies have tumbled against the US dollar since mid-October and in many cases they are close to the lows that they reached during the height of this summer’s market sell-off. Uncertainty about the timing of Fed tapering will remain a …
15th November 2013
The sharp pick-up in Brazilian growth in the second quarter of this year seems to have fizzled out in the third quarter. Indeed, it's possible that GDP data due to be released early next month will show that the economy contracted on a quarter-on-quarter …
14th November 2013
This weekend’s Chilean Presidential Election may go down as the most one-sided affair in recent memory, with former president Michelle Bachelet set to sweep to a second term in office. But while the outcome of Sunday’s poll has never been in doubt, …
13th November 2013
The Mexican economy has had a year to forget, but the worst should now be behind it. While GDP growth may struggle to top 1.2% this year, we expect it to accelerate to over 4% y/y in 2014-15. This would make it one of Latin America’s top performers. … …
12th November 2013
Peru surprised markets with an interest rate cut last night, becoming the latest in a line of Latin American central banks to launch into easing mode in 2013. Although the timing of yesterday’s rate cut was a little sooner than we had originally forecast, …
8th November 2013
Slowing food inflation dragged headline inflation in most of Latin America last month, but that masks significant differences in the underlying outlook for inflation within the region. While inflation looks set to remain relatively low in Mexico and …
7th November 2013
Our new Indicator of Global Conditions suggests that most of the fluctuations in Latin American GDP growth over the past few decades can be explained by changes in the global macroeconomic backdrop. If we're right to expect external conditions to become …
4th November 2013
October’s manufacturing PMIs rose to exactly the same level in both Brazil and Mexico. But of the two economies, we suspect the recovery is more likely to be sustained in Mexico. … Mexico’s industrial recovery likely to outshine …
1st November 2013
The monetary easing cycle in Colombia appears to now be over but, by the same token, interest rate hikes are probably still some way off. We expect rates to remain lower for longer than most expect and have pencilled in only small hikes from 3.25% …
31st October 2013
Our Argentina Activity Indicator points to decent growth for Argentina’s economy in Q3. However, this is partly the result of a further loosening of the public purse strings in the run-up to last Sunday’s mid-term election. With fiscal support set to fade …
Having picked up in several countries in the early part of this year, inflation has slowed in most of Latin America in recent months and is now back within its target range in each of the region's major economies. In most cases, the decline has been …
29th October 2013
The Central Bank of Mexico (BANXICO) lowered interest rates to a new record low today but its accompanying statement gave a heavy hint that this would be the last cut in the easing cycle. With the outlook for growth slowly improving, we are sticking to …
25th October 2013
The decision by Brazil’s central bank to respond to what has been a relatively modest rebound in the real over the past month by scaling back some of its support for the currency suggests that policymakers may be more tolerant of a weaker exchange rate …
Several recent developments, including the growing prospect of a political regime change, have combined to send Argentine asset prices soaring. But gains in Argentina's equity market are also symptomatic of a broader underlying problem - namely, a rapid …
24th October 2013
Lending growth has continued to cool in most parts of Latin America over the course of 2013. Although the credit boom of the past decade has yet to be reflected in a significant rise in default rates, a large overhang of private sector debt remains a …
23rd October 2013
Plans to run a substantially wider budget deficit in 2014 have raised concerns that the Mexican government is losing fiscal discipline. But while a spending splurge is a major risk to an otherwise bright outlook for 2014-15, the government's plans as they …
21st October 2013
While the timing of last night’s interest rate cut in Chile was a little unexpected, it nonetheless confirms our long-held belief that the central bank would begin trimming its benchmark rate by the end of 2013. Further monetary easing appears very likely …
18th October 2013
The continued disappointing performance of the Mexican economy makes it is increasingly likely that last month’s interest rate cut was not a one-off. We have now pencilled in a 25bp reduction to 3.5% at this month’s monetary policy meeting and would not …
17th October 2013
The sharp pick-up in Brazilian retail sales over the past couple of months has fuelled hopes that the country’s consumer-led growth model has kicked back into gear. We’re not so sure. While spending on small-ticket items (which is covered by the retail …
15th October 2013
Inflation in Venezuela may now be close to peaking, but it will remain between 30-50% for the foreseeable future - comfortably the highest rate in Latin America. This in turn will remain a major constraint on economic growth, leaving Venezuela gripped by …
Peru’s central bank (BCRP) extended its long pause on interest rates last night and gave few hints that a change of policy is on the cards. Following a recent downgrade to the BCRP’s 2013 growth forecast, the Bank has now come into line with our own …
11th October 2013
With mid-term elections approaching and Cristina Fernàndez’s hold on power seemingly slipping,some are betting on Argentina’s economy to roar back. This is premature – in fact, in the near term,a more uncertain policy environment will only increase the …
10th October 2013
Brazil raised interest rates by 50bps to 9.5% last night and the accompanying statement gave no hint that the recent falls in inflation might prompt policymakers to slow the pace of tightening. A further hike to 10% looks all but guaranteed at the next …
So far there is no evidence that weak currencies are pushing up inflation in Latin America. Inflation edged down in both Brazil and Mexico in September and it should fall further over the next six months as the recent food price shock continues to unwind. …
9th October 2013
It’s still early days, but on the basis of the latest data we remain sceptical that Uruguay’s recently revamped monetary policy will be any more successful at bringing inflation under control than the previous one. In the absence of major structural …
4th October 2013
September’s manufacturing PMIs provide further evidence that the decent start to the year for Brazilian industry was a false dawn. By contrast, Mexican industry appears to be finding its feet after a terrible first half of 2013. … PMIs add to evidence …
1st October 2013
Our GDP tracker suggests that the recent slowdown in Ecuador’s economy abated in Q2. But this has come alongside a sharp widening of the fiscal deficit. With external financing options limited, we are concerned about the potential for balance of payments …
Relatively subdued GDP growth looks set to ensure that interest rates in Colombia will remain lower forlonger than most expect. We think that the benchmark rate is likely to remain unchanged at 3.25%during the next twelve months or so, before rising to …
30th September 2013
Latin American financial markets have bounced back in September, snapping a three-month losing streak. While the US Fed’s decision to delay tapering does little to change our fundamental view on the outlook for the region’s markets, it is a source of …
26th September 2013
