Filtered by Subscriptions: Latin America Economics Use setting Latin America Economics
Argentina’s new certificate of deposit (CEDIN) is yet another stopgap measure aimed at alleviating a growing shortage of dollars. Without deeper reforms to economic policy, Argentina’s slow-burning balance of payments crisis is set to continue and the …
1st July 2013
Latin America’s financial markets have borne the brunt of the recent global sell-off since the US Fed signalled its intent to scale back its asset purchases under QE3 and evidence of weaker Chinese growth has emerged. While the biggest falls may now have …
28th June 2013
Latin American bonds, equities and currencies have slumped over the past month after the US Fed signalled its intention to taper its asset purchases under QE3 later this year. But while financial markets across the region have taken fright, the economic …
27th June 2013
The response of Brazil’s government to recent unrest suggests a willingness to engage with protestors’ concerns, but also reveals a fundamental misdiagnosis of the underlying issues. The problem lies with poor governance rather than a lack of spending. …
26th June 2013
The sharp falls in Latin American currencies over the past month mean that many are now below our end-year targets, which looked extremely bearish only a few months ago. But while we think the trend over the next couple of years will be towards further …
25th June 2013
The protests that have spread across Brazil over the past week have so far had a limited impact on financial markets and so – in contrast to Turkey – are unlikely to have immediate implications for central bank policy. Nonetheless, many of the protestors’ …
19th June 2013
The murky world of Brazil’s public finances has come under increased scrutiny in recent weeks, after ratings agency S&P downgraded the nation’s sovereign debt outlook. In this Watch we take a fresh look at Brazil’s public finances and explain why, …
18th June 2013
Chile’s central bank (BCC) held its interest rate at 5% last night, in spite of weaker growth and inflation data which had led some analysts (including ourselves) to forecast a cut. Going forward, rate cuts still appear more likely than not over the next …
14th June 2013
Changes to Uruguay’s monetary policy regime, including a shift towards monetarism, are unlikely to be a panacea for the country’s inflation problems. Without tighter economic policy and efforts to reduce wage indexation, headline CPI is likely to remain …
11th June 2013
Another devaluation of the bolivar would do nothing to solve Venezuela’s shortage of foreign currency. Until or unless the government changes tack and adopts a more market-friendly economic framework, it seems that shortages will worsen and the risk of a …
10th June 2013
Two developments over the past week make this an ideal opportunity to revisit our forecasts for Brazil. On the one hand, weak Q1 GDP data support our long-held view that the economic recovery will disappoint. But on the other, the decision to raise …
6th June 2013
The Chilean peso recently weakened to over 500/US$ and, with support for rate cuts within the central bank growing, we expect it to fall to around 520/US$ by year-end. Meanwhile, Brazil’s decision to remove its IOF tax on foreign investor inflows suggests …
5th June 2013
May’s manufacturing surveys suggest that the Brazilian and Mexican manufacturing sectors both weakened further last month. But while Brazilian industry will probably continue to struggle over the coming years, the outlook for Mexican firms remains far …
4th June 2013
The Venezuelan economy may already be in recession and we continue to expect GDP to contract by 1% this year. With the authorities running out of hard currency, and oil prices unlikely to rebound over the coming months, there is a growing risk of a …
3rd June 2013
Economic growth across Latin America was weaker than expected in Q1. We estimate that regional GDP increased by about 2.2% y/y, down from 2.8% y/y in Q4 of last year – the slowest pace since 2009. There may be some recovery over the coming months as …
31st May 2013
The recent weakness of Latin American stock markets has continued unabated in May, with returns well below those of developed and emerging market equity benchmarks. Going forward, we expect stocks to remain under pressure as GDP growth disappoints and …
30th May 2013
Brazil’s central bank raised interest rates by a larger-than-expected 50bps last night, sending out a strong message that it has not gone soft on inflation. Further hikes are possible in the months ahead. But with inflation set to fall back from mid-year …
The strong performance of Brazilian investment in Q1 is promising, but it will have to be maintained for a sustained period in order to significantly ease the economy’s supply constraints and rebalance growth. In the mean time, growth is likely to be …
29th May 2013
Our Argentina Activity Indicator shows some improvement in April and has prompted us to nudge up our 2013 GDP growth forecast to 1.5%. Even so, growth remains slow by the standards of recent years and uneven in scope. Indeed, the two biggest sectors of …
The fact that the Mexican current account deficit has doubled over the past year is not as alarming as it appears. The deficit remains small and there are no signs of a consumer import binge comparable to elsewhere in the region. That being said, the …
28th May 2013
The weakness of today’s Peruvian GDP data supports our belief that the economy is entering a phase of permanently slower growth as the mining boom of the past decade fades. Ample scope for a policy stimulus should, at least, help to ensure a soft landing …
23rd May 2013
Latin American GDP growth slowed to its lowest rate since 2009 in the first quarter of this year and, while we expect to see a gradual recovery over the coming quarters, mounting vulnerabilities will prevent a strong economic rebound. Weaker growth in …
22nd May 2013
The renewed focus of the Brazilian authorities on raising investment suggests a growing acceptance that the slump in growth over the past year or so has been driven in part by structural factors. Raising investment will be crucial to restoring growth to …
21st May 2013
Chile’s economy stumbled in Q1 as investment spending slipped back from the robust rates of the past few quarters. With copper prices now falling and credit conditions tightening, GDP growth is likely to slow by more than most expect in 2013 and rate cuts …
20th May 2013
Q1 data revealed that the Mexican economy expanded at its slowest annual rate since emerging from recession in 2009, but we suspect that the slowdown was just a blip rather than the start of a trend. On the contrary, we continue to expect output to expand …
17th May 2013
The Central Bank of Chile (BCC) left its benchmark interest rate unchanged at 5.0% last night, however the accompanying statement was a little more dovish in tone than in recent months. We continue to expect the BCC to cut rates by around 50bps by …
Argentina remains on a collision course with the IMF over the accuracy of its consumer price data. The Fund has threatened to impose sanctions if corrective measures are not taken by 29th September and, by way of a response, the Argentine authorities have …
16th May 2013
The Mexican economy has hit a soft patch in recent months, but we would caution against being too pessimistic. Growth is likely to accelerate in the second half of the year as inflation pressures subside and demand from the US recovers. But if we are …
13th May 2013
Last night’s central bank meeting in Peru offered little to suggest that policymakers are considering a near-term change in interest rates. Going forward, we expect the monetary policy bias to shift gradually towards easing as growth and inflation slow, …
10th May 2013
Brazil is unlikely to meet its ambitious targets for oil production, but crude output could still increase by at least one million barrels per day from current levels by 2020. This would add to booming global supply from both conventional and new sources …
9th May 2013
Contrary to popular belief, Uruguay’s stubbornly high inflation rate is partly structural in nature and not simply the result of overheated demand. Bringing inflation down permanently will require far-reaching policy reforms, for which we doubt that the …
The drop in Brazilian inflation last month was a bit smaller than expected but still sufficient to bring it back within the central bank’s target range. Looking ahead, we expect inflation to fluctuate around the upper bound of the target range over the …
8th May 2013
The recent slump in retail sales in Brazil probably overstates the true weakness of consumer spending. Nonetheless, putting to one side the volatility of the monthly data, there are signs that Brazil’s consumer boom is starting to fade. And while this may …
7th May 2013
The drop in the manufacturing PMI for April adds to evidence that Brazil’s recovery has faltered in recent months and is another reason to think that the current monetary policy tightening cycle will be smaller and shorter than the markets expect. … …
2nd May 2013
There appears to be some truth to claims that discrepancies in Chile’s consumer price data have lowered inflation artificially. Even so, the overall impact on headline CPI has been relatively small. Instead, it is food and energy prices that have been key …
The past month has brought further signs that the recovery in economic growth in Latin America that began in mid-2012 is now running into headwinds. Admittedly, calendar effects have probably exacerbated the weakness of the very latest activity data. But …
30th April 2013
Latin American equities have mostly sold off over the past month, compounding an already weak start to the year. Hardest hit have been the large mining firms based in the Andes, many of whom appear to be feeling the effects of a slowdown in Chinese …
29th April 2013
The Colombian government’s stimulus package may boost industry at the margin, but it is unlikely to solve the problem of an overvalued peso and widening economic imbalances. As a result, we doubt that the interest rate hikes to 4.5% that the consensus …
We suspect that the Mexican central bank (BANXICO) is set for another prolonged period of inactivity. High inflation will prevent additional rate cuts in the near term, while a rebound in economic growth in the second half of the year will remove the need …
26th April 2013
The recent falls in global copper prices add further weight to our belief that GDP growth in Chile will be slower than most expect this year. Even so, this is unlikely to be a disaster for the economy. Indeed, to the extent that a moderate fall in metals …
The softer tone of recent economic data, coupled with signs that support for the government’s reform programme may be fraying, have dented some of the optimism over the outlook for Mexico. Even so, while growth looks set to slow in the first half of 2013, …
25th April 2013
Our Argentina Activity Indicator shows that while GDP growth accelerated in Q1, the underlying pace of economic activity remained lacklustre. Moreover, the very latest data suggest that the recent recovery may already be faltering. … Argentina Activity …
23rd April 2013
The slump in commodity markets last week has raised questions over how exposed Latin America is to a period of lower prices. While the risks vary from country-to-country, the bigger picture is that the consumption boom that has propelled the region’s …
22nd April 2013
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 these concerns are justified. But while Latin America as a whole is vulnerable to weaker growth in …
18th April 2013
The decision by Brazil’s central bank to raise interest rates by 25bps – as opposed to the 50bps that was priced into the market – suggests that the tightening cycle is likely to be less aggressive than many seem to expect. In fact, we think it will be …
The Mexican economy has slowed since the start of the year, taking some of the shine off of one of Latin America’s more positive growth stories. Nonetheless, we expect the economy to rebound later this year, and continue to believe that Mexico will …
16th April 2013
Despite hopes for a new pragmatism, there is little evidence to suggest that Nicolas Maduro’s victory in yesterday’s Venezuelan presidential election will herald the dawn of an era of improved economic policymaking. Indeed, we think that the coming years …
15th April 2013
The central banks of Chile and Peru left their respective policy rates unchanged last night and offered little to suggest that a near-term rate move is on the cards. In the case of Chile, though, it is looking increasingly probable that the authorities …
12th April 2013
Brazilian inflation breached the upper bound of its target range last month, tipping the balance in favour of a hike in the benchmark Selic interest rate at next week’s COPOM meeting. Nonetheless, it remains a close call and even if rates are raised next …
10th April 2013
We suspect that the interest rate cutting cycle in Colombia has come to an end. Admittedly, to the extent that there are changes in the next 6-9 months, rates are more likely to fall than rise. But our central scenario is for rates to remain on hold at …
8th April 2013
