Filtered by Subscriptions: Latin America Economics Use setting Latin America Economics
The effectiveness of Peru’s benchmark interest rate as a policy instrument is constrained by high levels of foreign currency lending and concerns over the strength of the sol. Further increases in dollar reserve requirements appear likely this year, but …
15th January 2013
Record levels of foreign direct investment into the commodities sector suggest that Dutch Disease will continue to drag on the Colombian economy this year. We expect policymakers to react with another 50bps of interest rate cuts, to 3.75%, and additional …
14th January 2013
The rise in Brazilian inflation last month is particularly worrying since it came despite a moderation in food inflation. With plans to cut electricity tariffs now under threat from a drought that has hit hydro-electricity production, there is a real …
10th January 2013
The pace of growth of Ecuador’s economy slowed substantially in 2012 and we expect this trend to continue over the current year. This is unlikely to put a serious dent in President Correa’s bid for re-election, but it does suggest that another term in …
A strong start to the year for the Chilean peso has led to renewed speculation that the central bank will be forced to intervene in FX markets to weaken the currency. While intervention is possible, it will have a limited medium-term impact on the …
9th January 2013
Events have recently swung back in Argentina’s favour in its dispute with holdout bondholders. Despite this, there remains a significant risk of a default over the course of this year. What’s more, even if Argentina does avoid a technical default it is …
8th January 2013
The recent rally in Venezuelan government bonds, on the back of speculation that the deteriorating health of President Hugo Chávez will lead to a shift towards more market friendly policies, stands in sharp contrast to the fall in the black market value …
7th January 2013
We suspect that the record high reading from the Mexican manufacturing PMI in December paints a false picture of strength. Other surveys have been weaker, and the hard data suggest that activity slowed towards the end of last year. … Mexican industry …
3rd January 2013
Brazil’s recovery will continue in 2013 but growth is likely to be lacklustre by historic standards. Above target inflation will prevent further policy support in the first few months of the year, but further rate cuts are possible later on. We also …
The slight fall in the Brazilian Manufacturing PMI in December suggests that while industry in Latin America’s largest economy continued to grow in the final months of last year, the pace of expansion was lacklustre. We expect this pattern of positive but …
2nd January 2013
The unexpectedly sharp slowdown in Colombian GDP growth in Q3 supports our non-consensus view that interest rates are likely to fall further. In fact, we think the central bank is now likely to cut rates by 25bps to 4.5% at tomorrow’s Board meeting. And …
20th December 2012
Our GDP Tracker suggests that growth in Latin American has accelerated in Q4, with a recovery in Brazil offsetting a slowdown in Mexico. However, the Brazilian economy is reaching the limits of consumer-led growth, while the Mexican economy looks set to …
19th December 2012
Growth in Latin America has accelerated in the final months of this year. We reckon that regional GDP is on course to expand by just over 3% y/y in Q4, up from less than 2.5% y/y in Q3. This should mean that Latin America grows by around 3% this year. But …
14th December 2012
Chile’s economy is currently in a sweet spot between strong growth and low inflation, and we do not expect any moves in interest rates in the near term. But to the extent that rates are changed next year we continue to believe that cuts are more likely …
13th December 2012
As the dust settles on the latest twist in Argentina’s sovereign debt debacle, attention has turned to 2013 and the possibility of a fresh default. This remains a significant risk. But while a default would not trigger an economic collapse, as happened in …
12th December 2012
Venezuelan economic policy looks set to remain in limbo until the future of the President Hugo Chávez is resolved. Devaluation of the bolivar, which we had expected early next year, may be delayed, while renewed speculation that the opposition will edge …
10th December 2012
Peru kept interest rates on hold at 4.25% last night after a fall in food inflation brought the headline rate down to target for the first time since mid-2011. Looking forward, with the scope for further falls in food inflation now limited and domestic …
7th December 2012
After a decade of underperformance, we believe that growth in Central America will start to outpace that of South America over the coming years. Part of the reason for this is the changing relationship with China, where lower commodity demand and a …
6th December 2012
Fears about the looming fiscal cliff have caused US businesses and households to defer spending plans, in the process contributing to the recent slowdown in the Mexican economy. But with an abrupt fiscal tightening in the US likely to be averted, the …
5th December 2012
The new President of Mexico, Enrique Pena Nieto of the PRI, has continued to demonstrate an appetite for the kind of reforms that should help to raise economic activity over the medium-term. We expect potential growth to rise towards 4%. But overcoming …
4th December 2012
Brazilian industry should continue to grow over the coming months, but the current pace of expansion is unlikely to be maintained. Tax breaks on motor vehicles are due to expire, while the economy more generally is reaching the limits of consumption-led …
Today’s disappointing third quarter GDP data suggest that despite substantial policy stimulus the Brazilian economy is struggling to get going. We expect growth to remain lacklustre over the next year. … Brazil: Q3 GDP reinforces limits of …
30th November 2012
The sharp pick-up in Chilean manufacturing growth in October gives a misleading impression of the true health of local industry. What’s more, to the extent that there has been a rebound in manufacturing this year, it has been concentrated in processed …
29th November 2012
The decision by Brazil’s central bank to keep interest rates unchanged at a record low of 7.25% was expected, but the accompanying statement supports our view that they will remain at their current low until 2014. In fact, to the extent that there is any …
Latin America appears to be enjoying an end of year growth spurt. We estimate that regional GDP growth accelerated to around 3% y/y in Q3, from a three-year low of 2.5% y/y in Q2. What’s more, growth is on track to accelerate to around 3.5% y/y in Q4. …
28th November 2012
We expect the Mexican economy to outperform by recent standards over the next couple of years. By contrast, growth in Brazil – which until now has been the star performer out of Latin America’s two largest economies – is likely to be relatively …
27th November 2012
Colombian interest rates will probably fall further next year as external headwinds cause GDP growth to slow. By contrast, a weaker global economy could be helpful for Peru, where the latest economic data have revealed some early signs of overheating. … …
26th November 2012
Yesterday’s ruling by a US judge implies that if Argentina continues to play hardball on its holdout debt it will find itself in technical default within a matter of weeks. This may not be the economic disaster that some expect, but it has the potential …
22nd November 2012
The economies of Latin America will continue to outperform their peers in the developed world over the coming quarters, but growth is set to slow in 2013 and will be lacklustre by the standards of the past few years. The region’s recent resilience in the …
21st November 2012
Mexico’s labour market reforms are unlikely to lead to a swift acceleration in GDP growth in the very near-term. But with the re-election of the PRI seemingly having ended the political deadlock that has hampered the economy’s development for more than a …
20th November 2012
Chile’s economy posted another quarter of solid GDP growth in Q3, as an acceleration of consumption and investment offset export weakness. But a sharp rise in the current account deficit suggests that the current pace of growth will be difficult to …
19th November 2012
Mexico’s economy slowed by more than expected in Q3 and the latest monthly activity data suggest that growth in Q4 is likely to be even weaker. This should end speculation that the central bank might hike interest rates in the face of above-target …
16th November 2012
September’s activity data show that Peru remains among the region’s fastest growing economies and it seems that GDP probably grew by 6.5% y/y in Q3. We expect Peru to be one of Latin America’s best performers in 2013, but looser fiscal policy poses a …
15th November 2012
The Capital Economics Argentina Activity Indicator suggests that Argentina’s economy pulled out of recession in Q3 and is on course to register modest growth in Q4. But this turn-around has been largely driven by a weather-related improvement in …
14th November 2012
A combination of quick-fix remedies may enable the Venezuelan economy to withstand the loss of exports revenues if oil prices fall over the next couple of years. But with the authorities running out of financing options, there is a growing risk of an …
13th November 2012
Data released later this month are likely to show that after having stagnated for much of the past year, Brazil’s economy roared back to life in Q3 on the back of substantial policy stimulus. But while GDP looks on course to expand at a decent pace in Q4 …
12th November 2012
Last night’s central bank meeting in Peru provided further evidence that policymakers are not considering rate hikes despite vigorous domestic demand and credit growth. Instead, concerns over the strength of the sol and lending in dollars suggest that …
9th November 2012
The recent seizure of a handful of small Brazilian banks and a Colombian brokerage underline the extent of financial excesses in parts of the region in recent years. While there may be additional bank failures in the future, the authorities have the …
8th November 2012
Increased savings and investment levels have fuelled a surge in construction activity in Latin America’s Andean economies, helping to raise their long-run growth potential. But in a few countries, higher savings have been driven by terms of trade gains …
7th November 2012
We estimate that an increase in motor vehicle exports to the US could add around 0.5% to Mexican GDP in each of the next four years. This supports our expectation that the Mexican economy is comparatively well placed to overcome the global headwinds that …
6th November 2012
The sharp fall in Brazilian industrial production in September is partly a payback from the large monthly increases in output seen in July and August. The bigger picture is that policy stimulus has kick-started growth in industry, but that the pace of …
1st November 2012
A series of hawkish comments from Mexican policymakers has fuelled speculation that the central bank may finally be on the cusp of hiking interest rates – having kept them at record lows for the best part of four years. But we’re not convinced. Inflation …
31st October 2012
A recent ruling by a US court has raised questions over whether Argentina will be pushed into a fresh debt default. On closer inspection, the issue remains one of willingness to pay rather than ability to pay. Nonetheless, a combination of populist …
30th October 2012
Chile’s latest economic activity data are not as bad as they first appear. Much of the weakness in retail sales and manufacturing can be put down to the extended independence holidays. That said, we still expect growth to ease over the coming months and …
The Colombian central bank (BANREP) appears to have signalled that further interest rates cuts are contingent upon a deterioration in the global environment. We think that a deepening of the euro-zone debt crisis and sharp falls in commodity prices will …
29th October 2012
Fears that the ‘pesofication’ of foreign currency debt by one Argentine province earlier this month will lead to a wave of local government defaults are overdone. Even so, the provinces face a funding squeeze in the coming years as slower economic growth …
25th October 2012
The strength of local currencies is once again starting to trouble policymakers across Latin America. But while there has been a tendency to blame exchange rate appreciation on a third round of quantitative easing by the US Fed, strong currencies are …
24th October 2012
The fact that over half of FX transactions in Venezuela have already been forced onto the black market – where the bolivar trades at much weaker rates – means that the country has already seen a sharp fall in its “effective” exchange rate. Even so, we …
22nd October 2012
Chilean policymakers kept interest rates on hold last night amid growing concerns over the strength of the peso. The resilience of domestic demand means that rates should stay unchanged in the near-term, but we are sticking with our non-consensus call for …
19th October 2012
