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The Brazilian economy continues to struggle. Having expanded by a meagre 0.2% q/q in the first quarter of this year, there are few signs that growth picked up in Q2. Elsewhere in the region, growth has also started to slow, albeit to a far lesser extent …
27th July 2012
Ollanta Humala’s first year as Peru’s president has been a bittersweet one. While markets have warmed to the ex-army officer’s emergence as a pragmatic centrist, his poor rural support base appears to be rapidly losing faith. We are cautiously optimistic …
26th July 2012
With the outcome of the Venezuelan presidential election still delicately balanced, the authorities are taking steps to pump economic growth. But while that raises the chance that President Chavez will be returned to office in October, paradoxically it …
23rd July 2012
The Mexican Central Bank (BANXICO) left interest rates on hold at 4.5% this afternoon. Strong economic growth and a recent pick-up in inflation mean that the three-year pause may last a while longer. But with external headwinds brewing, we continue to …
20th July 2012
The latest activity data from Colombia indicate that the economy slowed further in Q2. As a result, while policymakers may await concrete evidence that the recent consumer credit boom has ended, it seems increasingly likely that interest rates will be cut …
Judging by the latest data, Argentina’s new Central Bank Charter has cemented the BCRA’s role as a state-financing vehicle. With the economy on the brink of recession, we suspect that the government will tighten its grip on the BCRA’s resources, eroding …
19th July 2012
Having been one of the darlings of the international markets over the past 18 months or so, Colombian equities have had a torrid time in recent weeks. But they remain amongst the best performing in the past year and they should continue to outperform over …
18th July 2012
While there was little doubt that Chile and Peru would leave interest rates unchanged last night, we continue to believe that both countries will lower rates before year-end. On balance, we feel that rate cuts are likely to come slightly sooner in Chile …
13th July 2012
Last night’s decision by the Brazilian Central Bank (BCB) to cut interest rates was widely expected. With policymakers struggling to revive the economy, and external headwinds brewing, we think that interest rates will remain at historically low levels …
12th July 2012
A sharp jump in some agricultural commodity prices has stoked fears of a renewed spike in inflation in Latin America. But we think that those concerns are misplaced. Indeed, we expect the agricultural price shock to prove to be temporary and think that …
11th July 2012
If Mexico’s President-elect, Enrique Peña Nieto, is to achieve 6% GDP growth he will have to press ahead with reforms. However, with the PRI falling short of a majority in Congress, he will need to gain the support of opposition parties if he is to be …
10th July 2012
Argentina’s tightly managed exchange rate is not compatible with the expansive macro policies that have driven inflation up to double-digit levels. Nonetheless, the authorities seem determined to have it both ways. Against this backdrop, the most …
9th July 2012
The recent data support our belief that Latin America is heading for a period of below-trend economic performance. Imbalances in the drivers of growth have left many countries increasingly exposed to falling commodity prices and weaker global risk …
5th July 2012
The current pace of credit growth in Brazil remains unsustainable – and the longer it continues, the bigger the risk of a messy ending further down the line. … Brazil’s looming credit …
4th July 2012
Structural rigidities mean that inflation will be slower to fall back in Uruguay than in the rest of the region this year. As a consequence, policymakers have less space to support growth via monetary easing than their Latin American peers. We continue to …
The latest fall in Brazil’s manufacturing PMI suggests that, despite a sharp drop in the currency over the past three months or so, producers in Latin America’s largest economy are still feeling the squeeze. Meanwhile, June’s business surveys also brought …
3rd July 2012
The deterioration in the outlook for Colombia has forced us to review our interest rates forecast. With the economy slowing more abruptly than we had expected, the rate cuts that we had pencilled in next year could now be brought forward to the second …
2nd July 2012
Ecuador’s headline GDP numbers give a somewhat misleading impression of the true health of the economy. A failure to accumulate savings during a run-up in oil prices means that the dollarised economy now looks highly vulnerable to a sustained period of …
The recent sharp drop in oil prices spells danger for Venezuela. The government may be able to muster sufficient funds to prop up the economy this year. But if oil prices continue to fall and remain low, as we expect, then Venezuela could be plunged back …
29th June 2012
There are growing signs that falling commodity prices and weaker demand from China are starting to take their toll on the economies of Latin America. In those countries that are most dependent on trade with China – namely Brazil, Peru and Chile – exports …
28th June 2012
The consensus view that the current strength of domestic demand rules out rate cuts in Chile looks to us to be fundamentally misplaced. Instead, in the absence of fresh rises in metals prices, domestic demand will slow by more than most expect, making …
27th June 2012
Enrique Peña Nieto of the PRI remains on course to register a comfortable victory in Sunday’s Mexican presidential election. But with the PRI now looking unlikely to win a majority in Congress there is a risk that the political stalemate that has blighted …
The fact that our forecasts for Brazilian growth were already at the very bottom of the consensus range means that we have not had to make significant adjustments in light of weaker than expected first quarter GDP data. Nonetheless, with both external and …
22nd June 2012
The Colombian economy seems to have hit a brick wall in Q1. While it is better placed than most in the region to withstand the turbulence from the euro-zone crisis, we are revising down our GDP growth forecast to 4.0% this year (from 5.0% previously). …
21st June 2012
The authorities in most Latin American countries have space to loosen policy in the event of a sharp slowdown in global economic growth. Indeed, we expect to see policy easing in most economies over the next 6-12 months. Yet while a global downturn on the …
The latest data show that the health of Argentina’s economy has gone from bad to worse in recent months. While the official statistics are largely discredited, we estimate that GDP contracted in Q1 and expect a recession this year as the current ‘model’ …
18th June 2012
A recent drop in regional export growth can be attributed to a number of factors, of which slowing Chinese commodity demand may be the most prominent. We expect export revenues to come under further pressure in the short-to-medium term as commodity prices …
15th June 2012
Increased intervention by the Colombian authorities in the foreign exchange market may halt the appreciation of the peso, but it is unlikely to significantly weaken it. Instead, a drop in commodity prices remains the most likely trigger for a weaker …
14th June 2012
Concerns that Latin America might be spiralling towards a new era of protectionism have emerged in 2012. But while it is true that the region as a whole has seen an increase in protectionist trade measures, these have been largely confined to Argentina …
13th June 2012
While overall credit growth in Colombia is slowing, consumer lending remains uncomfortably strong. The deepening crisis in Europe will probably prevent policymakers from raising rates over the next few months, but we still think that interest rates could …
11th June 2012
Today’s decisions by Peru and Mexico to leave interest rates unchanged support our belief that, in the near-term, most of the region’s policymakers will await clearer evidence on the health of the global economy before adjusting monetary policy. Further …
8th June 2012
In line with our forecast, inflation has eased across most of the region in 2012 as the effects of last year’s food price shock work their way out of the annual comparison. We expect this trend to continue over the remainder of the year, pushing inflation …
6th June 2012
A weather-related collapse in agricultural production is the main reason for Brazil’s desperately weak growth in the first quarter of this year. These effects will be temporary and should reverse over the course of this year. But even so, our …
1st June 2012
The latest opinion poll in Mexico suggests that the left-leaning Andrés Manuel López Obrador has made a late charge ahead of July’s presidential election. That has coincided with a sharp sell-off of the peso. However, Enrique Peña Nieto is still on course …
Last night’s decision by the Central Bank of Brazil to slow the pace of interest rate cuts suggests that we are getting close to the end of the easing cycle. Nonetheless, we continue to expect the benchmark Selic rate to be lowered further over the coming …
31st May 2012
Argentina’s ample foreign reserves and tight capital controls mean that the government will not be forced into allowing the peso to devalue sharply in the near-term. That said, the current managed exchange rate regime is not sustainable and, unless …
30th May 2012
A strong recovery in investment spending has helped to boost Peru’s economy so far this year. Despite concerns from some quarters about the pace of domestic demand growth, we think that the threat of overheating remains fairly contained at present. … …
28th May 2012
Our previous analysis, suggesting that Brazilian and Argentine equities would be most vulnerable to a general spike in risk aversion, has been borne out in the recent sell-off. Mexican markets, on the other hand, have been a touch more resilient than we …
25th May 2012
Financial markets across the whole of Latin America have been hammered over the past month by a euro-zone related flight to safety but amid the sell-off the collapse in the Brazilian real stands out. It has weakened by over 5% against the US dollar this …
We were one of the first forecasters to predict a recession during the Fernández government’s second term. Even so, the extent of the recent slowdown has been greater than even we had anticipated, and it now seems more likely than not that Argentina will …
23rd May 2012
The recent sale of debt by the Venezuelan authorities will help to bolster economic growth ahead of October’s presidential election. But the fact that the debt issuance has effectively been monetised by the central bank will increase inflation pressures …
We think that first quarter GDP growth in Brazil will be somewhat stronger than the monthly economic activity indicator produced by the central bank (BCB) suggests. But there is no sign yet of a much needed rebalancing of growth towards investment and …
22nd May 2012
The Chilean economy registered strong growth in Q1, but we doubt that the impressive performance can be maintained. With copper prices already down by about 10% so far this month, and likely to fall further as global headwinds intensify, we expect GDP …
18th May 2012
The direct exposure of Latin American banks to the deepening crisis in Spain is not as great as it seems at first sight. Even so, there are at least three ways in which the region’s banks could be hit by financial contagion from the euro-zone’s debt …
Mexican Q1 GDP growth was not only stronger than expected, but the drivers of the increase were broad-based. Although the economy may lose some of its steam over the coming quarters, it is well placed to withstand external shocks. That reinforces our view …
17th May 2012
Not content with waging a “currency war” against the rest of the world, Brazil’s government is now doing battle with its own banks over the high interest rates charged on loans to consumers and businesses. Various factors explain the high lending spreads …
Renewed fears about the future of the euro-zone have sparked a retreat from all risky assets in recent days, and Latin American currencies have been no exception. For now, the risks remain skewed to the downside and it is not inconceivable that, in an …
16th May 2012
Relative to the rest of the world, at least, the immediate outlook for Latin America remains good. Nonetheless, vulnerabilities are starting to emerge in a number of the region’s economies, which are likely to result in a period of below-trend growth over …
14th May 2012
History indicates that it is very difficult for a country to get rich purely through the extraction of natural resources. In order to meet President Piñera’s target of becoming a developed nation, Chile needs to diversify its productive base by creating …
9th May 2012
The emergence of a political consensus in favour of opening up the oil industry in Mexico has increased the likelihood that the winner of July’s presidential election will take steps to increase the participation of the private sector. We estimate that …
8th May 2012
