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Protectionist trade controls in Argentina are already taking a toll on growth in neighbouring countries, with Paraguay and Uruguay hardest hit. In the longer-term, however, it may be Argentina that pays the greatest price as a result of disruptions to …
8th May 2012
In contrast to most other emerging markets, the Mexican IMEF manufacturing survey rose in April. With the relatively cheap peso maintaining the competitiveness of exports and demand from the US relatively robust, Mexican industry looks set to outperform …
3rd May 2012
April’s manufacturing PMI survey for Brazil contains little in the way of good news. Not only does the drop in the headline index suggest that industrial output is falling once again, but the forward looking components of the survey suggest that a …
2nd May 2012
An improvement in the global backdrop helped Peru’s economy to gather pace in Q1. This has led to the re-emergence of some familiar concerns over the strength of domestic demand and credit growth. Despite this, we think rate increases are fairly unlikely …
1st May 2012
We are making some small tweaks to our forecast for interest rates in Latin America. If the global economy weakens later this year, as we expect, it is still likely that most central banks in the region will loosen policy. But in the meantime it seems …
30th April 2012
Last week’s news that Argentina is to nationalise YPF has helped to deflect attention from further signs that the economy is slowing sharply. A growing dependence on temporary fixes to prop up an unsustainable growth model reinforces our expectations for …
27th April 2012
The decision by Brazil’s central bank earlier this month to cut interest rates once again has raised concerns in some quarters about the outlook for inflation over the rest of this year. As it happens, inflation in most countries (including Brazil) has …
25th April 2012
History suggests that the nationalisation of YPF may do little to deter FDI in Argentina’s energy sector. Nevertheless, we suspect that it will have a more significant impact on investment flows into the wider economy, making the current ‘model’ …
24th April 2012
The latest opinion polls suggest that not only does the PRI’s Enrique Peña Nieto have a healthy lead in the race to July’s presidential election, but that his party may also take control of Congress. That would give him a clear path to press ahead with …
20th April 2012
The decision earlier this week by Brazil’s central bank (BCB) to cut interest rates once again – and signal further easing ahead – has revived talk about a “floor” on interest rates in Latin America’s largest economy. At present, the minimum rate of …
It was beginning to feel like somebody had turned the clock back twelve months. With the first quarter of 2012 bringing a renewed sense of calm to global markets and a rebound in activity across the region, the policy debate in Latin America had started …
19th April 2012
The Colombian credit boom appears to be unsustainable. Lending growth has been excessive, while new loans have been increasingly funded via wholesale foreign funding. We expect tighter macroeconomic policy – including interest rate hikes towards 6% – to …
The decision by the Central Bank of Brazil last night to cut interest rates by 75bps to 9% was widely expected. Instead, the critical issue for investors is whether this marks the end of the current easing cycle and, perhaps more importantly, how quickly …
Both Chile and Peru kept interest rates unchanged in April and signalled that moves in either direction are unlikely in the near-term. Further ahead, if we are right in expecting the global economic backdrop to weaken again, Chile looks the more likely to …
18th April 2012
The recent slowdown in Brazilian bank lending highlights the unsustainable nature of rapid credit growth in parts of Latin America. Credit risks are greatest in Argentina and Venezuela, while the Colombian financial system has also become more vulnerable …
16th April 2012
Having stagnated over the second half of 2011, the early signs are that Brazil’s economy grew by around 1% q/q in the first quarter of this year. But while Brazil’s return to growth is clearly good news, the economy remains stubbornly “two-speed”. … …
13th April 2012
While Brazilian GDP growth has outstripped that of Mexico in recent years, it has been very unbalanced. That has left Mexico better placed to weather any external shocks. As a result, we expect Mexico to outperform Brazil this year, while its equity …
12th April 2012
There are several reasons why we would have expected to have seen a sharp rise in Brazilian house prices over the past five years. But even so the sheer scale of the recent jump in prices is difficult to justify. As things stand, we estimate that the …
11th April 2012
Argentina’s experience after the collapse of the peso ten years ago supports the view that Greece, and perhaps other peripheral economies, would ultimately be better off leaving the euro-zone rather than struggling on with the current mix of austerity, …
10th April 2012
As the most open and commodity-dependent of the major Latin American economies, Chile benefited from an improvement in global conditions in Q1. The road ahead will not be a smooth one however and, if we are right in expecting the external backdrop to …
5th April 2012
Rumours that Argentina’s largest energy company, YPF, is on the brink of being nationalised have seen the company’s share price plummet and sovereign risk premia spike over the past few days. Not only would such a move be unlikely to relieve strains in …
On the face of it, news that Venezuelan inflation is falling seems to support President Chavez’s claims that price controls will tame inflation. In reality, though, they are not the long-term solution to Venezuela’s inflation problem. Moreover, they risk …
3rd April 2012
The latest survey data suggest that the Mexican economy may have expanded by an impressive 1.2% q/q in Q1. Even so, with the risks to growth and inflation to the downside, policymakers have recently lent weight to our view that interest rates are far more …
The manufacturing PMI survey suggests that after a torrid 2011, Brazilian industry stabilised in the first quarter of this year. But in truth the link between the manufacturing PMI and actual output is not particularly strong. And in any case, signs that …
2nd April 2012
The Mexican presidential election race formally begins today and the latest polls suggest that the PRI’s Enrique Peña Nieto is likely to triumph in July’s vote. But while Mr. Peña Nieto has identified many of the key reforms that are required to boost the …
30th March 2012
Uruguay’s Central Bank (BCU) kept interest rates at 8.75% last night but maintained a hawkish tone on inflation. Based on our outlook for growth to slow by more than most anticipate this year, overheating concerns should fade over the coming quarters and …
The rebound in financial markets across Latin America since the start of the year has lost some momentum in recent weeks. Having rallied by 10% or so in the first two months of this year, most of the region’s equity markets have posted more modest gains …
29th March 2012
Latin America is one of the few regions to have benefitted from the $25pb jump in oil prices over the past six months or so: higher prices provide a prop to regional growth and, for now at least, the impact on inflation will be limited. The benefit of …
28th March 2012
Official GDP data continue to overstate the health of Argentina’s economy and we estimate that growth slowed to 4.5% y/y in Q4. The current economic model is reaching its limits, and with little appetite for reform on the part of the authorities, a …
27th March 2012
The latest changes to Argentina’s Central Bank Charter will pave the way for further monetisation of a deteriorating fiscal balance. As such, any remaining hopes that the Fernández government is about to embark on a more orthodox economic agenda appear to …
23rd March 2012
Brazil’s so-called “currency war” has lost a little of its momentum in recent days, as the real – like most EM currencies – has weakened. This provides an ideal opportunity to take stock of the recent escalation of the “currency war” and assess how events …
Following bumper growth in Colombia last year and a strong start to this year, concerns about overheating are likely to resurface. We remain fundamentally upbeat on the economy and expect a soft landing, with GDP growth slowing from 5.0% this year to 3.5% …
22nd March 2012
News that Brazil last year overtook the UK to become the world’s sixth largest economy is further evidence, if any was needed, of the continued rebalancing of global economic power towards the emerging world. But at the same time, the fact that Latin …
20th March 2012
Today’s release of Chilean Q4 GDP data confirms that the economic slowdown in late 2011 was not as marked as many had initially feared. What’s more, the most recent monthly indicators suggest a pick-up in activity in Q1. While this is encouraging news, …
19th March 2012
The Mexican Central Bank (BANXICO) left interest rates on hold at 4.5% this afternoon after the outlook for economy brightened. Rates look set to remain on hold for the time being. But while the market expects rates to rise over the coming year, we …
16th March 2012
The immediate outlook for Latin America has brightened in recent months as fears of a renewed crisis in the developed world have eased. But even so, while the region is likely to outperform most others over the next year or so, the path ahead will remain …
15th March 2012
We remain fundamentally upbeat on the outlook for the Colombian economy. Nonetheless, the recent pick-up in capital inflows has seen a shift away from long-term flows and towards more volatile short-term funding. This, coupled with concerns about the pace …
The outlook for Mexican economy has brightened in recent months. Demand from the US is strengthening, while there are signs that domestic activity is recovering. But even so, we doubt that the current strong pace of growth can be sustained and suspect …
13th March 2012
Uruguay is undoubtedly one of the major losers from a lurch towards protectionism within the Mercosur block. To the extent that there is a silver lining, however, it is that in the near-term these measures will put the dampers on an economy which is …
12th March 2012
Peru’s central bank (BCRP) kept interest rates on hold at 4.25% last night, maintaining a resolutely neutral monetary policy bias. Nevertheless, with inflation set to fall back more sharply in the coming months, we believe that the policy debate will edge …
9th March 2012
The decision by the Brazilian Central Bank (BCB) to accelerate the pace of interest rate cuts reflects mounting concerns among policymakers about the sustainability of Brazil’s “twin-speed” growth model. Further cuts are likely and we now expect the …
8th March 2012
The latest opinion polls suggest that the Mexican presidential election may be closer than expected. Further gains for the left-wing Andrés Manuel López Obrador may spark some turbulence, but in general the market impact should be fairly muted. Rather, it …
7th March 2012
Brazil avoided falling into recession in the fourth quarter of last year by the narrowest of margins, thanks to a renewed pick-up in consumer spending. But while there are signs that growth has accelerated further in Q1 of this year, familiar concerns …
6th March 2012
Large capital inflows to Latin America have resumed in recent months. If we are right in expecting the euro-zone crisis to worsen later this year, then risk appetite is likely to deteriorate and lead to a reversal of capital flows to emerging markets. But …
5th March 2012
The tentative recovery in Brazilian industry is already running into headwinds in the form of a resurgent currency. But while the latest set of measures aimed at stemming the rise in the real are unlikely to do much harm, neither are they likely to have …
1st March 2012
Recent headlines questioning the validity of Argentina’s official data tell us little we don’t already know. Nevertheless, the fact remains that government manipulation is widening distortions in the real economy and we continue to expect this to be the …
Peru’s economy was one of Latin America’s standout performers in 2011, expanding by 7%. Looking ahead, the country’s solid macro fundamentals, combined with ample space for a policy response in the event of a relapse of external demand, imply that growth …
28th February 2012
Having shown signs of slowing in the second half of last year, Brazilian credit growth appears to have picked up again in recent months. But while this should give a boost to overall GDP growth in the first quarter of this year, the bigger picture is that …
27th February 2012
The Central Bank of Colombia (BANREP) increased interest rates by 25bps to 5.25% on Friday night. With concerns about the strength of the peso and unbalanced growth coming back onto the agenda, we doubt that there will be further aggressive rate hikes. …
Venezuelan markets have rallied in recent days on the back of renewed speculation that the President, Hugo Chavez, will not be able to stand in October’s elections. A victory for the Opposition’s Henrique Capriles Radonski would brighten the economic …
24th February 2012
