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IMF losing its patience with Argentina The IMF’s fifth and sixth reviews (which were combined) of Argentina’s $44bn programme out late last Friday make for pretty depressing reading. The Fund slashed its 2023 GDP growth forecast to -2.5% (from +2%) and …
1st September 2023
This page has been updated with additional analysis since first publication . A strong H1, but slower growth ahead The much faster-than-expected Brazilian Q2 GDP growth figure of 0.9% q/q suggests that the economy is in stronger health than many – …
Fixed investment has been the weak spot in Colombia’s strong post-pandemic recovery and it is likely to remain subdued over the next couple of years due to a combination of the fragile political backdrop, lower oil prices and weakness in the housing …
31st August 2023
History suggests that dollarisation, which is at the heart of Argentine presidential candidate Javier Milei’s policy platform, is a surefire way to get inflation under control. But whether this translates into broader macro stability would hinge on …
30th August 2023
Drought takes its toll on the Panama Canal Panama is the latest victim of climate change in the region. The country is reeling from a drought with “no historical precedence” according to Panamanian authorities, which has seen water levels at the Gatun …
25th August 2023
This page has been updated with additional analysis since first publication . Inflation rise likely to take larger rate cuts off the table The jump in Brazilian inflation to a higher-than-expected 4.2% y/y in the middle of the month (and the prospect of …
This page has been updated with additional analysis since first publication. Sticky services inflation to keep Banxico on the sidelines for now Mexico’s headline inflation rate declined further in the first half of August, but sticky services inflation …
24th August 2023
Brazil's and Mexico's economies are likely to outperform others in the region in 2023, but this is likely to go into reverse in 2024. And our growth forecasts for most countries in the region are below the consensus. Inflation in most parts of Latin …
23rd August 2023
Equities in Latin America have generally returned more than those in the rest of the world so far this year for US dollar-based investors willing to shoulder the currency risk. We think that is set to change. The total return in US dollars from the MSCI …
22nd August 2023
The Dominican Republic recorded an impressive post-pandemic recovery, but we think that a combination of a fading boost from tourism, weakness in the US and tight fiscal policy will cause growth to slow by more than most expect this year and next. The …
21st August 2023
Argentina: PASO vote triggers more chaos Last Sunday’s presidential primary election in Argentina (known as the PASO) sent the economy deeper into crisis. Although the results probably portend a shift to the right (and more investor-friendly …
18th August 2023
This page has been updated with additional analysis since first publication . Fall in GDP will sustain central bank’s dovish turn Chile’s GDP contracted by a shallower-than-expected 0.3% q/q in Q2, but the fall in output alongside downwards revisions to …
Entering a period of weakness The larger-than-expected 1.0% q/q contraction in Colombia’s GDP in Q2 is likely to be followed by further weakness over the coming quarters. We expect this to prompt BanRep to join other central banks in the region in …
15th August 2023
Emerging economies whose currencies have fallen by 15% or more against the dollar in a single day – as the Argentine peso did yesterday – have fallen into recession in more than 80% of cases in the last 30 years. Sovereign debt defaults occurred after …
PASO election tips economy deeper into crisis The news just out that Argentina has devalued the peso by around 20% against the dollar (to 350/$) and hiked the policy interest rate by 21%-pts to 118% underscores that the economy is lurching towards an even …
14th August 2023
The surprisingly strong showing for far-right self-proclaimed “anarcho-capitalist” Javier Milei in Argentina’s primary elections (known as the PASO) suggests that there is popular appetite for a shock-therapy style approach to deal with the economy’s …
A fork in the road for Argentina Sunday’s open, simultaneous and compulsory primary elections (PASO) should give a first sign of whether Argentina will buck the regional political trend and shift to the right at the presidential election in October. All …
11th August 2023
This page has been updated with additional analysis since first publication Inflation rise means Copom won’t increase the size of rate cuts The jump in Brazilian inflation to a slightly higher-than-expected 4.0% last month won’t stop Copom from lowering …
Banxico continues to sit on the sidelines Mexico’s central bank chose not to follow its peers in the rest of Latin America and begin an easing cycle, leaving its policy rate unchanged at 11.25% at today’s Board meeting. Concerns about the persistence of …
10th August 2023
Sticky services inflation to keep Banxico in hawkish mood Mexico’s headline inflation rate continued to drop back in July, to 4.8% y/y, but with services inflation proving to be sticky, we doubt that Banxico will turn to interest rate cuts until the turn …
9th August 2023
Brazil and Chile spring dovish surprise The decisions in the past week by central banks in both Chile and Brazil to cut interest rates confirm that Latin America remains at the front of the pack in this global monetary cycle. Having been among the first …
4th August 2023
We’ll be discussing Argentina’s upcoming PASO election and what it means for the economy in a 20-minute online Drop-In on Wednesday 9 th August at 10:00 EDT/15:00 BST. (Register here .) There are some unnerving similarities between Argentina’s current …
3rd August 2023
BCB kicks off Brazil’s easing cycle The Brazilian central bank (BCB) started its easing cycle today with a larger-than-expected 50bp cut in the Selic rate, to 13.25%, and the relatively dovish tone of the accompanying statement suggests that policymakers’ …
2nd August 2023
The latest Pemex capital injection underscores that Mexico’s President López Obrador is more likely to lean towards providing a sovereign debt guarantee (either implicit or explicit) to deal with the company’s financial problems. But with a less …
1st August 2023
This page has b een updated with additional analysis since first publication . Economy showed signs of resilience in Q2 The slightly better-than-expected 0.1% m/m increase in Brazilian industrial production in June indicates that the sector grew a little …
Strength seen in H2 unlikely to continue The 0.9% q/q rise in Mexican GDP last quarter followed a strong Q1 and showed that Mexico’s economy was more resilient in the first half of the year than we’d expected. That said, we think that weaker growth in the …
31st July 2023
Fitch gives Haddad a gift The upgrade by Fitch to Brazil’s long-term foreign currency sovereign debt rating this week, from BB- to BB, provides another sign that fiscal concerns in the country are easing. Fitch justified the move on the …
28th July 2023
Recently-announced measures by Argentina’s government are merely stopgap solutions and appear to be aimed at staving off a disorderly devaluation ahead of upcoming elections rather than stabilising the economy. Ultimately, the way out of the current …
26th July 2023
The Mexican peso’s relentless rise against the US dollar and most other major currencies is increasingly at odds with macroeconomic fundamentals. We think the peso is vulnerable to an abrupt fall over the coming months if, as we expect, risk sentiment …
25th July 2023
This page has been updated with additional analysis since first publication . Soft inflation print brings 50bp rate cut into play The Brazilian July mid-month inflation reading of 3.2% y/y suggests that price pressures are weaker than we and most others …
The region’s strong start to the year is unlikely to be sustained and we expect growth in 2024 to come in weaker than most expect. Inflation has come down a long way and price pressures should continue to ease over the coming months, paving the way for …
24th July 2023
This page has been updated with additional analysis since first publication . Fresh rise in services inflation likely to raise concerns at Banxico Mexico’s headline inflation rate eased further in the first half of July but the fresh rise in services …
Argentina continues to dodge exchange rate issue An Argentine delegation travelled to Washington this week in a bid to close negotiations with the IMF on the fifth review of the country’s $44bn Extended Fund Facility (and, according to local media, to …
21st July 2023
Mexico’s exports have fared well recently and the current account deficit remains small. But a closer look suggests that the strength of the peso is causing dynamics in the balance of payments to worsen. The Mexican peso has been one of the best …
20th July 2023
Table 1 has been updated to include the latest comments and proposals of the candidates. The latest polls ahead of next month’s primaries in Argentina suggest that the country could buck the regional trend by electing a more market-friendly government. In …
19th July 2023
The large macroeconomic imbalances that built up during Chile’s post-pandemic recovery have eased substantially, which is likely to prompt the central bank to deliver more rate cuts than almost any other EM central bank over the next couple of years. We …
17th July 2023
Colombia’s fiscal watchdog sounds the alarm bell Concerns about Colombia’s public finances have re-emerged this week after the country’s Autonomous Fiscal Rule Committee (CARF) warned that the government is unlikely to comply with the fiscal rule in the …
14th July 2023
Note: We’ll be discussing macro and market risks around El Niño’s return in a 20-minute briefing on Wednesday, 19 th July. Click here to register. The likelihood of an El Ni ño event over the second half of the year raises the risk that activity is …
13th July 2023
Industry now fully recovered from March drop The stronger-than-expected 1.0% m/m rise in Mexican industrial production in May means that the sector has now reversed all of the decline in output recorded in March. And more timely indicators point to a …
12th July 2023
This page has been updated with additional analysis since first publication. Inflation plunge seals the deal on an August rate cut The sharp fall in Brazilian inflation to just 3.2% y/y last month makes it almost certain that the central bank will kick …
11th July 2023
Survey data point to decent end to Q2 The batch of survey data for June from Brazil and Mexico released this week suggest that both economies gathered momentum at the end of Q2. In Brazil, having fallen back in May, the FGV confidence surveys generally …
7th July 2023
Fall in Chilean inflation paves the way for start of easing cycle later this month The larger-than-expected decline in inflation in Chile to an 18-month low of 7.6% in June seals the deal on an interest cut at the central bank’s next meeting later this …
We expect the Brazilian real to reverse its gains against the US dollar by the end of the year as Brazil’s central bank eases policy and risk sentiment deteriorates. Although it has fallen a bit over the past few weeks, the Brazilian real has risen nearly …
6th July 2023
The surge in Brazil’s exports since the start of the pandemic has helped the economy recover more quickly than we and most others had anticipated. And unlike previous spikes in exports, some of the windfall has been saved, which has caused the current …
Industry struggling in Q2 The weaker-than-expected 0.3% m/m rise in Brazilian industrial production in May only partly reverses April’s 0.6% m/m decline and suggests that industry remained weak over the course of the second quarter. At the margin, this …
4th July 2023
BCB: A parsimonious process The minutes to last week’s Brazilian central bank meeting made waves, revealing that a majority of Copom members expect to lower interest rates at the next meeting in August. We had thought the more cautious tone of the …
30th June 2023
It’s been a good month for Latin American currencies, particularly the Brazilian real and the Colombian peso, which should help the disinflation process across the region. This is one reason behind the recent dovish shift by the region’s central banks. …
27th June 2023
This page has been updated with additional analysis since first publication . Easing cycle to kick off in August The fall in Brazilian inflation to just 3.4% y/y in the first half of this month, coupled with the surprisingly dovish tilt on Copom shown in …
BRL rally for real? The Brazilian real’s recent rich vein of form has continued this week, with the currency appreciating by a further 1.5% against the dollar, to 4.8/$. Several factors have supported this, including improvements in Brazil’s trade balance …
23rd June 2023
Banxico stands pat as inflation drifts lower The further falls in headline and core inflation in recent months prompted Mexico’s central bank to leave its policy rate on hold at 11.25% at today’s Board meeting, but we doubt that monetary loosening will be …
22nd June 2023
