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The past month has brought further signs that growth in Latin America has started to slow in response to the deepening crisis in the euro-zone, the turmoil in world markets and weaker demand from China. Admittedly, Mexican growth surprised on the upside …
28th November 2011
The Central Bank of Colombia (BANREP) bucked the regional trend and raised interest rates by 25bps to 4.75% on Friday night. Nonetheless, with inflation now likely to have peaked, we suspect that this marks the last hike in the current cycle. Indeed, …
The relative resilience of Brazilian credit growth when measured in annual terms masks the fact that lending growth has slowed fairly sharply when measured on a month-on-month basis. Industry has borne the brunt of the slowdown, but consumer credit …
24th November 2011
While Colombia is unlikely to avoid the global slowdown altogether, we think it will outperform the likes of Brazil and Mexico next year. We expect GDP growth of 3.0% in 2012 and the strength of the economy means that Colombia may be the last in the …
In a recent visit to the UK, the President of Colombia, Juan Manuel Santos, underlined his ambitious plans for the expansion of his country’s burgeoning commodities sector. But while that may support GDP growth in the near-term and ensure that the economy …
23rd November 2011
Today’s better-than-expected Mexican GDP data present upside risks to our growth forecasts and mean that the economy may now expand by 4.0% this year. Even so, with the outlook for the global economy set to deteriorate over the coming months, it still …
22nd November 2011
The deepening crisis in the euro-zone, coupled with fears of a slowdown in China, has meant that concerns about overheating in Latin America’s major economies have quickly given way to worries over the outlook for growth. The good news is that while Latin …
21st November 2011
The fact that growth accelerated in Venezuela in Q3 but slowed in Chile paints a false picture of the relative strengths of each economy. Both are vulnerable to the drop in commodity prices that we expect over the next year, but the Chilean authorities …
18th November 2011
A combination of weak growth and deepening debt crises in the G7 and softer demand from China means that the economies of Latin America are likely to slow by more than most expect over the next few quarters. But falling inflation will provide room for …
The Central Bank of Chile (CBC) kept its policy rate at 5.25% for a fifth successive month last night. While policymakers in Chile and Peru will continue to exercise caution by not rushing into easing mode, a deteriorating external growth outlook will …
16th November 2011
Initial measures aimed at reducing Argentina’s growing subsidy bill are too small to make a meaningful difference to the public finances. Nevertheless, the commitment to review the entire subsidy system could potentially be far more significant. We remain …
14th November 2011
Policy makers in Peru left interest rates unchanged at 4.25% last night. In the very near-term strong domestic conditions, rising inflation and a planned fiscal stimulus will deter rate cuts, despite a rapidly deteriorating external backdrop. Nonetheless, …
11th November 2011
The official release of October’s inflation data this morning confirmed what yesterday’s leak from the statistics agency had suggested – Brazilian inflation has peaked. We expect it to fall back to within its target range by early next year, calming fears …
Ecuador’s rapid pace of recent growth has been built on rising prices in global oil markets. With energy prices more likely to fall back than rise over the next 6-12 months, we expect the economy to slow substantially in 2012. … Ecuador’s current pace …
9th November 2011
Three months after the sell-off of the peso began, there are still few signs that the weaker currency has passed through to higher inflation. Indeed, we continue to expect inflation to remain close to the Central Bank’s 3% target for the foreseeable …
News that the Free Trade Agreement between Colombia and the US has finally been signed is clearly positive. Not only should the pact boost trade between the two nations, but the elimination of tariffs on non-commodity products could help to reduce …
8th November 2011
This report is only available as a PDF. Click to download. … Are Brazil’s critics right? …
7th November 2011
The decision by Brazil’s central bank to start monetary easing has revived talk about a “floor” on interest rates in Latin America’s largest economy. At present, the minimum rate of return on popular “Poupança” savings accounts means that the benchmark …
2nd November 2011
Data released today confirmed that Brazilian industry slipped into recession in Q3, while the manufacturing PMI points to a difficult Q4. In response, the recent imposition of trade tariffs sets a worrying precedent. … Brazilian industry slides into …
1st November 2011
The raft of measures announced by Argentina’s government over the past few days to stem capital flight is unlikely to prevent further falls in the peso. Indeed, there is a real and growing risk that government intervention ultimately exacerbates the very …
31st October 2011
The Central Bank of Colombia (BANREP) left interest rates on hold at 4.5% on Friday night, but signalled a willingness to hike rates if the global environment improves. Nonetheless, while the accompanying statement was more hawkish than we had …
Growth has slowed sharply in Brazil and Mexico – Latin America’s two largest economies – over the past quarter. In Brazil, there are tentative signs that a two-year boom in domestic demand has started to cool. Meanwhile, industry appears to be in …
29th October 2011
The Brazilian public finances have improved beyond measure following the various debt crises of the 1980s. But government debt remains high by regional standards, and could rise further, perhaps to as much as 85% of GDP, if mounting credit risks in …
27th October 2011
Today’s current account data from Brazil provide further evidence that growth in Latin America’s largest economy is slowing sharply. … Worrying signs from Brazil's current account …
26th October 2011
Argentina’s incumbent president, Cristina Fernández, eased to victory in yesterday’s Presidential Election as was widely expected. We do not foresee any material changes to the government’s policy stance and believe that this will be the term where the …
25th October 2011
Brazil’s decision to continue cutting interest rates despite the fact that inflation is running at a five-year high remains as controversial as ever. Nonetheless, on balance we think that the central bank’s judgement that the greatest near-term threat to …
22nd October 2011
Opinion polls suggest that Cristina Fernández will easily secure a second term in this weekend’s Presidential Election. But what might the next few years hold for Argentina’s economy? … Argentina set to re-elect Cristina, but what …
21st October 2011
Emerging markets are not immune from the deepening debt crisis in the developed world, but most are well-placed to deal with the fallout. China faces a difficult structural transition of its own but, along with the rest of emerging Asia, has policy …
Although last night’s cut in Brazilian interest rates was well anticipated and fully priced into the market, the decision will add to widespread concerns that policymakers have fallen behind the curve in the face of rising inflation. We think this is …
Despite a sell-off over the past couple of months, various measures suggest that Latin America’s currencies – with the exception of the Mexican peso – are still stronger than fundamentals might otherwise imply. We expect currencies to fall further against …
19th October 2011
Chile’s central bank (CBC) kept interest rates unchanged at 5.25% last night for a fourth straight month. We expect cuts from Q1 next year as global growth slows and food and energy price pressures subside. … Chile: rate cuts expected from Q1 …
15th October 2011
With the Mexican equity market registering three consecutive quarter-on-quarter falls over the course of 2011, the Bolsa may be pointing to a dreaded ‘double-dip’ recession. … Mexican equity market highlights the risk of …
13th October 2011
We doubt that the recent sell-off of currencies in Latin America will cause inflation to rise significantly over the coming months. Indeed, with economic activity set to slow over the coming months, we expect any lingering fears about inflation to fade …
Chile’s 2012 draft budget sets out a 5% increase in public spending with no offsetting rise in taxes. On first inspection we would caution that some of the assumptions look to be too optimistic. Nonetheless, Chile’s healthy balance sheet means that a …
7th October 2011
Data released later this week are likely to show another pick-up in Brazilian inflation and will no doubt lead to fresh criticism of the decision to cut interest rates at August’s COPOM meeting. But inflation is close to peaking and, while it may be a …
The further deterioration in last month’s Mexican IMEF surveys adds to the evidence that the economy struggled in Q3. Indeed, despite the apparent resilience in the neighbouring US economy, Mexican output may even have contracted in Q3. Either way, we …
5th October 2011
This afternoon’s PMI survey data from Brazil suggest that the industrial sector is sliding into recession. In this context, we believe that the recent decision by the central bank (BCB) to cut interest rates will ultimately be justified, despite rising …
4th October 2011
The Central Bank of Uruguay (BCU) left its benchmark interest rate unchanged at 8.0% last night as the board weighed downside risks to growth against stubbornly high inflation. We believe that the BCU will need to cut rates in 2012, in line with the rest …
1st October 2011
30th September 2011
The rapid deterioration in the growth outlook for the developed world, and the deepening crisis in Europe in particular, should in time vindicate last month’s surprise (and controversial) decision by the Brazilian Central Bank to cut interest rates. …
29th September 2011
Lending growth has accelerated throughout Latin America and in some countries – notably Brazil and Argentina – it has reached unsustainable levels. Capital ratios remain high, but will fall if economic growth slows and bad debts rise over the coming …
27th September 2011
While the Colombian economy performed well in the first half of this year, the current global market mayhem underlines our belief that the economy will slow next year. But growth is unlikely to collapse altogether and we still expect GDP to expand by 3.0% …
23rd September 2011
Chile’s open economy is more susceptible than most in the region to a deterioration of external demand. Policy stimulus will provide some relief, however we anticipate a below-consensus 3% growth in 2012. … How vulnerable is Chile to a global …
Fears that the slump in the Brazilian real will lead to a further rise in inflation look greatly exaggerated. There is almost no relationship between fluctuations in the currency and inflation, while the bigger picture remains that a weaker real is …
The economies of Latin America are likely to slow by more than most expect over the next year. We do not anticipate a prolonged downturn, but the marked deterioration in the external environment means that regional growth will probably moderate to a …
21st September 2011
Argentina’s Q2 GDP figures reinforce our belief that the economy is overheating and poised for a sharp correction in the coming years. Official statistics continue to overstate the economy’s growth rate. … Argentina: threat of overheating still looms …
20th September 2011
Uruguay’s economy slowed in Q2 as a deteriorating trade balance weighed on growth. While weaker external conditions mean that growth will cool further over the next year, relatively solid fundamentals should ensure that Uruguay weathers the global …
16th September 2011
Official statistics continue to drastically underreport inflation in Argentina, resulting in a number of serious economic distortions. Building pressures on the regime make a recession probable further ahead. … Argentina’s inflation inaccuracies underlie …
Mexico’s status as a low productivity economy means that jobs are created even at low rates of GDP growth. The problem, however, is that a surplus pool of labour, coupled with a growing population and fact that many new jobs are created in low paid …
14th September 2011
Peru’s central bank (BCRP) kept its benchmark lending rate at 4.25% last night. While it appears to have dropped its tightening bias, we believe that it is premature to forecast any policy easing over the next few months. As such, we have revised down our …
10th September 2011
