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 below-consensus 2.5% in 2012, before rebounding to 3.5% or so in 2013. With inflation set to fall, we now expect rate cuts across the region next year and most central banks should start to ease policy from Q1 2012.