Latin America

Latin America Economics Weekly

Argentina’s PASO surprise, Pemex debt

The loss for Argentina’s ruling Peronists in the open primary (PASO) for mid-term legislative elections in November suggest that the political tides might be shifting and boosted local financial markets. But the country’s public debt problems are likely to re-surface before too long. Meanwhile, the news that Mexico’s government has purchased $7bn of foreign exchange from the central bank appears to be another step towards the state taking greater responsibility for Pemex’s debt problems.

17 September 2021

Latin America Economics Update

Is high inflation here to stay in Latin America?

Following a surge in inflation across the region this year, we think that headline rates are at, or close to, a peak in major Latin American economies. But strong underlying price pressures will prevent inflation from falling below central banks’ targets over the next year or so. Monetary tightening cycles therefore have a lot further to run across the region, especially compared to elsewhere in the emerging world.

15 September 2021

Latin America Economics Weekly

Brazil’s political crisis, Mexico’s austere budget

It’s been a rollercoaster week in Brazilian politics and financial markets and, while investors have breathed a small sigh of relief in the past day or so, we think that they will be put under further pressure as the 2022 election nears. Elsewhere, Mexico's austere 2022 budget unveiled this week suggests that fiscal policy will continue to do very little to support the economy, which reinforces our view that Mexico's recovery will underperform most of its regional peers.
CE Spotlight 2021: The Rebirth Of Inflation? We’re holding a week of online events from 27th September to accompany our special research series. Event details and registration here.

10 September 2021

Key Forecasts

Table 3: GDP & Consumer Prices (% y/y)

Share of

World1

GDP

Consumer Prices

2010-19 Ave.

2020

2021f

2022f

2023f

2020

2021f

2022f

2023f

Brazil

2.4

1.4

-4.1

4.8

3.0

2.0

3.2

7.8

5.0

3.0

Mexico

1.9

2.7

-8.3

6.5

3.5

2.5

3.4

5.3

4.0

4.0

Argentina

0.7

1.3

-9.9

8.0

2.5

2.0

42.0

48.0

42.5

38.0

Colombia

0.6

3.7

-6.8

7.5

4.0

3.0

2.5

3.3

4.0

3.3

Chile

0.3

3.3

-5.8

10.0

4.5

2.5

3.0

4.0

4.3

3.5

Peru

0.3

4.5

-11.0

13.0

4.0

3.5

1.8

3.5

3.8

3.0

Ecuador

0.1

2.8

-7.8

3.0

4.0

2.0

-0.3

0.0

0.5

0.3

Venezuela

-

-9.7

-30.0

5.0

2.5

0.0

2,355

2,000

1,500

1,000

Uruguay

0.1

2.9

-5.9

3.0

4.5

2.5

9.8

7.5

6.8

6.5

Costa Rica

0.1

3.7

-4.1

3.5

3.0

2.5

0.7

1.5

2.0

2.0

Bolivia

0.1

4.6

-8.5

6.5

4.0

3.0

0.9

1.5

2.5

2.3

Latin America2

6.5

2.3

-6.8

6.4

3.3

2.3

3.0

5.7

4.3

3.3

Sources: Refinitiv, Capital Economics. 1) % of GDP, 2020, PPP terms. 2) GDP Excl. Venezuela; Consumer Prices Excl. Argentina & Venezuela.


Argentina’s PASO surprise, Pemex debt

Latin America Economics Weekly

19 September 2021

Our view

Easing virus outbreaks across much of Latin America should support activity in the near term, and we think that the pace of the regional recovery will beat most analysts’ expectations in the coming years. Strengthening demand will keep inflation well above central bank’s targets over the coming quarters, suggesting that further monetary tightening lies in store. Meanwhile, political risks are likely to grow across the region, raising debt concerns and putting local financial assets and currencies under further pressure.

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Latest Outlook

Latin America Economic Outlook

Not all doom and gloom

Virus outbreaks are easing in much of Latin America which should support activity in the near term. And while vaccination coverage is still weak in most of the region, suggesting there is still a clear risk of further virus waves, economies are becoming increasingly resilient on this front. We think that the pace of the regional recovery will beat most analysts’ expectations in the coming years. Further monetary tightening lies in store but, with headline inflation rates set to drop back in 2022, interest rates probably won’t rise as far as investors are currently pricing into financial markets. Meanwhile, political risks are likely to grow over the coming year, raising debt concerns and putting local financial assets under pressure.

19 July 2021