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Latin America Economics Weekly

Petro reaction, Lula’s plans, hawkish central banks

Gustavo Petro’s win in Colombia’s presidential election has caused tremors in the country’s financial markets. While the appointment of a centrist finance minister could help to settle investors’ nerves, the global backdrop is turning increasingly unfavourable. In Brazil, Lula, the front-runner in the race for the presidency, unveiled policy plans that will, likewise, probably unnerve investors around the election there in October. Finally, the week was marked by further hawkish noises from central banks in the region. We’ve revised up our interest rate profile in Brazil and the upside risks to our interest rate forecast in Mexico are growing.

24 June 2022

Latin America Economics Update

Banxico’s tightening cycle shifts up a gear

The Mexican central bank’s shift to a 75bp interest rate hike yesterday (to 7.75%) and the hawkish language in the accompanying statement make another 75bp move at the next meeting in August a done deal. And the risks to our end-2022 interest rate forecast of 9.50%, which is already higher than most expect, are now skewed to the upside.

24 June 2022

Latin America Economics Update

Copom: revisiting the 2015-16 playbook

The latest Brazilian central bank communications give a strong signal that, when Copom stops hiking interest rates, it will act in a similar way to the end of the last tightening cycle in 2015. The lesson from that period is that rates will be kept high for a long time and, when an easing cycle begins, it will start very slowly. As a result, we have pushed some of the interest rate cuts in our profile from 2023 to 2024. We now expect the Selic rate to end next year at 11.00% (our previous forecast was 8.50%) and are sticking to our end-24 forecast of 7.50% (versus a current Selic rate of 13.25%).

23 June 2022

Key Forecasts


Petro reaction, Lula’s plans, hawkish central banks

Latin America Economics Weekly

26 June 2022

Our view

The surge in commodity prices will drive stronger regional growth than the consensus expects this year, but not all economies in Latin America will benefit. While Brazil and Colombia will see a terms of trade windfall – we expect GDP growth in both countries to beat consensus expectations in 2022 – major oil importers such as Chile and Peru will lose out. Meanwhile, inflation will be higher across the region and monetary policy tighter than most analysts anticipate over the next 6-12 months.

Latest Outlook

Latin America Economic Outlook

High commodity prices won’t lift all boats

The surge in commodity prices will drive stronger regional growth than the consensus expects this year, but not all economies in Latin America will benefit. While Brazil and Colombia will see a terms of trade windfall – we expect GDP growth in both countries to beat consensus expectations in 2022 – major oil importers such as Chile and Peru will lose out. Meanwhile, inflation will be higher across the region and monetary policy tighter than most analysts anticipate over the next 6-12 months.

21 April 2022