Latin America

Latin America Economics Weekly

Closer look at Lula, auto sector U-turn?

There have been some recent clues that Brazil’s former left-wing president Lula, the current favourite to win October’s election, may not be as radical as some fear. But there is still a clear risk that he would backslide on key economic reforms. Otherwise, the encouraging recoveries in auto production in Brazil and Mexico tallies with broader evidence that global goods shortages began to ease towards the end of 2021. Unfortunately, the recent surge in Omicron cases globally risks putting a spanner in the works as supply chains may face renewed disruption.

14 January 2022

Latin America Economics Update

Argentina & the IMF: deal or no deal?

Although the Argentine government and the IMF do not fully see eye-to-eye, there have been signs of progress in negotiations and we think it’s most likely that they will sign a fresh agreement within the next few months. That would probably give some relief to bondholders in the near term. But we remain sceptical that a new IMF deal would be enough to fix Argentina’s economic issues over the coming years. Drop-In: Neil Shearing will host an online panel of our senior economists to answer your questions and update on macro and markets this Thursday, 13th January (11:00 ET/16:00 GMT). Register for the latest on everything from Omicron to the Fed to our key calls for 2022. Registration here.  

12 January 2022

Latin America Data Response

Mexico Industrial Production (Nov.)

The disappointing 0.1% m/m fall in Mexican industrial production in November raises the chances that the economy slipped into a recession last quarter. And while auto production looks to have rebounded strongly in December, the supply disruptions may continue to keep industry weak in Q1.

11 January 2022

Key Forecasts

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

Share of

World1

GDP

Consumer Prices

2010-19 Ave.

2020

2021e

2022f

2023f

2020

2021

2022f

2023f

Brazil

2.4

1.4

-3.9

4.8

1.3

1.8

3.2

8.3

7.3

3.5

Mexico

1.8

2.7

-8.2

6.0

2.8

1.5

3.4

5.7

5.3

3.8

Argentina

0.7

1.3

-9.9

8.5

2.5

2.0

42.0

48.4

52.0

47.5

Colombia

0.6

3.7

-6.8

9.5

4.0

2.0

2.5

3.5

4.8

3.5

Chile

0.3

3.3

-5.8

12.0

3.0

1.5

3.0

4.5

6.0

3.0

Peru

0.3

4.5

-11.0

13.0

3.5

2.5

1.8

4.0

4.3

2.8

Ecuador

0.1

2.8

-7.8

3.8

3.5

2.0

-0.3

0.1

1.3

0.3

Venezuela

-

-9.7

-30.0

5.0

2.5

0.0

2,355

1,589

500

300

Uruguay

0.1

2.9

-5.9

3.5

5.0

2.0

9.8

7.7

8.5

7.0

Costa Rica

0.1

3.8

-4.1

4.5

2.5

2.0

0.7

1.7

3.3

2.0

Bolivia

0.1

4.6

-8.8

5.5

4.5

3.0

0.9

0.7

1.3

1.8

Latin America2

6.5

2.3

-6.7

6.8

2.3

1.7

3.0

6.2

5.9

3.4

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


Closer look at Lula, auto sector U-turn?

Latin America Economics Weekly

19 January 2022

Our view

Having beaten expectations in recent months, the pace of the regional recovery is now likely to disappoint. Inflation is likely to remain uncomfortably high, prompting further aggressive monetary tightening. In the meantime, the spectre of more populist policymaking will keep public debt concerns high, particularly in Brazil, putting local financial markets under pressure.

Latest Outlook

Latin America Economic Outlook

Best of the recovery now over

Easing virus outbreaks and the lifting of restrictions boosted recoveries across Latin America in Q3, but growth looks set to slow sharply over the coming quarters. The re-opening boost will soon fade. Fiscal support is, or will be, unwound while sustained above-target inflation will prompt more monetary tightening than most analysts expect. Meanwhile, supply constraints and falling commodity prices are becoming headwinds to the regional recovery too. So, having beaten expectations in recent months, the pace of the regional recovery is now likely to disappoint. The spectre of more populist policymaking will keep public debt concerns high, particularly in Brazil, putting local financial markets under pressure.

19 October 2021