Brazil turning the corner

The downturn in Latin America appears to have bottomed out in the second quarter of this year. Our GDP Tracker suggests that the region’s economy contracted by 1.2% y/y in Q2, compared to 1.5% y/y in Q1. This was due in large part to Brazil, where economic conditions have begun to stabilise. Consumer spending remains under extreme pressure but a weaker currency is providing support to the external sector and to industry. Brazil aside, the latest data suggest that growth was either stable or marginally weaker in Q2 compared to Q1. In Mexico, the effects of tighter fiscal and monetary policy are starting to weigh on domestic demand. Meanwhile, in Argentina, President Macri’s adjustment programme is beginning to squeeze consumers. The shift in macro policy should eventually pave the way for a period of stronger growth but over the next 3-6 months the price to pay will be an economic recession.