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.
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