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Chilean external imbalances, Peronists humbled

While much of the focus in Chile has centred on Sunday's general election, one story which may have flown under the radar is that external vulnerabilities are building. Data this week showed that the current account deficit blew out in Q3 on the back of surging imports, adding to the evidence that the economy is overheating. This leaves the Chilean peso vulnerable to a tightening of external financial conditions. Elsewhere, following a poor performance in the midterm elections, Argentina's government appears to be turning towards more orthodox economic policies.
Olivia Cross Assistant Economist
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Latin America Economics Weekly

Chile’s new constitution, Brazil’s improving finances

Some of the doubts over Chile’s political system have eased after the Constitutional Convention completed a draft of the new charter, but political risks remain high for now, which may keep the peso on the backfoot in the coming months. Elsewhere, while the Brazilian government’s budget deficit has continued to narrow, we don’t think the country’s fiscal troubles are over for good. LatAm Drop-In (26th May, 10:00 ET/15:00 BST): Join our 20-minute briefing about Colombia’s election and other regional political and fiscal risks – including Lula vs Bolsonaro in October. Register here.

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Latin America Economics Update

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A fresh look at fiscal positions in Latin America

Fiscal balances have generally improved across Latin America this year (barring Chile and Colombia) but we think that governments in most major economies will struggle to implement the substantial austerity needed to stabilise public debt-to-GDP ratios. Lingering fiscal and debt risks will probably keep government bond yields high and currencies under pressure in the region, particularly in Brazil.

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Latin America Data Response

Mexico Consumer Prices (Oct.)

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Latin America Economics Update

A closer look at the latest surveys

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