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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.
William Jackson Chief Emerging Markets Economist
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More from Latin America

Latin America Chart Book

High inflation fuels strikes and protests

High inflation seems to be causing growing unrest in the region, which threatens to be economically disruptive and raise fiscal concerns. Recent protests in Ecuador have hit its oil sector hard, while truck drivers in Peru are about to embark on a strike. Elsewhere, Brazil’s government is seeking to stave off possible unrest among truck drivers with higher benefits, while Mexico’s last month sought to freeze the prices of some basic goods. It remains to be seen what impact all this will have. But the regions’ recent experience suggests that strikes and protests can hit output significantly. And higher public spending to cushion the blow to consumers and businesses will cause weigh on budget positions. EM Drop-In (Thurs, 7th July): Join our economists for their regular monthly briefing on the hot stories in EMs – and those that aren’t getting the attention they deserve. In this 20-minute session, topics will include the outlook for EM FX markets after the recent sell-offs. Register now.

28 June 2022

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

More from William Jackson

Latin America Economics Update

Brazil’s tightening cycle not derailing credit growth

Brazil’s central bank has undertaken the most aggressive tightening cycle of any major economy over the past year, but there has been surprisingly little impact on bank lending. And while we do expect credit growth to weaken, we doubt that it will collapse. Perhaps the bigger risk from the sharp rise in interest rates is that the government’s fiscal challenge will become larger. EM Drop-In (17th May): Do current EM debt strains point to a repeat of the kinds of crises seen in the 1980s and 1990s? Join our special briefing on EM sovereign debt risk on Tuesday. Register now.

12 May 2022

Latin America Data Response

Brazil IPCA (Apr. 2022)

The jump in Brazilian inflation to 12.1% y/y in April was driven by a broad based increase in price pressures and supports our view that the central bank’s tightening cycle has further to run. We still expect an additional 75bp of hikes in the Selic rate (to 13.50%) over the coming months – markets have shifted this way over the past week. EM Drop-In (17th May): Do current EM debt strains point to a repeat of the kinds of crises seen in the 1980s and 1990s? Join our special briefing on EM sovereign debt risk on Tuesday. Register now.

11 May 2022

Africa Economics Update

A primer on South Africa’s monetary policy reform

The South African Reserve Bank is set to shake up its monetary policy setup. This Update provides some clarity on what policymakers will do and why, and what it means for monetary and credit conditions. China Drop-In (12th May, 09:00 BST/16:00 SGT): Join our China and Markets economists for a 20-minute discussion about near to long-term economic challenges, from zero-COVID disruptions to US-China decoupling. Register now.

11 May 2022
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