Latin America

Latin America Economics Update

Latin America Economics Update

Revising up our Brazil growth forecast

The latest data suggest that Brazil’s economy has been much more resilient to the latest virus waves than we had anticipated and, as a result, we’re revising up our GDP growth forecast for this year to 4.5% (previously 3.0%). The brighter economic outlook means that we now think that the Selic rate will be raised from 3.50% now to 5.50% by the end of the year (previously 4.75%). We remain of the view that Copom will bring the tightening cycle to an end sooner than most currently think.

3 June 2021

Latin America Economics Update

Five key questions on Mexico’s midterm elections

Sunday’s midterm elections in Mexico are widely seen as a referendum on President López Obrador’s tenure, and a strong result for his coalition could embolden him to pursue more interventionist policies. This Update outlines five key questions (and answers) about the upcoming vote, including what to look out for and the implications for Mexico’s economy, the oil sector and financial markets.

2 June 2021

Latin America Economics Update

Unpacking the political risks in Chile

Chilean financial assets have been hit hard following the Constitutional Convention election, and this Update outlines three key political risks which could keep local markets under pressure over the coming quarters. These are likely to shape how Chile’s economy develops over the medium term, but we doubt that they will have a major bearing on the near-term economic outlook.

27 May 2021
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Latin America Economics Update

How big a threat is Brazil’s drought to the recovery?

For now, it seems unlikely that the drought affecting Brazil will hit hydropower production hard enough to cause disruptions to electricity supply and broader economic activity. But the drought does pose a risk to the outlook for inflation (and possibly the public finances too), which might make the central bank more inclined to raise interest rates further than we currently expect.

Latin America Economics Update

Lat Am: taking stock of the latest virus developments

The latest COVID-19 outbreaks in Latin America have passed their peak and the near-term outlook is improving. But, with the probable exception of Chile, the latest developments reinforce the message that the threat of renewed outbreaks will continue to cloud the outlook for the rest of the year. The region’s economic recovery is likely to be a slow and bumpy one.

Latin America Economics Update

Banxico statement points to a long pause

The statement accompanying the Banxico Board’s decision to keep the policy rate at 4.00% suggests that policymakers’ concerns about inflation risks are growing, but it doesn’t change our view that they will keep rates unchanged throughout this year and next. Investors, in contrast, are pricing in the start of a tightening cycle by the end of the year.

14 May 2021

Latin America Economics Update

Assessing the fallout from Colombia’s fiscal drama

Recent protests have pushed Colombia’s government away from the fiscal reforms that are needed to reduce the public debt ratio in the coming years. It’s therefore likely that the sovereign will lose its investment grade rating, which will keep local financial markets under pressure. Given these fiscal risks, we now expect the central bank to begin a tightening cycle later this year rather than in early 2022.

Latin America Economics Update

Brazil: Copom turning increasingly hawkish

The statement accompanying Brazil’s central bank meeting, at which it raised the Selic rate by 75bp to 3.50%, was more hawkish than the previous one. While we doubt that the tightening cycle will go as far as most expect, the risks to our forecast for a further 125bp of hikes (to 4.75%) are skewed to the upside.

6 May 2021
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