Lessons from Brazil’s 2001/02 energy crisis

The threat of energy shortages looms over Brazil once again. The country’s experience with electricity rationing in 2001/02 offers a useful guide about how the situation may pan out. We estimate that this episode knocked about 1%-pt off GDP growth, added roughly 2%-pts to inflation, and caused Copom to become more hawkish. This suggests that the risks to our current growth forecasts clearly lie to the downside, and that the central bank’s aggressive tightening cycle could ramp up.
William Jackson Chief Emerging Markets Economist
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Latin America Economics Weekly

New face at Banxico, Chile election wrap-up

The unexpected change in the nomination for Banxico’s next governor, to Victoria Rodríguez from Arturo Herrera, hit investor confidence but we don't think this switch alters the outlook for Banxico’s gradual tightening cycle. Meanwhile, investors initially cheered the result of Chile’s first-round presidential election but with political risks unlikely to fade soon, and copper prices set to fall further, we see little upside in Chilean local markets from here. Drop-In: Why is Asia sitting out the global inflation surge? 09:00 GMT/17:00 HKT, Thursday 2nd December https://event.on24.com/wcc/r/3546145/A9D34EF592141BEFCAC819ADB40359D5?partnerref=report

26 November 2021

Latin America Economics Update

Unpacking the oddities in Mexican GDP

The final estimate of Mexican Q3 GDP data was revised down to a 0.4% q/q fall (original -0.2% q/q), but the breakdown showed the contraction was almost entirely due to an outsourcing law that hit services output. Regardless of this statistical quirk, Mexico’s recovery will remain one of the weakest in the region.

25 November 2021

Latin America Data Response

Brazil IPCA-15 (Nov. 2021)

The Brazilian inflation reading of 10.7% y/y in mid-November (the same as the October full month figure) provides the first sign that inflation is now stabilising. But with the headline rate still far above target and fiscal risks persisting, it looks more likely than not that Copom will raise the Selic rate in a larger 175bp step (to 9.50%) when it meets next month.

25 November 2021

More from William Jackson

Emerging Markets Economics Update

China’s long-term property decline: the fallout for EMs

Irrespective of how the current problems in China’s property sector are resolved, property construction there is entering a period of structural decline. Among other EMs, the main effects will be felt in metals producers in Latin America and Africa, adding to reasons to expect weak long-term growth in countries such as Brazil and South Africa. In view of the wider interest, we have made this Emerging Markets Update available to clients of our Long Run Service

7 October 2021

Latin America Data Response

Brazil Industrial Production (Aug.)

The larger than expected 0.7% m/m fall in Brazilian industrial production in August suggests that the sector probably knocked 0.1-0.2%-pts off q/q GDP growth in Q3. Persistent shortages of component parts are likely to keep industry on the backfoot in the current quarter.

5 October 2021

Emerging Markets Economics Update

EM supply constraints mount

Although the emerging market manufacturing PMI ticked up last month, EM industry has been undergoing a slowdown for some time. And the surveys show that supply constraints are mounting, which is likely to weigh on manufacturers’ output in the months ahead.

1 October 2021
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