Latin America


Omicron sweeps across the emerging world

The Omicron variant of COVID-19 is causing new virus cases to surge in the emerging world. Many EMs are reporting record daily cases or that new infections are rising sharply. South Africa’s experience offers some hope – cases are now falling sharply there and it looks like the economic fallout was limited. Elsewhere, most EM governments are following South Africa’s playbook by imposing limited (if any) containment measures, although China is a key exception. And given weakness in testing capacity and large informal sectors in most EMs, workplace absenteeism is unlikely to be as economically disruptive as in DMs.

14 January 2022

Argentina & the IMF: deal or no deal?

Although the Argentine government and the IMF do not fully see eye-to-eye, there have been signs of progress in negotiations and we think it’s most likely that they will sign a fresh agreement within the next few months. That would probably give some relief to bondholders in the near term. But we remain sceptical that a new IMF deal would be enough to fix Argentina’s economic issues over the coming years. Drop-In: Neil Shearing will host an online panel of our senior economists to answer your questions and update on macro and markets this Thursday, 13th January (11:00 ET/16:00 GMT). Register for the latest on everything from Omicron to the Fed to our key calls for 2022. Registration here.  

12 January 2022

Latin America: five key calls for 2022

We think that Latin American GDP growth will slow by more than most expect in 2022, while inflation will also drop more a bit more quickly than the consensus anticipates. This feeds into our relatively dovish monetary policy views across the region. Meanwhile, heightened political and/or fiscal risks, alongside falling commodity prices, will cause the region’s currencies to weaken further against the US dollar.

10 January 2022
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Omicron may hinder already weakening recoveries

Recoveries across Latin America have lost momentum in Q4 even though, unlike in other regions such as Europe, new COVID-19 cases generally remain low and containment measures are still light-touch at this stage. The situation could get worse if the Omicron variant takes hold. One reassuring sign is that vaccine coverage continues to improve across much of the region, particularly in Chile and Uruguay which have world-leading booster programmes. But the rollout of third doses has barely got off the ground in the likes of Mexico, Colombia and Peru, suggesting these economies are most vulnerable to a renewed flare-up in virus cases and fresh lockdowns.

2021 in review

For the last Weekly of the year we look back at some our key 2021 forecasts. Our biggest wins were predicting that Brazil’s government would effectively cast aside its spending cap and that Colombia would lose its investment-grade rating. However, we underestimated this year’s surge in inflation and the aggressive monetary policy response across the region. Otherwise, all eyes are on Chile’s presidential election on Sunday between José Antonio Kast and Gabriel Boric, which looks too close to call. Both candidates have moderated their stance in recent weeks suggesting that a radical shift in policymaking seems unlikely, but fiscal risks will linger regardless of who wins.
– This will be the last Economics Weekly for 2021. The next Weekly will be sent on Friday 7th Jan. 2022 –

Lat Am’s recovery falling behind other EMs

The recent batch of GDP figures showed that growth in Latin America as a whole picked up in Q3, but the region’s recovery so far has been one of the weakest in the emerging world. And growth prospects are only deteriorating, suggesting Latin America will fall even further behind in the coming quarters. Note: Central Bank Drop-In – The Fed, ECB and BoE are just some of the key central bank decisions expected in this packed week of meetings. Neil Shearing and a special panel of our chief economists will sift through the outcomes on Thursday, 16th December at 11:00 ET/16:00 GMT and discuss the monetary policy outlook for 2022.

Political storm clouds lifting for investors…for now

Political developments in Latin America have generally turned in investors’ favour this month. Right-wing José Antonio Kast beat his left-wing rival, Gabriel Boric, in the first round of Chile’s presidential election which buoyed local markets. Elsewhere, the Peronists’ heavy defeat in Argentina’s legislative elections points to more market-friendly policymaking there. However, political risks still linger across the region. The fractured nature of Chilean politics and uncertainty over the new constitution may weigh on investor sentiment, while the Argentine government has a long way to go to win over markets. Meanwhile, fears over populist shifts will persist in Brazil and Colombia ahead of elections next year. Taken together with our view that growth will slow and commodity prices will fall (further), we remain downbeat on the outlook for Latin American financial markets.

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.

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