Brazil and Mexico’s outperformance to end

Brazil and Mexico will outperform others in the region this year, but that’s likely to flip on its head in 2024 as they slow – and by more than most expect – while the Andean economies recover. Central banks across the region will continue to lower interest rates over the coming months and quarters – and deliver more cuts than most of their EM peers. That said, with the disinflation process set to slow next year, easing cycles will proceed more gradually than the consensus is anticipating. Public debt risks are likely to build again in 2024 as debt ratios resume to an upwards path in many parts of the region. Risks are clearly most acute in Argentina and Ecuador, where sovereign defaults are on the cards later this decade – even if the upcoming elections result in market friendly governments.