Argentina’s grim IMF review, Brazil’s budget deficit

The acknowledgement by the IMF that Argentina's programme has gone 'off track' confirms that the Fund's patience is (belatedly) wearing thin. The next president will have to quickly make market-friendly reforms. If not, it seems likely that the deal will fall apart. Elsewhere, the sharp widening of Brazil’s budget deficit, coupled with growing political pressure to drop some fiscal targets, reaffirms our view that the public debt-to-GDP ratio will continue to rise. Finally, the news that Mexico’s central bank is winding down a currency hedge programme suggests that it is coming round to our view that the peso is too strong and may be starting to harm the economy.

Note: We’ll be discussing heightened EM political risk – including coups in West Africa and Russian macro instability ahead of next year’s election – in a Drop-In on Thursday, 7th September. Register here to join.