Data out of Brazil this week suggest that the strength of domestic demand is causing the trade surplus to erode, which goes some way in explaining the real's poor performance. But the more important driver has been concerns about Brazil's public finances, which are unlikely to go away anytime soon and will keep the real on the backfoot. Elsewhere, the market reaction to the resignation of Colombia's finance minister was relatively muted but the turmoil at the Finance Ministry is still a cause for concern given Colombia's fragile public finances. Finally, the large minimum wage hike announced by Mexico's government will complicate Banxico's task of bringing inflation back down to target and supports our view that the central bank will deliver less easing in the next couple of years than most expect.
Note: Does Donald Trump's return to the White House portend a radically different outlook for the emerging world? Our economists will be online on Thursday 12th December to discuss this and to take your questions. Register for the event here.
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