Copom rates, Brazil’s rare earths, fiscal developments

With the latest indicators suggesting that Brazil's economy is holding up well and the labour market is still strong, we now expect the Selic rate to end this year at 13.25% (compared to 12.50% previously). Meanwhile, the critical minerals deal passed by Brazil's lower house of congress tackles some of the key impediments to rare earths extraction, but developing the sector will take time and Brazil is unlikely to break China’s dominance in the sector. Finally, while the fiscal picture is improving in some of the more fragile countries in the region, we remain concerned about slow-burning problems in some of the larger economies, in particular Brazil and Colombia.