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The gloss coming off Brazil The latest Brazilian activity data have taken some of the shine off the economic recovery. Industrial production figures released last week showed that output fell in November, and other data published in the last few days also …
17th January 2020
The prevailing view that this will be the year when Brazil’s recovery finally shifts up a gear looks overly optimistic. We expect that GDP growth will come in at just 1.5% over 2020, which leaves us close to the bottom of the consensus range. ‘This year …
14th January 2020
Chilean peso weakens, will gain later this year While most EM currencies tumbled this week following the assassination of Iranian General Qassem Soleimani, the Chilean peso fell furthest. Having strengthened from a trough of 837/$ to 750/$ over the course …
10th January 2020
Brazil’s inflation jump takes further easing off the table Strong Brazilian inflation – which jumped to 4.3% y/y last month – and signs that the economy is on a firmer footing, suggest that the further interest rate cuts some still expect in early 2020 …
Inflation eases, industrial production slips Mexican inflation eased again in December, supporting our view that policymakers will continue to cut rates this year. Elsewhere, the larger-than-expected 1.2% m/m fall in Brazilian industrial production in …
9th January 2020
Spike in inflation will be temporary, rate cuts likely by end year The rise in Chilean inflation to 3.0% y/y in December is likely to be followed by a further increase to around 4.0% y/y over the first half of this year. That said, this period of …
8th January 2020
Argentine policymakers resorting to old tricks There is a sense of déjà vu about recent Argentine policymaking. Deficit monetisation is back, despite Economy Minister Martín Guzmán’s warning last month that it is a destabilising tool. The central bank has …
3rd January 2020
Inflation soft but limited rate cuts ahead The fall in Mexican inflation to 2.6% y/y in the first two weeks of December, from 3.0% in the full month of November, will pave the way for Banxico to continue its easing cycle in the coming months. That said, …
23rd December 2019
Argentina: Maturity extensions not bold enough The government stated today that it will postpone around $9bn of upcoming payments on Treasury bills (known as Letes) until August 2020. This is not hugely surprising. Most upcoming payments were due on …
20th December 2019
Inflation jump takes further easing off the table The sharp rise in Brazilian inflation, to 3.9% y/y in the first half of December, from 2.7% a month earlier rules out another interest rate cut at the next central bank meeting in February. The mid-month …
The last round of economic data released in 2019 pointed to a mixed performance in Latin America. Growth seems to have remained robust in Colombia in Q4 – and to have strengthened in Brazil – but activity faltered elsewhere. For the region as a whole, …
19th December 2019
To mark the new year, our various teams have published a series of key calls notes setting out what to watch for in 2020. This Update wraps up some of our key views for Latin America. First, growth is likely to disappoint in 2020 . Economies across the …
18th December 2019
Protests in Chile will probably result in a shift towards permanently looser fiscal policy. But it would take a long time for the debt ratio to become a concern, so any corresponding rise in bond yields over the next five years is likely to be fairly …
16th December 2019
Argentina: Still more questions than answers Reassuring comments from newly inaugurated President Fernández and his economy minister Martín Guzmán helped to drive a small rise in Argentine bond prices this week. Both said that the government seeks a …
13th December 2019
Manufacturing headwinds strengthen The fall in Mexican manufacturing output in October was largely due to the GM strike, but even if this were excluded the latest figures show weakness across key industrial sectors. This strengthens our belief that the …
12th December 2019
The statement accompanying the Brazilian central bank’s meeting last night did leave the door open for one more interest rate cut, but on balance we think the easing cycle is at an end. By the same token, the interest rate hikes that are now being priced …
Alberto Fernández’s government, which takes office today, will soon begin to implement its economic agenda and outline its proposals to resolve the debt crisis. This Update outlines four key things to watch. The first is an extension of capital controls . …
10th December 2019
Inflation stable, opening way for 25bp cut next week Mexican inflation remained at a three-year low of 3.0% y/y in November, which strengthens our view that policymakers will cut their key rate from 7.50% to 7.25% next week. Full-month figures released …
9th December 2019
The big reveal for Argentina’s Economy Minister Recent reports suggest that Alberto Fernández, who takes office on Tuesday, has selected Martín Guzmán as his economy minister. That’s unlikely to inspire much investor confidence; IMF-backed policy …
6th December 2019
Inflation rises, but 50bp rate cut still on the cards The slightly larger-than-expected rise in Brazilian inflation in November, to 3.3% y/y, was driven partly by food inflation, but also by a rise in regulated prices. The data are unlikely to prevent …
Inflation set for a temporary spike, rate cuts still to come next year The rise in Chilean inflation to 2.7% y/y in November is likely to be followed by a further increase to around 4.0% y/y early next year. That said, this increase will be temporary. As …
The statement accompanying the Chilean central bank’s decision to hold interest rates at 1.75% yesterday signalled that policy rates will be left unchanged over Q1, but we still think it’s most likely that rates will be lowered over the next 12 months. We …
5th December 2019
A good start to Q4 The 0.8% m/m rise in Brazilian industrial production in October provides early evidence that GDP growth in Q4 is shaping up to be a bit stronger than Q3’s 0.6% q/q. The industrial production figure was a touch weaker the Bloomberg …
4th December 2019
While there is likely to be more turbulence ahead for the Chilean peso, the big falls are probably behind us. Indeed, with the central bank intervening and copper prices likely to rise, we think it’s more likely than not that the peso will strengthen by …
A slow recovery The slightly better-than-expected Brazilian Q3 GDP growth figure of 0.6% q/q adds to the evidence that the recovery is gaining some momentum. But growth remains soft, and the central bank is still almost certain to lower the Selic rate by …
3rd December 2019
We estimate that regional GDP growth picked up to about 0.5% q/q in Q3, which would be the fastest pace in 18 months. But that probably marks the peak in the recovery. Argentina and Chile are set to contract in Q4, Mexico’s economy is showing few signs of …
29th November 2019
Brazil: Real’s fall doesn’t rule out a final cut The Brazilian real continued to tumble this week, hitting a record low of 4.27/$ and prompting the central bank to sell FX. The currency has regained ground over the past 48 hours, but is still down by 5% …
Comments by Venezuelan President Nicolás Maduro suggest that the government considers dollarisation as an option to tackle hyperinflation. If implemented, this would probably bring inflation down sharply. But we doubt that this would be sustained so long …
28th November 2019
Revised GDP figures have, again, shown Mexico as one of the worst-performing large EMs. But a closer look at the data underlines the huge variation within the country, which includes both pockets of outperformance as well as sectors locked in structural …
27th November 2019
Ecuador: Dollar bonds likely to rebound Legislators’ rejection of President Lenín Moreno’s latest fiscal reform bill caused a sharp sell-off in Ecuadorian bonds this week. But we think that investors have gone too far. The spread of government dollar …
22nd November 2019
Slight pickup, but policymakers will still cut in December Inflation ticked up in the first half of November in both Brazil and Mexico, but we doubt that this will be enough to dissuade policymakers from cutting their key interest rates in December. We …
President-elect Alberto Fernández’s plan to resolve Argentina’s debt crisis by growing the economy is not a realistic option. We think that a large debt write-down within a few years is inevitable, suggesting that there is little scope for a large or …
Recovery to continue as policy is loosened The pick-up in Peruvian GDP growth from 1.2% y/y in Q2 to 3.0% y/y in Q3 probably marks the beginning of a sustained economic recovery. While GDP growth over this year as a whole is likely to be just 2.5%, we …
21st November 2019
While GDP growth picked up in Q3, activity data for September indicates that the economy had already slowed significantly prior to the protests beginning. GDP is likely to contract in Q4. That said, events of recent days have raised hopes of the protests …
18th November 2019
Chilean markets recover on government offer The Chilean peso rallied against the US dollar today after lawmakers accepted protestors’ demand that a constituent assembly will play a role in writing a new constitution next year, which may help to …
15th November 2019
After loosening policy again yesterday, Mexican policymakers will probably cut rates by another 75bp over the coming six months. Given that the US loosening cycle now seems to be at an end, market expectations – which point to 150bp of cuts – seem to have …
The sharp fall in the Chilean peso today amid widespread strikes will push up inflation although, with the central bank focused more on the hit to the economy, further interest rate cuts are still likely. There is a growing risk that the unrest lasts for …
12th November 2019
Manufacturing headwinds will grow Mexican industrial production stagnated in September, and problems in the auto sector probably caused conditions to deteriorate further in October. This adds to the pressure for policymakers to cut their key rate in …
11th November 2019
Brazil: Reforms accelerate, oil auction stalls President Jair Bolsonaro’s government announced new constitutional reforms this week, which we think will improve the management of fiscal policy. The plans would rebalance the distribution of resources …
8th November 2019
The statement accompanying yesterday’s decision by Peru’s central bank to cut interest rates made it clear that this did not mark the beginning of a prolonged easing cycle. With inflation and economic activity likely to gradually rise, we expect the …
There is a good chance that protests caused GDP to contract in Q4. While we expect growth to strengthen by next year, the weak starting point from Q4 has prompted us to revise down our 2020 growth forecast from 3.5% to 2.5%. We are currently forecasting …
7th November 2019
Lower inflation keeps door open to easing The fall in Brazilian inflation to 2.5% in October, one of the lowest rates on record, makes another 50bp cut in the Selic rate at December’s Copom meeting almost certain. That said, policymakers have given a …
The fiscal package presented to Brazil’s congress yesterday shows that the government is not resting on its laurels after its successful pension reform. However, the good news on fiscal reform already seems to be priced in, suggesting that there’s little …
6th November 2019
Colombia’s economic recovery since 2017 has been in large part due to strength in private consumption, but we think it will likely slow in the coming quarters. This is one reason why our 2020 growth forecast sits at the bottom of the consensus range . …
4th November 2019
Argentina: Fernández uncertainty a bad sign The victory for Peronist Alberto Fernández in Argentina’s presidential election on Sunday provoked a small negative shock in local financial markets. The peso has held up, though, largely due to the drastic …
1st November 2019
A bumpy recovery The weaker-than-expected 0.3% m/m rise in Brazilian industrial production in September serves as a reminder that, while the economy is now strengthening, it will be a weak and bumpy recovery. The outturn was in line with our forecast but …
Political risk grabbed the headlines this month, with protestors taking to the streets across the Andes and Argentina electing a new Peronist president. Demonstrations in Ecuador and Chile will weigh on growth in Q4 and have already forced policymakers to …
31st October 2019
The statement accompanying last night’s Copom meeting gave a clear signal that there will be just one more 50bp interest rate cut in the current cycle (to 4.50%), which should temper expectations in the market for more aggressive rate cuts in the next few …
Weak recovery to spur further rate cuts The meagre 0.1% q/q rise in Mexican GDP in Q3 makes another interest rate cut at the next central bank meeting in November almost certain. The data release increases the likelihood of a larger 50bp cut. The 0.1% q/q …
30th October 2019
Ecuador’s government has successfully stabilised the debt-to-GDP ratio, and it remains committed to IMF plans to cut the public debt ratio to just 30% of GDP. But the president’s climbdown in the face of protests has highlighted the fragility of the …
29th October 2019
