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Robust GDP growth in the Andes over the past year or so has been a rare piece of good news in Latin America, but in Chile and Colombia’s case, this has come alongside growing external vulnerabilities. Recently-released figures show that current account …
25th March 2019
Swings in Brazil’s equity and currency markets this week suggest that investors are coming to terms with the idea that pension reform will be diluted. But there are much greater concerns about disputes between the Bolsonaro administration and his fragile …
22nd March 2019
Mexican inflation remained above target, at 4.0% y/y, in the first half of March and will probably stay around this rate in Q2. But we expect that the headline rate will decline during the second half of the year, paving the way for monetary loosening. We …
The wording of last night’s Brazilian monetary policy statement provides further evidence that the appointment of new governor Roberto Campos Neto won’t cause much of a change to monetary policy. With this in mind, we think the financial market’s current …
21st March 2019
Brazil’s new central bank governor, Roberto Campos Neto, inherits a benign inflation environment and we now think the Selic rate will be left unchanged at its current historic low of 6.5% until at least end-2020. In contrast, the markets are pricing in …
19th March 2019
Colombia’s current account deficit is widening, making the recovery vulnerable to a deterioration in global risk appetite that we expect later this year. The country’s weak external position is likely to put the peso under pressure, push up headline …
18th March 2019
The pick-up in Chilean GDP growth from 2.6% y/y in Q3 to 3.6% y/y in Q4 was driven in large part by stronger domestic demand, but this has also caused the current account deficit to widen rapidly. While the consensus expects a very modest slowdown from …
Measures announced by Argentina’s central bank last night appear to have supported the peso today, but the currency will remain vulnerable to large falls, particularly as October’s presidential election approaches. Meanwhile, signs of discord between …
15th March 2019
The stronger-than-expected expansion in Mexican industrial production in January, of 0.6% m/m, is an early sign that the huge drag the sector exerted on Q4 GDP won’t be repeated in Q1. We still hold an above-consensus view for GDP growth over this year as …
13th March 2019
The much larger-than-expected fall in Brazilian industrial production in January, of 0.8% m/m, suggests that the economy is being buffeted by global headwinds. If anything, the risks to our below-consensus growth forecast of 2.0% this year are starting to …
The slightly higher-than-expected Brazilian inflation figure for February, of 3.9% y/y, was driven by a spike in prices in a few food products which should prove temporary. Copom will probably stick to its recent dovish line when it meets next week. … …
12th March 2019
Venezuela’s oil exports have dropped sharply following the imposition of US sanctions on PDVSA last month, and further falls are likely in the coming months. This will make it increasingly difficult for President Maduro to keep the top brass in the …
11th March 2019
The sharp falls in the Argentine peso and Brazilian real in the second half of the week reflected both worsening global risk appetite and domestic political concerns. A few weeks ago it had felt that we were out on a limb in forecasting chunky falls in …
8th March 2019
The weaker-than-expected Chilean inflation data for February of 1.7% y/y (down from 1.8% y/y in January), means that we are increasingly comfortable with our forecast for rates to be left on hold at 3.00% until next year. In contrast, the markets …
Sunday marks Andrés Manuel López’s Obrador’s (Amlo’s) first 100 days as Mexico’s president, and some of his unorthodox policies appear to have resulted in a 50-60bp risk premium on sovereign debt. That said, Amlo has kept the core tenets of fiscal and …
7th March 2019
The further large fall in Mexican inflation, from 4.4% y/y in January to 3.9% y/y in February, combined with another dip in core inflation, strengthens the case for rate cuts later this year. We are increasingly comfortable with our forecast for 75bp of …
The Mexican central bank’s recently released Q1 Inflation Report reiterated concerns about sticky core inflation. But we think these worries are overdone, and core inflation should fall back in the coming quarters. As such, we remain comfortable with our …
5th March 2019
Noises from Brazilian lawmakers this week hinted that parts of the government’s pension reform plan could be diluted. But so far, the core components of the bill do not appear to have come up against significant resistance. Elsewhere, Mexican local …
1st March 2019
Colombian GDP growth edged up from 2.7% y/y in Q3 to 2.8% y/y in Q4, but while the consensus expects growth to be stronger this year, we expect it to slow. … Colombia GDP …
28th February 2019
The meagre 0.1% q/q rise in Brazilian GDP in Q4 confirmed that, despite the surge in business and consumer confidence, there has been no Bolsonaro boost for the real economy yet. This supports our view that the economic recovery over the coming quarters …
Inflation has fallen across the region at the start of this year, and is likely to stay relatively soft in the coming months. One common driver of weaker inflation has been lower fuel inflation. But core inflation has also edged down in Mexico, Chile and …
27th February 2019
A partial sale of Colombia’s state-owned oil company, Ecopetrol, now appears likely and should limit the scale of fiscal austerity, particularly in 2020. But Colombia is yet to fully adjust to low oil prices and fiscal policy will remain tight in the …
26th February 2019
Brazil would be the biggest loser if China increases its imports of US soybeans as part of a trade deal. But the overall impact on Brazil’s export revenues and overall GDP growth would probably be modest. … Brazil, soybeans and the trade …
25th February 2019
The slump in Mexican industry late last year largely reflects domestic problems, particularly in the mining sector. But with the US economy now coming off the boil, the external environment will be an added headwind to Mexican industry this year. The …
Ecuador’s IMF deal announced this week will help to anchor President Lenín Moreno’s austerity drive and sustain the rally in sovereign bonds. Meanwhile, the Argentine peso has come under renewed pressure over the course of this week, and we think that it …
22nd February 2019
The larger-than-expected fall in Mexican inflation in the first half of February, to 3.9% y/y, brings the headline rate back into the central bank’s 2-4% target range for the first time in almost two-and-a-half years and strengthens the case for interest …
The continued softness of Brazilian inflation up to mid-February, combined with the ambitious pension reform presented to Congress yesterday, will keep interest rate hikes off the table in the coming months. … Brazil IPCA-15 …
21st February 2019
The Mexican government’s bailout for Pemex last week is unlikely to solve the company’s fundamental issues, which stem from an extremely heavy tax burden and chronically low productivity. In the absence of broad fiscal and labour reform, which is not on …
20th February 2019
The Brazilian government’s pension reform plan unveiled today lives up to high hopes and is likely to sustain the rally in local markets over the coming weeks. But history suggests that the legislative process could take time, and will ultimately result …
Rumours about the shape of the Brazilian government’s pension reform that will be presented to congress on Wednesday suggest that it is ambitious and would, if implemented in full, stabilise the public debt ratio. But historically congress has watered …
19th February 2019
The weakness of the latest inflation and economic activity data in Chile means we now think that the central bank will pause its tightening cycle until next year (previously we expected 50bp of hikes this year). But, we still expect interest rate hikes in …
18th February 2019
The bailout package announced earlier today by Mexico’s president for the ailing state-owned oil company Pemex is unlikely to arrest the alarming decline in oil output and prevent yields on Pemex debt from rising this year. Meanwhile, rumours that …
15th February 2019
Views are polarised about size of the losses Venezuelan bondholders might face in an eventual debt restructuring, with some suggesting only modest debt relief is needed and others suggesting a large write-down is inevitable. Historically, we find that the …
12th February 2019
The surprise contraction in Mexican industrial production in December means that the sector was weaker over Q4 as a whole than we (and probably the statistics office) thought. As a result, there’s a good chance that the preliminary Q4 GDP growth figure of …
11th February 2019
Details of Brazilian Finance Minister Paulo Guedes’ pension reform unveiled this week are impressive, but political realities could yet scupper these plans. Elsewhere, despite the hawkish statement accompanying this week’s interest rate decision by …
8th February 2019
The continued softness of Brazilian inflation last month reinforces Copom’s dovish message delivered in this week’s policy communiqué, and keeps rate hikes off the table for now. Elsewhere, the larger-than-expected fall in Chilean inflation in January …
The larger-than-expected fall in Mexican inflation last month, to 4.4% y/y, adds to the reasons to think that Banxico will row back on previous hawkish rhetoric when it meets this evening. We expect inflation to fall further, prompting a shift towards …
7th February 2019
Venezuelan dollar bonds have continued to rally this week on hopes of a swift political transition, debt restructuring and economic overhaul, but history suggests that this could prove optimistic. Elsewhere, mining company Vale’s decision to halt …
1st February 2019
Even though Brazilian industrial production rose by a slightly better-than-expected 0.2% m/m in December, the sector was a drag on growth over Q4 as a whole. The services sector seemed to fare a bit better, but there’s a real risk that GDP contracted last …
Venezuela’s sovereign dollar bonds have rallied strongly over the past few weeks as investors appear to be betting on a swift regime change and a smooth debt restructuring, but the markets risk getting ahead of themselves. Some of the latest newsflow …
31st January 2019
The statement accompanying the Chilean central bank’s decision to hike its policy rate by 25bp to 3.00% last night was slightly less hawkish than the previous one, and supports our view for fewer rate hikes than the markets are pricing in. We expect rates …
Preliminary Q4 GDP figures from Mexico were better than expected, but showed a sharp slowdown in growth from Q3. We still expect growth to accelerate this year and our forecast for a pick-up to 2.5% (from 2.0% over 2018 as a whole) is above consensus. … …
30th January 2019
Mexican inflation has been stubbornly above Banxico’s 2-4% target over the past two years, but we think it will fall back within this range by year-end. And with the Fed’s tightening cycle near its peak, we expect Banxico to shift into easing mode later …
29th January 2019
The decision by the US to impose sanctions on Venezuela’s state-owned oil company, PDVSA, will lead to a large loss of export earnings in the next few months. If Maduro can cling on to power during this time (perhaps by securing loans from China and …
Speculation is growing that Ecuador’s president, Lenín Moreno, will seek an IMF deal in the coming months, and history suggests that the recent rally in sovereign dollar bonds has further to run. Venezuela’s dollar bonds have also rallied this week as …
25th January 2019
The larger-than-expected fall in Mexican inflation in the first half of January, combined with the recent rally in the peso, means that we no longer expect a 25bp interest rate hike at next month’s meeting. The next move in interest rates will be down, …
24th January 2019
The decision by the US and other governments to recognise the leader of Venezuela’s opposition Juan Guaido as president seems to have ratcheted up the pressure on the Maduro regime. Regardless of how events play out, history suggests that hyperinflation …
The continued softness of Brazilian inflation up to the middle of January will give the central bank room to hold off raising rates until there is more clarity on the government’s reform plan. For our part, we think it’s most likely that reforms will …
23rd January 2019
Brazilian president Jair Bolsonaro’s headline speech in Davos today suggests that opening up the economy to international trade will be a major priority, something that would boost the economy’s long-term prospects. But the near absence of any mention of …
22nd January 2019
The Argentine peso has given up some of its recent gains against the dollar this week, and we expect further weakness over the coming months. Elsewhere, better-than-expected Brazilian retail sales figures for November, released this week, raised hopes of …
18th January 2019
