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GDP growth in Latin America should strengthen in the coming quarters, but the pace of the recovery will be weaker than most expect. Fiscal and monetary policy are likely to be tightened and external headwinds are brewing. We think some of the optimism …
17th January 2019
Brazil’s President Jair Bolsonaro seems to be pushing one of his campaign pledges to liberalise trade and, if successful, history suggests that this might plausibly add as much as 0.75%-pts to potential GDP growth. … Brazil: why trade liberalisation would …
16th January 2019
Brazil’s government is reportedly close to agreeing a pension reform bill, but we still think that political realities may end up diluting or stalling welfare reform. Elsewhere, the Mexican government’s decision to temporarily close key gas pipelines to …
11th January 2019
The surprise contraction in Mexican industrial production in November – the second consecutive monthly fall – all but confirms that overall GDP growth slowed sharply in Q4. As things stand, following a 0.8% q/q expansion in Q3, growth is shaping up to be …
The fall in Brazilian inflation to a seven-month low of 3.7% y/y in December, coming alongside the continued strength of the real, means the central bank is likely to strike a more dovish line in the next few months. But there are tentative signs that …
The rise in Mexican inflation, from 4.7% y/y in November to 4.8% y/y in December, means that another 25bp interest rate hike (to 8.50%) at next month’s meeting is still likely. However, this will probably be the last hike in the cycle. … Mexico Consumer …
9th January 2019
The softer-than-expected Brazilian industrial production figure for November of 0.1% m/m underscores the weakness of the economy and supports our view that some of the optimism about growth prospects following Jair Bolsonaro’s election victory is a bit …
8th January 2019
Brazilian markets have performed strongly this week as hopes for business-friendly reforms under President Jair Bolsonaro have continued to build, but we think that the rally may run out of steam before long. Elsewhere, the minutes to the Mexican central …
4th January 2019
News that creditors have started the process for triggering an “acceleration” clause in one of Venezuela’s sovereign dollar bonds suggests that, after a lengthy impasse, the debt crisis is likely to escalate quickly from here. Looking into next year, …
21st December 2018
The statement accompanying the Mexican central bank’s decision to raise interest rates by another 25bp was very hawkish, suggesting that the board is not done tightening yet. As such, we’re still expecting a further 25bp hike in the near term, but we see …
GDP data released last night confirmed that Argentina entered a technical recession in Q3 and, while net trade provided a positive contribution to growth, we don’t think that this can be pinned solely on a weaker peso. More timely data suggest the economy …
19th December 2018
The recent slowdown in Latin American growth appears to have passed its trough. Our regional GDP Tracker suggests that output rose by around 1.3-1.5% y/y at the start of Q4, up from a low point of about 0.8% y/y in July. Growth in the region as a whole is …
18th December 2018
The Mexico City airport bond dispute appears to be at an impasse and, if the wrangle drags on, sovereign bond yields are likely to drift up, and Banxico would be more likely to hike interest rates further. … Three questions on Mexico’s airport bond …
The prudent 2019 budget presented by Mexican President Andrés Manuel López Obrador (Amlo) at the weekend is probably an attempt to try to get investors back onside after a series of policy moves which have spooked markets. It adds to the impression that, …
17th December 2018
Mexico’s 2019 budget that will be presented to Congress on Saturday looks set to (unrealistically) target a primary budget surplus. But, more importantly, if spending is projected to rise by much more than the 7-8% most expect, the peso and bonds would …
14th December 2018
The Brazilian Central Bank’s (BCB’s) statement from last night’s meeting suggests that interest rates will be left unchanged over the next few months at least. We think a tightening cycle will start next year, probably in Q2, as some of the optimism …
13th December 2018
The larger-than-expected contraction in Mexican industrial production in October was driven partly by a collapse in mining output, but other parts of industry also struggled. October’s disappointing data provide early evidence that GDP growth in Q4 is …
12th December 2018
Mexican President Andres Manuel Lopez Obrador’s announcement that he will postpone oil auctions adds to a series of populist moves that have rattled local markets, and we reckon this has resulted in a political risk premium of 40-50bp on sovereign debt. …
7th December 2018
The further decline in Mexican inflation in November is unlikely to cause Banxico to soften its hawkish stance. Another 25bp rate hike, to 8.25%, at this month’s meeting still seems more likely than not. … Mexico Consumer Prices …
The larger-than-expected drop in Brazilian inflation in November, to 4.1% y/y (from 4.6% y/y in October), reinforces our view that Copom won’t rush to tighten policy. We expect the Selic rate to be left unchanged at Wednesday’s meeting, and have pencilled …
Mexican economic growth has weakened after all but one presidential election since 1950, and there have been growing suggestions that the recent change of government could cause growth to weaken next year. But we don’t think this will be the case and are …
6th December 2018
The decision by Andrés Manuel López Obrador (Amlo) to seemingly postpone Mexico’s deep water oil auctions for three years is unlikely to have a major bearing on oil production in the near term. But it is the clearest sign yet that Amlo intends to stop the …
5th December 2018
The statement accompanying the Chilean central bank’s decision to hold its policy rate at 2.75% last night suggested that this was only a brief pause in its tightening cycle. We continue to think that tightening over the next year will be more rapid than …
Brazil’s incoming government has given little detail about its proposed (and much-needed) reforms to the country’s pension system. But stabilising the public debt ratio would require reform at the more ambitious end of the policies under consideration – …
4th December 2018
Weaker-than-expected Brazilian industrial growth in October, of 0.2% m/m, provides early evidence that GDP growth in Q4 is likely to be weaker than Q3’s outturn of 0.8% q/q. … Brazil Industrial Production …
Oil prices are up today, but the recent decline means that inflation will rise more slowly in Latin America over the next few months than we had previously thought. We still expect a majority of central banks to hike rates in the coming months, although …
3rd December 2018
The minutes to Banxico’s latest interest rate meeting send a clear message that the recent policy shift under Andrés Manuel López Obrador’s (Amlo’s) will result in further rate hikes. Elsewhere, commodity prices seem to have re-asserted themselves as key …
30th November 2018
The robust 0.8% q/q expansion in Brazilian GDP in Q3 was flattered by the recovery from disruptions caused by the truck drivers’ strike in May. That said, the improvement in the latest survey data suggest that underlying momentum in the economy has …
Having struck a business-friendly tone after his election, Mexico’s president elect Andrés Manuel López Obrador has more recently begun to unnerve investors. Ahead of his inauguration on Saturday, this Update highlights five things that would suggest his …
29th November 2018
The drop in oil prices this month is clearly bad news for the region’s large net energy exporters, Colombia and Venezuela; a fiscal squeeze in on the cards in the former and the latter’s crisis will get even worse. But for the rest of the region, lower …
28th November 2018
A range of factors, including a fall in soybean prices, expectations of central bank intervention and political risk, appears to best explain the recent drop in the Argentine peso against the dollar. Our base case is that the peso continues to fall, …
27th November 2018
The market reaction to the incoming Mexican government’s public consultation is unlikely to be as bad as the last one, which voted to scrap a flagship airport project. Even so, it provides more evidence that Andrés Manuel López Obrador (Amlo) is shifting …
23rd November 2018
The decline in Mexican inflation in the first half of November, which was in line with expectations, is unlikely to cause Banxico to soften its hawkish stance. Another 25bp interest rate hike (to 8.25%) at next month’s meeting still seems more likely than …
22nd November 2018
Having already hit the IMF’s primary deficit target for this year, Argentine policymakers have made impressive progress on fiscal tightening. But the squeeze so far accounts for only a third of the total effort requested by the IMF over the course of the …
The slowdown in Peruvian GDP growth from 5.4% y/y in Q2 to 2.3% y/y in Q3 is likely to be a blip, and growth should be stronger in Q4. Even so, growth is likely to be weaker than most expect over 2019. … Peru GDP (Q3 …
21st November 2018
The slowdown in Chilean GDP growth from 5.3% y/y in Q2 to 2.8% y/y in Q3 was driven in large part by a drop in export growth, but there are also signs that domestic demand is losing some steam. While the consensus expects GDP growth to pick up from here, …
19th November 2018
Argentina’s Senate this week passed the government’s IMF-endorsed austerity budget for next year, but bond markets are starting to share our concerns over mounting political risks surrounding October’s elections. Elsewhere, the appointment of ex-finance …
16th November 2018
In the 16 cases of hyperinflation since 1980, countries have either a) implemented “shock therapy”, b) dollarised or c) adopted a currency board in order to stabilise the economy, all of which seem unlikely in Venezuela under President Maduro. That said, …
Colombian GDP growth edged down from 2.8% y/y in Q2 to 2.7% y/y in Q3, and while the consensus expects growth to be stronger next year, we expect it to slow further in 2019. … Colombia GDP (Q3 …
15th November 2018
The tax reform introduced to Colombia’s congress is unlikely to pass in its current form, but even a diluted version would result in tighter fiscal policy, higher inflation and, ultimately, more interest rate hikes in the coming tightening cycle. In this …
12th November 2018
A bill to make Brazil’s central bank formally independent, which has been rumoured this week, would boost market optimism about Jair Bolsonaro’s reform promise and have positive long-term economic effects. Elsewhere, markets are pricing in an interest …
9th November 2018
The larger-than-expected gain in Mexican industrial production in September chimes with the strong preliminary GDP data for Q3 released late last month, and supports our view that economic growth as a whole will be better than most anticipate in the …
The fall in Mexican inflation in October confirms that September’s rise was just a blip, and we expect the headline rate to decline further in the coming quarters. Today’s data won’t be enough to bring interest rate cuts onto the table yet, but we do …
8th November 2018
Chilean inflation decline from 3.1% to 2.9% y/y in October, but with the headline rate likely to resume its upward trend this month and recent labour market data improving, we still think that another interest rate hike in December is more likely than …
The slightly smaller-than-expected increase in Brazilian inflation last month, to 4.6% y/y, reinforces our view that Copom will hold off from starting a tightening cycle for a few more months. … Brazil IPCA …
7th November 2018
The recent uptick in Chilean unemployment has prompted some analysts to suggest that interest rates may not rise much further. But the central bank doesn’t seem too concerned and we think that any weakness that does exist in the labour market will soon …
6th November 2018
Concerns that “super minister” Paulo Guedes’ plan to reduce the Brazilian government’s interest payments by selling FX reserves would increase external vulnerabilities look overdone. However, the plan would only make a minor dent in the country’s fiscal …
5th November 2018
The decision by Mexican president-elect Andrés Manuel López Obrador (Amlo) to cancel the Texcoco airport construction spooked local markets, and upcoming decisions on the 2019 budget and oil field sales should give a clearer sign of whether he will tack …
2nd November 2018
The sharper-than-expected 1.8% m/m contraction in Brazilian industrial production in September won’t prevent the economy as a whole from strengthening in Q3. But it reinforces concerns about the scale of the challenge facing president-elect Jair Bolsonaro …
1st November 2018
The Brazilian Central Bank’s (BCB’s) statement from last night’s meeting hints that Copom is waiting to see if president-elect Jair Bolsonaro can deliver on his reform promise when he takes office at the start of 2019. We now expect the Selic rate to stay …
