Filtered by Subscriptions: Latin America Economics Use setting Latin America Economics
The strength of Brazil’s economy in Q2 means the central bank (BCB) now looks set to raise interest rates, having cut rates as recently as May. Still, monetary tightening is likely to be modest, of around 150bp (to 12.00%), and will end early next year. …
6th September 2024
The tightening of Brazil’s labour market and pick-up in wage growth over the first half of the year has supported a consumer boom. We expect conditions to cool over the coming quarters but, for now, the buoyant labour market is adding to the central …
5th September 2024
Bumper growth in Q2 tilts odds towards rate hike The much stronger-than-expected Brazilian GDP figure for Q2, of 1.4% q/q, means that the economy now appears to be on course to expand by 3% over the year as a whole. The flip side is that it will heighten …
3rd September 2024
Lula taps Galípolo In a move that had been long signalled, Brazil’s President Lula announced this week that Gabriel Galípolo is his nominee to take over at the helm of the central bank when the term of current governor Roberto Campos Neto finishes at the …
30th August 2024
Most Latin American economies appear to have headed into Q3 with little momentum and regional growth is likely to remain sub-2% this year and next. With inflation set to remain above target for a while yet, easing cycles in many countries will be …
28th August 2024
The small fall in Brazil’s headline inflation rate, to 4.35% y/y in the first half of August, alongside the prospects of a Fed rate cut next month, means that Copom is most likely to leave rates unchanged (rather than hike) at its meeting next month. The …
27th August 2024
Mexico: likelihood of September cut increasing The inflation and activity data out of Mexico this week, alongside the minutes to the central bank’s August meeting, mean that Banxico is likely to continue its easing cycle with a 25bp cut, to 10.50%, at its …
23rd August 2024
You can find all our research on Mexico's election on a dedicated webpage . The swearing in of a new congress next month gives Mexico’s outgoing president, Amlo, a one month window to re-start plans to pass controversial planned constitutional …
22nd August 2024
The fall in Mexican inflation in the first half of August, to 5.2% y/y, alongside clear signals from the Fed that it will start loosening monetary policy next month, supports our view that Banxico will continue its easing cycle with another 25bp cut in …
The prevailing view that, over the medium term, Colombia will maintain its position as Latin America’s fastest-growing major economy looks overly optimistic in light of the collapse in its savings and investment rates. GDP growth is more likely to come in …
20th August 2024
Brazilian assets have generally underperformed other EMs so far this year, but measures of risk premia still appear low to us, especially given concerns over public finances. While bonds may offer large gains by end-2025, our downbeat view on commodity …
The 0.6% q/q fall in Chilean GDP in Q2 is mainly payback for a strong Q1, and we expect a return to positive growth in Q3. Still, the Q2 figures should the central bank confidence to deliver a couple of more cuts this year. The outturn was in line with …
19th August 2024
Winds of change in Venezuela? Hopes for a regime change in Venezuela have risen after leftwing governments in Brazil and Colombia made several suggestions to overcome Venezuela’s impasse, including holding fresh elections or forming a transitional …
16th August 2024
Strong domestic demand means BanRep likely to maintain the pace of easing The Colombian economy isn’t nearly as weak as the meagre 0.1% q/q rise in headline GDP in Q2 would suggest; there was a large drag from net trade while domestic demand remained very …
15th August 2024
Housing inflation has become an increasingly important driver of core services inflation in Mexico – a key concern of the central bank, Banxico. And we think that robust household income growth and a lack of supply of dwellings will keep housing and, by …
13th August 2024
Signs of a thaw in frosty relations between India and China don’t point to a fundamental realignment in India’s position in a fracturing global economy. But they highlight a growing theme of some EMs tactically courting investment from China to put …
Banxico looks through peso volatility and cuts The Mexican peso was on a rollercoaster ride this week. It was one of the hardest hit EM currencies in the market rout, briefly breaching 20/$ (the weakest level in over a year) in early hour trading on …
9th August 2024
Rise in inflation will add to Copom’s hawkishness, but rate hike unlikely The rise in Brazil’s headline inflation rate to 4.5% y/y in July was mainly driven by a pick-up in underlying core services inflation which will do little to quell the hawkishness …
Easing cycle continues despite peso weakness Mexico’s central bank opted to reduce its policy rate by 25bp, to 10.75%, at today’s meeting and the statement generally retained the moderately dovish tone from the last one. We think further rate cuts are …
8th August 2024
Rise in inflation leaves Banxico decision on a knife edge The rise in Mexico’s headline inflation rate, to 5.6% y/y in July, alongside the weakness in the peso means that Banxico’s interest rate decision later today will be a very close call between a cut …
The minutes to last week’s central bank meeting in Brazil raised the possibility that policymakers will respond to the worsening inflation outlook by hiking interest rates. And despite the sharp shift down in US interest rate expectations since that …
6th August 2024
Fears of a US recession have rattled EM equity markets at a time when EM economies themselves are showing more pronounced signs of weakness. Most EM currencies have held up well, suggesting a dovish tilt may come from EM central banks – particularly those …
5th August 2024
We will discuss our latest EM Financial Risk Monitor in a Drop-In next Thursday. Register here for the 20-minute online briefing. By hook or by crook The declaration that incumbent Nicolás Maduro won Venezuela’s presidential election was met with …
2nd August 2024
Copom on hold, rate cuts off the cards for the rest of 2024 Rising inflation, a worsening fiscal position and a slump in the real prompted Brazil’s central bank to leave the Selic rate at 10.50% today and strike a more hawkish tone in the accompanying …
31st July 2024
The Argentine peso’s overvaluation is becoming an increasing point of concern and attention has shifted to whether the Milei administration will lift capital controls. We think that some form of easing of restrictions, such as the scrapping of taxes on FX …
Weak Q2 makes August rate cut likely The weaker-than-expected 0.2% q/q expansion in Mexico’s economy in Q2 means that Banxico is likely to resume its easing cycle at next week’s Board meeting with a 25bp cut to 10.75%. The outturn was a little weaker …
30th July 2024
Venezuela at a turning point? Venezuelans head to the polls on Sunday in what could be a pivotal election – the latest opinion polls put opposition candidate Edmundo González well ahead of incumbent President Nicolás Maduro, meaning there’s the biggest …
26th July 2024
Inflation rises, no more cuts this year The stronger-than-expected rise in Brazil’s headline inflation rate, 4.45% y/y in the first half of July, was mainly driven by a pick-up in underlying core services inflation. This, coming alongside fiscal concerns …
25th July 2024
Regional growth appears to have slowed in Q2 and we think it will be sluggish in the next few quarters. At a country level, we expect the Andean economies to outperform Brazil and Mexico in the next couple of years. With inflation set to rise further in …
24th July 2024
The larger-than-expected rise in Mexican inflation in the first half of July, to 5.6% y/y, was driven entirely by a jump in non-core inflation; core inflation fell. Our base case remains that Banxico will resume its easing cycle next month (as has been …
The recent sharp deterioration in Brazil’s public finances has forced Finance Minister Fernando Haddad to outline further fiscal tightening measures, but we doubt that the government will do enough to prevent public debt from rising in the coming years. …
23rd July 2024
Argentina: falling back into old habits? While it was a good week for Argentine football – the Albiceleste won the Copa America for a second consecutive time – the opposite was the case for Argentine financial assets. Sovereign dollar bonds and the Merval …
19th July 2024
The latest polls suggest that the opposition is on track to win Venezuela’s election later this month but President Maduro is likely to do all he can to cling on to power. If he manages to do so, Venezuela’s nascent economic recovery would be nipped in …
18th July 2024
Inflation data not as bad as headline rates suggest At first sight, the raft of inflation data out of Latin America this week made for worrying reading. Inflation rebounded in most countries last month, with the headline rate in Mexico reaching 5.0% y/y …
12th July 2024
Inflation increases again, Copom in no mood to restart easing The rise in Brazil’s headline inflation rate to 4.2% y/y in June was a little softer than expected but the recent weakness in the real and mounting fiscal concerns means that there is no chance …
10th July 2024
Inflation rise doesn’t rule out August rate cut The larger-than-expected rise in Mexico’s headline inflation rate, to 5.0% y/y in June, was mainly due to a surge in agricultural inflation; core inflation edged down last month. While there’s still a lot of …
9th July 2024
Brazil’s President Lula has renewed his attacks on the central bank and high interest rates in recent weeks, raising fears that there could be more political influence on monetary policy from next year after he has appointed three new Copom members. …
8th July 2024
Rise in inflation makes pause in easing cycle likely The fourth consecutive increase in Chilean inflation, to 4.2% y/y, in June means that interest rates are likely to be left unchanged at 5.75% at the central bank’s meeting at the end of the month. We …
Chile’s economy losing momentum Having made a very strong start to the year , the latest activity data suggest that Chile’s economy struggled in Q2. The monthly activity index (Imacec) contracted by 0.4% m/m in May – the third consecutive monthly decline. …
5th July 2024
The recently-published fiscal plans of Colombia’s government seem to have alleviated some near-term fiscal concerns, but we think the medium-term budget and debt projections are based on rosy assumptions around growth and oil prices. Policymakers’ (and …
2nd July 2024
This page brings together our analysis of how Donald Trump's return to the White House will affect the outlook for emerging economies. Use the Table of Contents on the right to navigate. All of our analysis on the election, including the implications for …
28th June 2024
Failed coup, economy on the ropes The news on Wednesday that armed soldiers had tried to storm Bolivia’s presidential palace in an attempted coup seemed to hark back to the Latin America of the 1970s (as well as a James Bond film of the 2000s). The …
Rates on hold again, but a dovish tilt Mexico’s central bank left rates unchanged at 11.00% today, but there was a surprising dovish shift in the Board’s communications – despite the post-election fall in the peso. A small reduction in the policy rate …
27th June 2024
Monday marks the 30 th anniversary of the introduction of Brazil’s currency, the real, as part of a stabilisation plan (the Plano Real ) which successfully tamed runaway inflation. For other EMs facing similar problems, most notably Argentina, the key …
Slightly softer inflation print won’t ease Copom’s concerns The slightly lower-than-expected Brazilian inflation figure, of 4.1% y/y, for the first half of June won’t change the picture that the central bank’s easing cycle is over – for this year at …
26th June 2024
After a strong start of the year, regional growth appears to have slowed in Q2 and we expect this to continue in the coming quarters. Brazil and Mexico’s economies are likely to underperform the Andes and disappoint consensus expectations in the next …
25th June 2024
Strong services inflation and fall in peso to keep Banxico in hawkish mood The continued strength in core services inflation in Mexico in the first half of June, combined with the post-election slump in the peso and heightened political uncertainty, means …
24th June 2024
IMF praises Milei but more to be done The eighth review of Argentina’s $44bn IMF programme, which was published this week, is a whole-hearted endorsement of President Milei’s economic record. It notes that the “program remains firmly on track” and that …
21st June 2024
Latin American assets have generally underperformed those elsewhere of late, in part driven by rising risk premia on the region’s assets. We think these risk premia may rise further over the coming year or so, given our downbeat view on economic growth in …
Overview – The economies of Latin America started the year on the front foot, but the strong growth rates recorded in early 2024 are unlikely to be sustained and growth in many parts of the region is likely to be soft in the coming quarters. This is …
20th June 2024
