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The pause in the decline in Mexican headline inflation in the first half of February masks the fact that core inflation posted its biggest decline in over three years. The central bank is likely to stay hawkish, but our central view is that policymakers …
22nd February 2018
We expect inflation in Brazil to drift higher in the coming months, reaching just over 4% y/y by the end of this year. This won’t cause a major headache for policymakers but, despite the dovish tone of this month’s Copom minutes, we think it will be …
16th February 2018
Colombian GDP growth slowed from 2.3% y/y in Q3 to a weaker-than-expected 1.6% y/y in Q4, but we still expect the economy to recover over the course of this year. … Colombia GDP …
15th February 2018
The decision by Argentina’s central bank to pause its easing cycle last night was accompanied by another cautious statement, reinforcing our view that interest rates will be cut by less than most expect this year. … Argentina: interest rates to be cut by …
The volatility in global financial markets in recent weeks has brought concerns about EM external vulnerabilities back into the spotlight. However, with the notable exception of Argentina, economies in Latin America are now better placed to weather either …
9th February 2018
Mexican industrial production returned to growth in December, on the back of a (delayed) rebound in construction activity following September’s earthquakes. However, the impact of the earthquakes is still being felt in the utilities sector. … Mexico …
Peru’s central bank left interest rates unchanged at 3.00% yesterday as expected, but the accompanying statement left the door open for further easing. We think that a further drop in inflation in the next few months will give policymakers the room to …
The sharp fall in Mexican inflation last month is likely to be the start of a downwards trend, and we expect headline inflation to fall back into the central bank’s target range by Q3. The consensus and the market expects interest rates to be raised at …
8th February 2018
The weaker-than-expected increase in Brazilian consumer prices last month, of 2.9% y/y, unchanged from December, reinforces our view that the rise in inflation over the course of this year will be gradual. While Copom signalled the end of the easing cycle …
This report is only available as a PDF. Click to download. … Brazil's industrial recovery remains on track …
1st February 2018
The 1.0% q/q rebound in Mexican GDP in Q4 was larger than expected but needs to be viewed alongside the -0.3% q/q contraction in Q3. While a stronger US economy will provide a prop to growth this year, this will be largely offset by other headwinds …
30th January 2018
While the rest of the global economy experienced a pick-up in growth towards the end of last year, our GDP Tracker suggests that regional growth in Latin America flat-lined at around 2.5% y/y in Q4 – broadly unchanged from the pace of expansion recorded …
29th January 2018
The decision by a Brazilian court to uphold the corruption conviction against former President Lula complicates his plans to run for the presidency this year but it doesn't finish them altogether. The jump in markets that followed today’s decision was …
26th January 2018
It’s been a good start to 2018 for Latin America’s financial markets, with equities outperforming those in developed markets, currencies posting strong gains against the dollar, and bond spreads narrowing. Argentine markets have had a more mixed start to …
25th January 2018
The sharp fall in Mexican inflation in the first half of January is likely to be the start of a downwards trend, and we expect headline inflation to fall back into the central bank’s target range by Q3. In contrast to the markets, we think that the next …
24th January 2018
The modest rise in Brazilian inflation in the first half of January, which was slightly weaker than expectations, is unlikely to alter the thinking of COPOM. Assuming that the real holds up over the next few weeks, policymakers should deliver one final …
23rd January 2018
We expect economic growth in Colombia to accelerate over the course of 2018. Inflation should fall sharply from the start of this year and interest rates are likely to be cut further. We do not anticipate that the presidential election (scheduled for May) …
22nd January 2018
July’s elections and Nafta renegotiations make the uncertainties around the outlook for interest rates in Mexico unusually high. An election upset or the collapse of Nafta could result in interest rates being hiked by as much as 200bp. However, under a …
19th January 2018
The cyclical forces driving Brazil’s economic recovery are likely to strengthen over the next 6-12 months and our GDP forecast for 2018 remains above the consensus. Our bigger concern lies around elections at the end of this year and the potential for a …
17th January 2018
The admission by World Bank Chief Economist Paul Romer that the drop in Chile’s ranking in its annual Doing Business survey in recent years is due almost entirely to changes in how the survey is constructed, rather than a fundamental deterioration in the …
15th January 2018
Peru’s central bank cut its policy interest rate last night by 25bp to 3.00% and, while the statement didn’t give much away regarding future moves, we still think there’s room for another 25bp cut in the policy rate (to 2.75%) in this cycle. … Peru’s …
12th January 2018
Concerns over the fate of Nafta have caused more wobbles in Mexican markets over the past day, but the economic implications are less straightforward than much of the commentary suggests. While any move by the US to pull out of Nafta would cause a market …
11th January 2018
The rise in Brazilian inflation to 3.0% y/y last month leaves it right at the lower bound of the central bank’s 4.5±1.5% target range, which should provide room for a further 25bp cut in the Selic interest rate at the next Copom meeting in February. But …
10th January 2018
The rise in Mexican inflation to a fresh 18-year high of 6.8% y/y in December will probably lead to further calls for Banxico to raise rates again at its policy meeting on 9th February. While another hike is possible, with inflation set to fall sharply in …
9th January 2018
Argentina’s president, Mauricio Macri, has wasted little time in kick-starting his reform agenda following October’s mid-term elections, with a range of fiscal measures announced over the past month. These should help to narrow the budget deficit in 2018 …
8th January 2018
The rise in Chilean inflation in the final month of 2017, to 2.3% y/y, was driven largely by an increase in food inflation – core inflation rose only marginally and remained below the central bank’s target range. As such, while we acknowledge that the …
November’s 0.2% m/m rise in Brazilian industrial production was the third consecutive monthly expansion, and the latest survey data indicate that conditions in the sector should continue to improve over the coming months. … Brazil Industrial Production …
5th January 2018
We wouldn’t put much weight on the dip in Mexico’s business surveys in December since they have become a less reliable indicator of shifts in economic conditions over the past year. Indeed, the hard activity data that are so far available suggest that the …
3rd January 2018
2017 has been another strong year for asset markets in Latin America but there are already signs that 2018 will be more challenging. … A strong 2017 – but 2018 likely to be more …
19th December 2017
The vote due later this week by Peru’s congress on whether to impeach President Pedro Pablo Kuczynski seems likely to pass. If removed, Vice President Martin Vizcarra would take over and, while a significant change in fiscal policy is unlikely, the …
Sebastián Piñera won the second round of Chile’s presidential election, but difficulties in Congress may make it hard to implement parts of his market-friendly reform agenda, including cuts to the corporate tax rate. This won’t prevent a rally in the …
18th December 2017
Central banks in Chile and Peru left interest rates unchanged last night, but both accompanying statements left the door open for further easing. With inflation rising in Chile, the window for cuts is closing, but as things stand we continue to expect …
15th December 2017
The latest data confirm that inflation in Latin America has bottomed out. Having hit a seven-year low of 3.6% y/y in September, our measure of regional inflation edged up to 3.9% y/y in November. This rise has been driven by stronger price pressures in …
13th December 2017
Mexican industrial production contracted for a second consecutive month in October, but this was due largely to a drop in utilities output, which reflects lingering disruption from September’s earthquakes. We still expect industrial production to return …
12th December 2017
The rise in Brazilian inflation to 2.8% y/y in November, from 2.7% y/y in October, was in line with our forecast but a bit smaller than the consensus had expected (2.9% y/y). Either way, none of this will have much bearing on decisions by Copom over the …
8th December 2017
Mexico’s presidential election race is starting to take shape, with Finance Minister José Antonio Meade this month stepping down from his post in order to run on the ticket of the ruling PRI party. While the other main parties in Mexico have yet to …
7th December 2017
November’s inflation data from Mexico, which showed a second consecutive monthly rise in the headline rate, has strengthened the case for further monetary tightening. We now expect policymakers to raise interest rates by 25bp (to 7.25%) at Alejandro Díaz …
The 0.2% m/m gain in Brazilian industrial production in October suggests that the sector started Q4 on a decent footing, and the latest survey data indicate that conditions in the sector should continue to improve over the coming months. … Brazil …
5th December 2017
The resilience of foreign direct investment (FDI) flows to Brazil has been held up as one of the few good news stories of recent years. The reality, however, is far more complicated. While FDI inflows have remained relatively stable, this is not a sign …
4th December 2017
The meagre 0.1% q/q increase in Brazil GDP in Q3 is not as bad as it looks at first sight. The big hit came from a contraction in agricultural production, which is volatile from quarter to quarter, with other sectors posting stronger growth. … Brazil GDP …
1st December 2017
The collapse in Chile’s equity market following a smaller-than-expected victory for business-friendly candidate Sebastián Piñera in the first round of this month’s presidential election has not been matched by similar falls in other asset classes in the …
29th November 2017
Alejandro Diaz de León, who has been named as the next Governor of the Central Bank of Mexico, is very much a continuity appointment that is unlikely to have a major impact on either financial markets or the immediate direction of monetary policy. …
Monetary policy easing cycles across Latin America are getting close to an end, but the evidence of the past month suggests that central banks think they still have a bit more work to do. Policymakers in Colombia and Peru surprised the markets this month …
The unexpected rise in Mexican inflation in the first half of November has increased the chances that the central bank will restart its tightening cycle in the next few months. However, we still think that the next move in interest rates will be down. … …
23rd November 2017
The further increase in Brazilian inflation in the first half of November, which was in line with expectations, is unlikely to alter the thinking of COPOM, and we continue to expect a 50bp cut in the Selic interest rate (to 7.00%) at its next meeting on …
We expect economic growth in most countries in Latin America to accelerate further in 2018. Of the region’s major economies, we anticipate a pick-up in growth next year in Brazil, Mexico, Colombia, Chile and Peru. Argentina is the only major economy where …
22nd November 2017
The pick-up in Peruvian GDP growth in Q3 was due entirely to a surge in domestic demand, with net trade dragging on growth. While we expect the economic recovery to continue over the coming quarters, it is likely to be weaker than most analysts expect. … …
21st November 2017
GDP growth in Chile picked up strongly in Q3 and we expect the recovery to continue over the next year or so. The outcome of the elections is unlikely to have a major bearing on the economic outlook. … Chile GDP & Current Account …
20th November 2017
Centre-right ex-president Sebastián Piñera won yesterday’s election in Chile but by a smaller margin than expected and will now face Alejandro Guillier in a second-round run-off on 17th December. While our base case remains that Mr. Piñera will prevail, a …
The narrowing in Brazil’s current account deficit over the past couple of years has been driven almost entirely by a recession-induced collapse in imports. As a result, the deficit is likely to widen once again as the economy recovers. This supports our …
17th November 2017
