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Our latest Banking Heat Map shows that, while Latin America’s credit bubbles have continued to deflate, this doesn’t yet appear to have triggered widespread problems in the region’s banking sectors. Non-performing loans remain low and have even started to …
20th April 2017
Data to mid-April showed that Brazilian inflation has fallen below the BCB’s central target for the first time in almost seven years. We expect it to fall further over the coming months, before bottoming out in July/August. … Brazil IPCA-15 …
Rising food inflation is likely to dissuade Peru’s central bank from cutting its policy interest rate for the time being. But with the economy slowing and core price pressure low, an easing of monetary policy is likely when the impact of recent floods on …
18th April 2017
February’s industrial production data from Mexico were soft by most standards, but there is still no sign of the outright collapse that has been suggested by the recent business surveys. Indeed, as things stand, industry looks likely to make a small …
11th April 2017
The collapse in Mexico’s main business surveys and a number of confidence indices since President Trump’s election victory in November has been alarming, but it hasn’t yet been accompanied by a weakening in the hard data. As such, while we think the …
10th April 2017
Brazilian export growth looks set to rebound this year as the impact of last year’s drought on agricultural shipments fades. This should help to finally pull the economy out of recession. That being said, the substantial rally in the real over the past …
Mexican inflation hit a fresh seven-year high of 5.4% y/y in March, up from 4.9% y/y in February, but the recent rebound in the peso means that it is probably now close to peaking. Much still depends on the currency, but assuming that it remains broadly …
7th April 2017
The latest drop in Brazilian inflation leaves it only a whisker above the BCB’s central target and probably seals the deal on a larger 100bp cut in interest rates at next week’s Copom meeting. … Brazil & Chile Consumer Prices …
Peru’s central bank kept its policy interest rate on hold at 4.25% and, while the accompanying statement struck a dovish tone, the risk of a surge in inflation means rate cuts are unlikely. That said, with the economy likely to have weakened further in …
Venezuela has hit the headlines for all the wrong reasons over the past week, with the Supreme Court first annulling the National Assembly before then partly reversing its decision. However, a change in the so-called “Hydrocarbons Law” has slipped under …
6th April 2017
The contraction in Chilean economic activity in February largely reflects a strike at the country’s largest copper mine, which has now come to an end. But the rest of the economy also weakened and today’s data all but confirm the economy entered a …
5th April 2017
Brazil’s beleaguered government will have to fight major challenges on at least three fronts over the coming months. As things stand, there appears to be a way forward for the government on each of them and our central scenario remains that it muddles …
The latest batch of survey data suggests that Brazil’s economy continued to recover in March, while in Mexico the recent slump in the IMEF business surveys is starting to reverse. … March survey data strike more positive tone in Brazil and …
4th April 2017
The 0.1% m/m rise in Brazilian industrial production in February was smaller than expected but still leaves the sector on course to make a positive contribution to GDP over Q1 as a whole. … Brazil Industrial Production …
Opinion polls suggest that the outcome of Ecuador’s presidential election on Sunday is still too close to call. A victory for government candidate Lenin Moreno would mean more of the same leftist economic policies as under current president Rafael Correa. …
31st March 2017
A leaked copy of a notification letter from the Trump administration to Congress suggests that its plans for renegotiating NAFTA are more consistent with the idea of creating a “North American manufacturing powerhouse” than they are with imposing severe …
The scandal over Brazil’s meat sector, which at one point appeared to threaten the country’s economic recovery, seems to have faded just as quickly as it escalated. The crisis exploded following the revelation earlier this month that the authorities had …
28th March 2017
The proposed spending cap on Argentina’s provincial governments is a positive step and could in theory narrow the overall public sector budget deficit by almost 1% of GDP by 2019. However, it’s not clear how the spending cap will be enforced. More …
23rd March 2017
Mexican inflation rose to a fresh seven-year high of 5.3% y/y in the first half of March but the details of the data contained some signs that the upward pressure on prices is easing. Nonetheless, we suspect Banxico will remain cautious and hike its …
Data to mid-March showed another dip in Brazilian inflation and probably give enough cover for policymakers to accelerate interest rate cuts at next month’s Copom meeting. In practice, however, any decision to increase the pace of easing will depend less …
22nd March 2017
The Mexican central bank’s new programme of auctioning currency hedges marks a significant departure from its previous FX intervention policy, but is currently small in scale. As such, we doubt it would prevent a renewed drop in the peso if sentiment took …
21st March 2017
It’s too soon to say exactly how events will play out, but at face value the developing scandal over Brazil’s meat exports could plausibly derail the country’s economic recovery. … Meat scandal could be the latest threat to Brazil’s …
20th March 2017
Revised Chilean GDP data confirmed that annual growth slowed to a seven-year low in Q4. They also revealed that the economy contracted from the previous quarter. With a strike at the country’s largest copper mine now in its fifth week, we expect GDP to …
Chile’s central bank cut its policy interest rate by 25bp, to 3.00%, and used the accompanying statement to signal that further easing is likely over the coming months. This supports our non-consensus view that the policy rate is set to fall to 2.50% by …
17th March 2017
Argentina’s dollar debt burden as a share of GDP is now one of the largest in the EM world. What’s more, it is concentrated largely in the public sector. This leaves the government vulnerable to rising US interest rates and a weaker peso. For now, the …
16th March 2017
Peru’s economy rebounded strongly in January due largely to a pick-up in the mining sector. But with a strike underway at the country’s largest copper mine, we suspect the improvement in GDP growth over Q1 as a whole will be more modest. … Peru Economic …
15th March 2017
The various forecasts circulating of the GDP growth rate needed to stabilize unemployment in Brazil tend to miss the important point that productivity growth is typically faster in the early stages of an economic recovery. Accordingly, even on our more …
We expect economic growth in Latin America to accelerate over the coming years as the effects of the downturn in global commodity prices fade, policy is loosened and financial conditions ease. Having contracted by 1.5% in 2016, we expect the region’s …
14th March 2017
The increase in Mexican industrial production in January was modest, but the fact it grew at all stands in stark contrast to the sharp fall in the business surveys since President Trump has taken office. In fact, the outturn would have been much stronger …
The larger-than-expected drop in Brazilian headline inflation in February, to 4.8% y/y, from 5.4% y/y in January, was broad-based and reinforces the case for further significant monetary easing over the course of this year. We expect the Selic interest …
10th March 2017
Peru’s central bank kept interest rates on hold once again at 4.25% and, while the economic outlook has deteriorated in recent months, stubbornly above-target inflation means the next move in the policy interest rate is still likely to be up. … Peruvian …
Mexican inflation rose to a seven-year high of 4.9% y/y in February, from 4.7% y/y in January, and, despite the recent rally in the peso, we suspect this will be enough to convince the central bank to continue hiking interest rates. We expect another 50bp …
9th March 2017
With legislative elections due in October, progress in narrowing Argentina’s bulging budget deficit will be slow this year and we expect only a modest fiscal squeeze in 2018-19. More fundamentally, fixing the fiscal mess will take us well beyond President …
With Brazil returning from carnival, thoughts are shifting back to President Temer’s domestic policy agenda and, in particular, the prospects for planned pensions reform over the coming months that will make or break his fiscal programme. In this Update …
8th March 2017
The small 0.1% m/m fall in Brazilian industrial production in January is partly payback for a 2.3% m/m surge in December, and we think the recovery should resume over the coming months. Elsewhere, the decline in Chilean inflation in February strengthens …
There is a good chance that a strike at Chile’s largest copper mine will tip the economy into a technical recession in Q1. While growth should return in Q2, the weakness of the non-mining sector means that we expect GDP to expand by just 1.0% in 2017. …
7th March 2017
The 0.9% q/q fall in GDP in Q4 is the eighth consecutive quarter that Brazil’s economy has contracted but it should also be the last in this cycle. Indeed, not only do we expect the economy to return to growth this year, but our forecasts for 2017 and …
The latest activity data for Chile suggest that the economy rebounded from Q4’s slump in January, but with a strike at a major mine set to hit copper output in February, we suspect that growth is likely to remain weak over Q1 as a whole. … Chile IMACEC …
6th March 2017
The deterioration in Mexico’s IMEF survey since the start of this year looks alarming but there are reasons to believe that it is overstating the softness in the real economy. Meanwhile, the incoming survey data from Brazil since the turn of the year …
2nd March 2017
Peru’s economy is likely to weaken in 2017 as the one-off boost from a surge in copper production fades and a gradual tightening of policy weighs on the non-mining sector. After expanding by 3.9% in 2016, we expect the GDP to grow by a below-consensus …
1st March 2017
Inflation in Brazil has fallen more quickly than even we had anticipated and, as such, we have pencilled in additional cuts to interest rates this year. We now expect the Selic to fall to 9.00% by end-2017 (previously 10.00%), which is a little below what …
28th February 2017
The decision by Colombia’s central bank to cut its policy interest rate by 25bp (to 7.25%) caught most off guard but was in line with our expectations. The statement accompanying the decision was dovish and supports our view that the policy rate will be …
27th February 2017
Changes to US trade statistics that are apparently being considered by the Trump administration would double Mexico’s trade surplus with the US as reported by the US Census Bureau, from $60bn to around $120bn. But this would only bring the US data for …
23rd February 2017
Mexican inflation was unchanged at 4.7% y/y in the first-half of February and, along with the rebound in the peso over the past month, this could convince the central bank to keep interest rate on hold (at 6.25%) at its next meeting. But, with core price …
The statement accompanying the Brazilian central bank’s decision to cut the Selic interest rate by 75bp to 12.25% maintained an explicit easing bias but gave little away in terms of the future pace of rate reductions. For our part, we suspect that the …
The stronger-than-expected expansion in Colombian GDP in Q4 confirms that the worst of the country’s economic downturn has now passed. Higher oil prices should support a further gradual recovery over the course of this year, but a hike in VAT will weigh …
22nd February 2017
Data to mid-February showed another big drop in Brazilian inflation which, coming alongside the recent strength of the real, paves the way for a large reduction in the Selic interest rate at tonight’s meeting. A 100bp cut is now possible, but we still …
The recent deterioration in survey data across most of Latin America suggests that the region’s economic recovery may have softened at the start of 2017. Following President Trump’s inauguration and a cut in fuel subsidies, consumer confidence in Mexico …
21st February 2017
Mexico has more to lose than the US from the renegotiation of NAFTA, but there are a number of changes that could be made with little economic impact and the government does have some bargaining power that it could use to push back if President Trump …
17th February 2017
The recent strength of the Argentine peso, which has been the best-performing currency in Latin America so far this month, has led some to suggest that the worst is over for the currency. However, the peso still looks overvalued to us and we expect it to …
16th February 2017
