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Brazil’s economy is bottoming out and, while the recovery will be slow going, our 2017 GDP forecast is a bit above consensus. Inflation should ease and, although COPOM will move gradually in the first instance, interest rates could fall to as low as …
15th September 2016
An imminent restructuring of the short term dollar debt of Venezuela’s state-owned oil company, PDVSA, means that the severely cash-strapped government should avoid default over the next 12 months. However, with similarly large FX debt repayments falling …
14th September 2016
Q2 GDP data released across Latin America over the past month revealed that the mining sector was a key drag on growth in a number of economies. This looks set to continue as the lagged impact of lower commodity prices continues to weigh on mining …
13th September 2016
The 1.0% y/y drop in Mexican industrial production in July will grab the headlines, but this figure was distorted by working day effects. And the fact that output rose in seasonally-adjusted m/m terms for the third consecutive month suggests that the …
9th September 2016
August’s inflation data are not going to provide any reassurance to Brazilian policymakers that now is the time to begin lowering interest rates. The headline inflation rate rose to a three-month high, led by a further increase in food and transport …
Substantial cuts to government spending announced by Mexico’s new finance minister José Meade in the 2017 budget reinforce our view that GDP growth will be weaker than the consensus expects next year. The cuts fall unevenly on state-owned oil company …
The weaker-than-expected 2.7% y/y increase in Mexican consumer prices in August, coming alongside further government spending cuts expected to be announced in the 2017 budget later today, strengthens the case for interest rates to remain unchanged this …
8th September 2016
The sharp drop in Chilean inflation in August takes it firmly back within the central bank’s target range and reinforces our view that interest rates are likely to remain on hold for a prolonged period. … Chile Consumer Prices …
There is little doubt that the finances of Brazil’s State governments are in dire straits, but there is some confusion as to how this relates to the wider fiscal position. The key point is that the State’s finances are already captured in the broader …
6th September 2016
The fall in Brazil’s manufacturing PMI in August is disappointing, particularly coming on the back of consecutive increases in the previous two months. However, the decline was relatively modest and we don’t see this as a sign that the nascent …
1st September 2016
The bigger-than-expected 0.6% q/q drop in Brazil Q2 GDP was caused by another large fall in consumer spending. An improvement in investment should ensure that the economy returns to growth over the second half of this year but with consumers likely to …
31st August 2016
The vote by Brazil’s Senate to formally remove President Rousseff from office was a foregone conclusion and is unlikely to have a major impact on markets. Attention will now shift to the passage of fiscal reforms under new president, Michel Temer. The …
Currencies in Latin America have edged down against the dollar since Fed Chair Janet Yellen left the door open to a hike in US interest rates this year in her Jackson Hole speech, but the moves have been small – most currencies are still up against the …
30th August 2016
July’s activity data were slightly better than the dire outturns in May and June, but,on balance, they still suggest the economy remained weak at the start of Q3. … Chile Retail Sales, Ind. Prod. & Copper Prod. …
The continuing slump in mining output pulled annual growth in Colombia down to just 2.0% y/y in Q2. We expect it to fall further over the second half of the year. … Colombia GDP …
29th August 2016
Food inflation has risen further in several economies in Latin America over the past month. The increase has been especially sharp in Brazil and Colombia, but food inflation has also edged up in Chile. The subsequent upward pressure on headline CPI …
25th August 2016
According to media reports a final peace deal between the Colombian government and the FARC is likely to be announced later today at 6pm local time. This will be an historic milestone and should provide a boost to the economy's medium-term outlook. …
24th August 2016
The further rise in Mexican inflation in the first half of this month, to 2.8% y/y from 2.7% y/y over July as a whole, means that the headline rate is on course to breach the central bank’s 3% target by year-end. Against this backdrop, we remain …
Brazil’s mid-month inflation data have tended to overestimate inflation over the full month recently but even so the latest rise, from 8.9% y/y to 9.0% y/y in mid-August, is likely to cause some alarm at the central bank. The likely timing of the first …
The slowdown in Peruvian GDP growth in Q2 was due to a weakening of domestic demand. But, with the new government intent on loosening fiscal policy to stimulate the economy, we doubt the slowdown will persist. … Peru GDP …
22nd August 2016
The good news is that the final estimate of Mexican Q2 GDP showed that the economy contracted by less than previously thought. The bad news is that downward revisions to growth in the previous two quarters mean that the economy was already on a weaker …
The downturn in Latin America is starting to bottom out and growth should return as we enter 2017. The region’s largest economy – Brazil – is turning the corner and our growth forecasts for the next year are a bit above consensus. Likewise, we expect …
The quarterly contraction in Chilean GDP in Q2 is a disappointing sign that the economy remains fragile. But we don’t expect the weakness to persist and revisions to past data mean that the economy is in better shape than we previously thought. … Chile …
18th August 2016
The further narrowing of Brazil’s current account deficit in June has significantly reduced the vulnerability of the country’s financial markets to external shocks. Elsewhere, however, there is still work to do. In particular, balance of payments …
16th August 2016
The slowdown in Peruvian economic activity in June suggests that GDP growth eased to around 3.6% y/y in Q2, from 4.4% y/y in Q1. Nonetheless, this largely reflects weakness in volatile primary sectors that is unlikely to persist and we expect growth to …
15th August 2016
Having left interest rates unchanged last night, the Chilean and Peruvian central banks both removed the reference to a tightening bias in their accompanying statements. However, with inflation likely to remain higher than policymakers expect over the …
12th August 2016
Given the extent of its rally over the past couple of months it’s difficult to make the case that the Brazilian real will now strengthen much further from here. But by the same token, we think there is a reasonable chance that the currency will hold on to …
11th August 2016
Mexico’s manufacturing and construction sectors posted strong m/m gains in June, but a big drag from mining means that overall industrial production only rose by a modest 0.1% m/m. … Mexico Industrial Production …
This report is only available as a PDF. Click to download. … Brazil Consumer Prices (Jul.) …
10th August 2016
The increase in Mexican inflation in July, to 2.7% y/y from 2.5% y/y in June, is unlikely to prompt the central bank to raise interest rates again at Thursday’s MPC meeting. But with inflation likely to breach the central bank’s target over the coming …
9th August 2016
The fall in Chilean inflation in July, coming on the back of a recent weakening in the economy, means that interest rate hikes this year are now looking unlikely. … Chile Consumer Prices …
8th August 2016
Our latest Banking Heat Map shows that Latin America’s credit bubbles are gradually deflating and so far this does not appear to have triggered widespread problems in the region’s banking sectors. Non-performing loans have edged up, particularly in …
4th August 2016
The strong increase in Brazilian industrial production in June was encouraging and, coming on the back of rises in output in both April and May, it looks like the sector added to q/q GDP growth for the first time since Q1 2014. … Brazil Industrial …
2nd August 2016
The jump in Brazil’s manufacturing PMI in July adds to the evidence that the economy has finally begun to turn the corner. Meanwhile, the fall in Mexico’s PMI suggests that the slowdown in the manufacturing sector may have continued in Q3. … Brazil & …
1st August 2016
Despite hopes to the contrary, the Rio Games are unlikely to provide much of a boost to Brazil’s economy. We expect the country’s recession to ease further over the coming quarters, but this has little to do with any boost to activity from the Olympics. … …
The fall in Mexican GDP in Q2 is partly payback for a strong Q1 but it also reflects the continuing drag on Mexican industry from manufacturing weakness in the US. With policy tightening now set to weigh on domestic demand, we expect growth to remain …
29th July 2016
Equities in Latin America have outperformed those in the developed and wider emerging world so far this month, despite another dip in the prices of some global commodities. Meanwhile, Venezuela’s foreign currency bonds have rallied following rumours that …
28th July 2016
The downturn in Latin America appears to have bottomed out in the second quarter of this year. Our GDP Tracker suggests that the region’s economy contracted by 1.2% y/y in Q2, compared to 1.5% y/y in Q1. This was due in large part to Brazil, where …
27th July 2016
In contrast to the prevailing view that tight credit conditions have been a constraint on Mexican growth, the debt ratio has actually increased at a reasonably sharp pace over the past five years. This does not yet pose an imminent threat to financial …
25th July 2016
We expect the rise in Mexican inflation in the first half of this month, to 2.7% y/y from 2.5% y/y over June as a whole, to be the start of an upward trend that will ultimately force the central bank to tighten monetary policy further. The MPC is unlikely …
22nd July 2016
The uptick in Brazilian inflation in the first half of this month was modest but it will reinforce the hawkish tone set by last night’s COPOM statement. Our base case is that interest rate cuts will commence in October but it’s possible that policymakers …
21st July 2016
Upside risks to Colombian inflation over the next few months mean that we now expect the central bank to raise interest rates by 25bp this month, to 7.75%, with a further hike in August likely. Nonetheless, the bigger picture is that inflation is close to …
20th July 2016
The rebound in Peruvian economic activity in May leaves the economy on course to expand by around 4% in Q2. That would be weaker than the Q1 outturn, but it would still mean that Peru remained one of the region’s best performers. … Peru Economic Activity …
15th July 2016
The decisions by the Chilean and Peruvian central banks to leave monetary policy unchanged didn’t come as a surprise as, for now, the inflation picture in both economies is improving. But with inflation unlikely to fall as far as policy makers expect, …
The likely signing of a final peace agreement between the Colombian government and the country’s largest insurgent group, the Revolutionary Armed Forces of Colombia (FARC), will be an historic milestone and it should provide a boost to the economy’s …
14th July 2016
The weakening of most Latin American currencies has helped the region’s economies adjust to the terms of trade shock caused by the drop in global commodity prices. But while weaker currencies mean that non-commodity export sectors now look more …
13th July 2016
The weaker-than-expected 0.4% y/y rise in Mexican industrial production growth in May, down sharply from 1.9% y/y in April, confirms that the sector remains the weak spot of the economy. There’s little here to suggest that manufacturers are benefitting …
12th July 2016
The drop in Brazil inflation, from 9.3% in May to 8.9% in June, should be followed by further falls over the coming months. That said, our view remains that the central bank will resist lowering interest rates until Q4 of this year. … Brazil & Chile …
8th July 2016
The modest fall in Mexico’s headline inflation rate in June, to 2.5% y/y from 2.6% y/y in May, hides the fact that core inflation pressures are creeping up. Coupled with continued pressure on the peso, this means further interest rate hikes are still …
7th July 2016
We expect inflation in Brazil to fall back over the next year but, despite a recent repricing, the centralbank may still not cut interest rates as quickly as the markets expect. … Brazil inflation set to fall but interest rate cuts to be …
