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The month-on-month fall in Chile’s IMACEC activity indicator in March was due largely to severe floods in the north of the country, which disrupted activity and led to the temporary closure of many mines. This weather-related weakness will prove …
5th May 2015
The recovery that was seemingly underway in most parts of Latin America towards the end of last year appears to have faltered in recent months. Indeed, our proprietary GDP Tracker suggests that the region grew by just 0.5% y/y in the first quarter, down …
30th April 2015
Calling turning points is always tricky but, assuming that the real remains stable over the coming months, we think that last night’s 50bp increase in Brazilian interest rates to 13.25% could be the last in the current tightening cycle. … Brazil hike …
The raft of weak activity data for Chile, while disappointing, are unlikely to have prevented a robust expansion of GDP in Q1. We suspect that much of last month’s weakness can be explained by the severe floods in the north of the country. … Chile …
29th April 2015
Following an extended period of weakness, it appears that Latin America’s currencies have finally started to find their feet. Most have been broadly flat against the dollar so far this month, while the Brazilian real and the Colombian peso have both …
28th April 2015
Some of the structural constraints that have held back manufacturing in Brazil over the past decade now appear to have eased. So while we don’t expect an imminent turnaround in the sector, or an Asian-style industrial boom over the medium-term, there are …
27th April 2015
Interest rates in Colombia were left unchanged at 4.50% on Friday night and above target inflation and a large current account deficit limit the room for monetary easing to counter slowing economic growth. There may be a window for some small rate cuts …
The pick-up in retail sales growth in February suggests that consumer spending in Mexico has strengthened in the early months of this year, even if problems in the mining sector have weighed on wider economic growth. … Mexico Retail Sales …
24th April 2015
Activity data from Mexico for February were a little weaker than expected and leave the economy on course to grow by a relatively sluggish 2.5% y/y in the first quarter of the year. There is better news on the inflation front, however, with data to the …
23rd April 2015
Our Argentina Activity Indicator (AAI) suggests that conditions in the economy have stabilised following sharp falls in output last year, but the best we can say is that GDP is stagnating – there is no sign yet of a return to growth. And while we wouldn’t …
Changes to the methodology that Brazil uses to produce its balance of payments data have resulted in an even larger current account deficit. However, the impact on financial markets – and the currency in particular – is likely to be small. The new data …
22nd April 2015
Despite a recession in the mining sector and an impending fiscal squeeze, we remain upbeat about Mexico. A gradual improvement in the labour market and a likely recovery in the US, after a weak start to this year, provide reasons for optimism. We expect …
21st April 2015
Interest rates in Chile were left unchanged at 3.00% last night and despite the central bank adopting a relatively more hawkish tone than a couple of months ago in its statement accompanying the decision, we do not think that policy tightening is …
17th April 2015
Colombia’s current account deficit widened to its largest level on record last year as exports plummeted following the drop in oil prices. Narrowing the deficit in the absence of a rebound in oil prices will require a cut in imports and tighter policy. …
16th April 2015
Despite falling back a little over the past few weeks, the strength of the US dollar has rekindled fears in Latin America of a re-run of the economic crises that swept across the region in the 1980s and 1990s. For our part, we think that the worst of …
14th April 2015
Mexican industrial production rebounded in February, largely due to an encouraging rise in manufacturing output. However, the bigger picture is that industrial production has had a soft start to the year. Looking ahead though, we are optimistic that a …
10th April 2015
Interest rates in Peru were left unchanged last night and a subtle shift in language in the statement accompanying the decision suggests that policymakers appear to have closed the door to further rate cuts. Inflation is likely to remain close to the …
Inflation in Mexico remained close to the central bank’s 3% target last month and we expect it to remain around there over the next eighteen months. The benign inflation outlook, combined with recent softer activity data, bolsters the case for interest …
9th April 2015
The Brazilian real has come under renewed pressure over the past couple of months as markets have responded to an ugly mix of a stagnant economy and a deepening political crisis that is threatening to paralyse the government. However, while there is not …
8th April 2015
Concerns about the recent strength of inflation in Chile are partly overdone given that it has been elevated by tax hikes which will unwind over the next year. But a relatively buoyant labour market and limited economic slack are reasons to still be wary …
3rd April 2015
The best that can be said about February’s industrial production data from Brazil is that the fall in output was not quite as large as some had feared. Production was affected by a strike in the vehicle sector, but even allowing for this there is still no …
2nd April 2015
Currencies across Latin America have continued to weaken against the dollar over the past month. Concerns that this could trigger a spate of crises in the region seem overdone. However, one consequence of the latest currency sell-off is that further …
1st April 2015
The fall in industrial output in annual terms last month, while disappointing, is unlikely to derail Chile’s incipient economic recovery. The monthly data are volatile, the consumer side of the economy appears to be strengthening and our GDP Tracker …
31st March 2015
The better-than-expected 0.3% q/q increase in Brazilian GDP in Q4 will get the headlines, but an excessive reliance on over-stretched consumers to drive growth remains a concern. Meanwhile, revisions to the methodology used to calculate GDP mean that the …
27th March 2015
Currencies in Latin America have regained some ground over the past week, but have still typically fallen by between 10-20% against the dollar over the past six months. The risk that the slide in currencies triggers a spate of crises across the region is …
26th March 2015
February’s balance of payments data will do little to ease investor’s concerns about Brazil’s current account deficit. Although the 12-month rolling deficit narrowed a touch in dollar terms, it remained unchanged at 4.2% of GDP. Against this backdrop, we …
24th March 2015
We estimate that all of the jump in inflation in Brazil over the past year can be explained by increases in government-regulated prices and a drought-related rise in food costs. Both of these effects should prove temporary, meaning that the spike in …
23rd March 2015
Interest rates in Colombia were left unchanged at 4.50% on Friday and, although the latest sell-off in the peso and above-target inflation has weakened the case for rate cuts in the near-term, we still think that, on balance, the next move in rates will …
The early results from this year’s spring wage negotiations confirm that the tight labour market has boosted wage pressure. However, this year’s overall increase in labour income will likely still fall well short of the level required to reach the Bank of …
20th March 2015
Interest rates in Chile were left unchanged at 3% last night but the accompanying statement revealed a subtle shift in tone from the central bank, which now seems to think that inflation is likely to take longer to return to target than it previously …
GDP growth in Chile accelerated in both quarterly and annual terms in the final quarter of last year, driven by strong government spending and a sharp pick-up in investment. What’s more, the current account deficit narrowed sharply, even on a four-quarter …
18th March 2015
Mexican industry made a disappointing start to the year, but with demand from the US likely to strengthen and a weaker peso set to boost the external competitiveness of exporters, we still expect the sector to perform well in the months ahead. … Mexico …
13th March 2015
Judge Griesa’s ruling that Citibank cannot process interest payments on Argentine government bonds that were issued under local law has dealt another blow to the authorities’ bid to return to international capital markets. The ruling leaves the …
The fact that the Peruvian nuevo sol has been caught up in the latest EM currency sell-off probably convinced policymakers to leave interest rates unchanged at 3.25% last night. But with economic growth still weak and inflation likely to fall further …
All of Latin America’s currencies will probably weaken further against the dollar in the near-term as we approach a first interest rate hike by the Fed. But with most currencies no longer appearing to be fundamentally overvalued, we do not expect exchange …
12th March 2015
The corruption scandal at state-owned oil company, Petrobras, has developed over the past week or so into a full-blown national political crisis that, in our view, is now the biggest headwind facing Brazil’s economy. The immediate casualty has been the …
11th March 2015
Mexican inflation edged down to 3.0% y/y in February and there is still little evidence to suggest that a weaker peso is feeding through to higher inflation. Inflation should remain close to the central bank’s 3% target throughout 2015-16, meaning that …
9th March 2015
The slump in commodity prices since last summer has exposed fragilities in the balance of payments of several economies in Latin America. But while that has left some governments looking to China for loans to plug the holes in their current accounts, we …
6th March 2015
Brazilian inflation surged to its highest annual rate in a decade last month and the relentless increase, coupled with the recent sell-off in the real, bolsters the case for interest rate hikes to continue at the current pace of 50bp. Meanwhile in Chile, …
The 2.0% m/m rise in Brazilian industrial production in January looks encouraging, but a rebound was always expected after the sharp 3.2% m/m drop last month. And the bigger picture is that industrial production continues to contract sharply in annual …
4th March 2015
The slowdown in private sector lending growth across Latin America should help to ease concerns about the build-up of credit bubbles in the region. However, the accumulation of private sector debt over the past decade could still create problems for banks …
3rd March 2015
A strong rebound in mining output led to a sharp rise in industrial production in January. But mining output is volatile and we wouldn’t read too much into this. Even so, there are signs from the rest of the activity data that the economy maintained a …
27th February 2015
The Brazilian real has tumbled to its weakest level against the dollar since 2005 in recent days. We suspect that this has more to do with deteriorating economic fundamentals and suggestions from policymakers that central bank support for the currency may …
26th February 2015
Mexico’s current account deficit narrowed to 2.1% of GDP on a four-quarter sum in Q4 and, with the worst of the falls in oil prices now behind us, we think it could narrow a touch further to about 1.5% of GDP during the course of 2015. … Not much cause …
25th February 2015
Growth in Latin America appears to have picked up in recent months. Our proprietary GDP Tracker suggests that the region’s economy expanded by about 1.5% y/y in the fourth quarter of last year, having grown by less than 1% y/y in both the second and third …
A further sharp rise in Brazilian inflation in the first half of February has tipped the balance towards another 50bp increase in the Selic interest rate at next month’s central bank meeting, rather than a smaller 25bp that had seemed possible a few …
24th February 2015
Interest rates in Colombia were left unchanged at 4.50% on Friday but a slightly more dovish tone in the accompanying statement, combined with the announcement of budget cuts over the weekend triggered by the fall in oil prices, have bolstered the case …
23rd February 2015
Although annual GDP growth in Peru dropped to a five-year low in the fourth quarter of last year, an encouraging rebound in investment and private consumption drove a sharp pick-up in the quarterly rate of growth. Looking ahead, we expect the economy to …
20th February 2015
Mexican GDP growth accelerated to 2.6% y/y in the fourth quarter of last year, but the economy has yet to really take off. With fiscal policy set to be tightened further over the course of this year following the sharp fall in oil prices since last …
It’s difficult to be precise, but we think the direct impact of the corruption scandal at Petrobras , including the effects of reduced investment by the company and others that have been implicated, could shave around 0.5% off Brazil’s GDP this year. …
19th February 2015
