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December’s activity data suggest that economic growth in Peru dropped to a five-year low in the fourth quarter of last year. A fiscal stimulus will start to bear fruit in early 2015, but weak data mean that the central bank may also opt to lower interest …
16th February 2015
The collapse in oil prices will cause the economic and financial crisis in Venezuela to deepen over the course of this year. In this Focus we answer a series of key questions that we have received from clients over the past few weeks. … Venezuela’s …
Interest rates in both Chile and Peru were left unchanged last night and, while we do not expect further monetary stimulus in Chile as its economy is finally showing signs of strengthening, we think there is still a possibility of a small cut in interest …
13th February 2015
An intensifying drought in Brazil has made it increasingly likely that the authorities will implement some form of power rationing over the coming months. Much remains uncertain, but we think that power rationing could plausibly shave 0.5-1.0%-pts off GDP …
12th February 2015
A programme of government austerity will result in modest improvements to Brazil’s budget and current account deficits over the next year but at the expense of extremely weak growth and, in the near term at least, higher inflation. Those hoping for a …
11th February 2015
Mexican industrial production growth accelerated to 3.0% y/y in December and it should continue to pick-up over the coming months as the manufacturing sector benefits from stronger US demand and the current drag from mining eases. … Mexico Industrial …
Following last year’s sharp downturn, economic growth in Latin America should improve this year and next. But the pace of the recovery will be slow-going and GDP growth will remain far weaker than during the past decade. We are forecasting GDP growth of …
9th February 2015
Mexican inflation fell to a three-and-a-half year low of 3.1% in January and looks set to remain close to the central bank’s 3% target throughout 2015-16. As a result, monetary policy is likely to remain loose for the foreseeable future. Indeed, we still …
The sharp rise in Brazilian inflation to 7.1% last month was driven by a combination of higher food prices, caused by the continuing droughts, and increases in regulated prices as part of the government’s austerity plan. Inflation is likely to rise …
6th February 2015
The huge 2.8% m/m fall in Brazilian industrial production in December was caused by a collapse in capital goods production, which tends to be extremely volatile. Even so, the underlying picture remains that Brazil’s industrial sector is struggling. Output …
3rd February 2015
Spending cuts announced by the Mexican government worth 0.7% of GDP are unlikely to be enough to compensate for the loss of oil revenues this year and further spending cuts are likely later this year and in 2016. Against a backdrop of tightening fiscal …
2nd February 2015
Brazil’s manufacturing PMI rose to a 12-month high in January but we wouldn’t read too much into this – the relationship between the headline PMI and the hard monthly data on industrial production is not particularly strong, meaning we would hesitate …
Interest rates in Colombia were left unchanged at 4.50% on Friday but, while the accompanying statement remained relatively balanced, the downward revision to this year’s GDP growth forecast suggests that policymakers are becoming more dovish. …
Interest rates in Mexico were left unchanged at 3.0% last night and concerns amongst policymakers about the weakness of the peso suggest that cuts are unlikely in the very near-term. For our part, we do not think that the recent depreciation of the peso …
30th January 2015
December’s activity data suggest that economic growth in Chile recovered in the fourth quarter of last year. But the bigger picture is that growth over 2014 as a whole was probably just 1.8%, the weakest rate since 2009. … Chile Retail Sales, Ind. Prod. …
29th January 2015
Data released over the past month have highlighted the contrasting outlook for inflation in Brazil compared with that of the rest of the region. After a brief period within the central bank’s target range at the end of last year, it looks like Brazilian …
27th January 2015
We think the prevailing view that close economic ties with the US will force Mexico to raise interest rates if, as expected, the Fed starts to tighten later this year is wrong. Indeed, with lower oil prices likely to mean that fiscal policy becomes less …
23rd January 2015
The big news from yesterday’s central bank meeting in Brazil isn’t the decision to raise interest rates to a three-year high of 12.25% - this was expected by pretty much everyone. Instead, the major surprise was that policymakers seem to be shifting …
22nd January 2015
Latin America’s financial markets have suffered so far this year following fresh declines in the prices of a number of the region’s commodity exports – notably copper and oil. Most equities and currencies are down month to date, while the bond market now …
21st January 2015
Good news remains thin on the ground in Brazil, but we take some comfort from the fact that the country’s frothy housing market has so far managed to avoid a hard landing. It’s still early days, but the initial signs are that Brazil’s housing bubble is …
20th January 2015
We have revised down many of our forecasts in recent weeks and, on the whole, expect GDP growth and inflation in Latin America to be lower than the consensus forecasts this year. As a result, policymakers may surprise the market by lowering interest …
Although the timing of last night’s interest rate cut in Peru caught us (and the market) by surprise, we had been one of the few forecasters expecting rates to fall in the first half of this year. The accompanying statement suggests that this isn’t the …
16th January 2015
The key elements of Brazil’s President Rousseff’s policy agenda for her second term in office have started to emerge over the past month. The central theme is a return to “orthodoxy”, with fiscal and monetary policy likely to tighten. But while a period …
14th January 2015
The continued slide in oil prices will weigh heavily on Colombia’s economy. We have lowered our 2015 GDP growth forecast to just 2.5% (from 3.8% previously), which is well below the 4.3% forecasted by the consensus. This would be the weakest outturn since …
13th January 2015
Balance of payments problems in Venezuela and Argentina have deflected attention away from the fact that current account positions across much of the rest of Latin America have deteriorated significantly over the past year or so. This doesn’t necessarily …
12th January 2015
Mexican industrial production growth slowed in November, but the bigger picture is that both the manufacturing and construction sectors are performing well and should continue to do so. As such, industry is likely to make a decent contribution to overall …
9th January 2015
The drop in Brazilian inflation in December was enough to ensure that the central bank met its target for 2014 but doesn’t spell the end of the country’s inflation battle. We expect it grind lower over the course of this year but inflation will remain …
Mexican inflation fell for the second consecutive month in December, confirming that it has peaked. We expect the CPI rate to fall further over the coming months, and to remain close to the central bank’s 3% target from mid-year onwards. … Mexico …
8th January 2015
The sharp fall in Brazil industrial production in November leaves it on course to contract in Q4 and suggests the economy ended 2014 on a predictably weak footing. GDP is likely to have done little more than stagnate over the year as a whole and the …
Ecuador’s economy faces a slump this year as the sharp fall in oil prices threatens to open up large twin current account and budget deficits. As a result, we are revising down our forecast and now think that the economy will stagnate in 2014 having …
7th January 2015
The Venezuelan economy faces a multi-year recession following the recent fall in oil prices. GDPprobably contracted by 3.5% last year and we now suspect that it could decline by another 5.0% thisyear. But recession is probably the best case scenario. With …
6th January 2015
We’ll start 2015 with some good news: having slowed to a five-year low of just 1.5% in 2014, we expect GDP growth in Latin America to accelerate this year. The bad news is that the pick-up is likely to be modest, perhaps to around 2.5%. In this Focus we …
5th January 2015
Financial markets across Latin America have come under renewed pressure in the final weeks of this year. Part of the trigger has been renewed falls in oil prices. The currencies of two of the region’s largest oil exporters – Colombia and Mexico – have …
22nd December 2014
Data to the middle of this month suggest that inflation is on track to fall back within target range in December. However, we doubt that this will be enough to prevent policymakers from raising interest rates further in early 2015. … Brazil IPCA-15 …
19th December 2014
There is growing evidence that, even before the latest drop in oil prices, the US shale oil revolution had started to weigh on oil producers in Latin America. Oil exports to the US from three of the region’s major oil producers (Venezuela, Mexico and …
18th December 2014
The fall in most Latin American currencies over the past few weeks has taken them through both our end-2014 and our end-2015 forecasts. We still expect most currencies – notably the Brazilian real – to weaken further against the dollar next year and …
Colombia maintained a relatively strong pace of growth in the third quarter, seemingly driven by construction and agriculture. However, given the recent oil price falls, we expect the economy to lose some steam in the coming quarters. … Colombia GDP …
15th December 2014
Another fall in mining output meant that Mexican industrial production growth was weaker-than-expected in October. But the bigger picture is that the rest of the industrial sector continued to perform well. We expect strong construction and manufacturing …
12th December 2014
Interest rates in Chile were left unchanged at 3.00% last night but, with the economic recovery expected to be slow-going and inflation likely to have peaked, we are sticking to our non-consensus forecast for rates to be cut by another 50bp next year. …
All of the signs suggest that Venezuela is already suffering an economic crisis, making it highly likely that the government will default on its foreign currency debt. … Four charts that show Venezuela is in a …
10th December 2014
An improvement in Argentina’s foreign currency liquidity makes it much less likely that the government will reach a settlement with holdout creditors in the New Year and exit default. Indeed, we continue to think that any agreement is unlikely at least …
9th December 2014
The slight fall in Mexican inflation to 4.2% y/y last month suggests that the CPI rate has peaked and that it is on course to fall to the central bank’s 3% target by the second quarter of next year. … Mexico Consumer Prices …
The continued slide in the price of oil has sent Colombia’s financial markets tumbling over the past month. The peso has dropped to a five-year low against the dollar, breaching both our end-14 and end-15 forecasts, which we have revised accordingly. At …
8th December 2014
The 0.5% m/m increase in consumer prices in Brazil in November was enough to keep the annual rate of inflation above the upper bound of the central bank’s target range for the fourth consecutive month, albeit by the narrowest of margins. Interest rates …
5th December 2014
Mexico’s growth story has lost some of its shine in recent weeks. We still expect GDP growth to accelerate in 2015. But the recent fall in oil prices, coupled with the fact that fiscal policy is likely to be tighter than we had previously assumed, means …
4th December 2014
The Central Bank of Brazil stepped up the pace of policy tightening last night but the accompanying statement gave a strong signal that future interest rate hikes are likely to be gradual. This supports our view that rates may not rise as far as is …
Having only just managed to limp out of recession in Q3, October’s industrial production data suggest that Brazil’s economy continued to struggle at the start of Q4. … Brazil Industrial Production …
2nd December 2014
Continuity of economic policy following Mr. Vásquez’s victory in Uruguay’s presidential election is likely to ensure that inflation remains high and economic growth relatively weak. We are forecasting GDP growth to average just 3% over the next four …
1st December 2014
The November manufacturing PMI surveys continue to point to a sustained acceleration in Mexican manufacturing growth over the coming months. By contrast, another fall in the Brazilian PMI signals a weak fourth quarter. … Mexico & Brazil Manufacturing …
Interest rates in Colombia were left unchanged at 4.50% today but, with the risks to economic growthskewed to the downside and inflation under control, we think that rate cuts are becoming increasinglylikely. By contrast, the consensus still expects rates …
28th November 2014
