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Interest rates in Peru were left unchanged at 3.50% last night but, with economic growth still weak and inflation likely to fall back into target in the coming months, we are comfortable with our forecast for at least one more 25bp rate cut in the current …
14th November 2014
The growing pile of cash held abroad by US firms, which has now reached more than $2trn, or 12% of GDP, is unlikely to provide much of a boost to the economy, not least because the prospects of that cash being repatriated are fairly low. … A limp …
13th November 2014
A decline in mining output weighed on Mexican industrial production in September, but strong growth in the manufacturing and construction sectors suggests that the rest of industry is in good shape. With the decline in mining output set to ease, we expect …
11th November 2014
The pick-up in Mexican inflation from 4.2% in September to 4.3% in October probably marks the peak for this cycle. We expect it to edge down over the rest of this year and think it could reach the central bank’s 3% target by mid-2015. … Mexico Consumer …
7th November 2014
The larger-than-expected drop in Brazilian inflation last month will come as a welcome relief to policymakers but is unlikely to prevent interest rates from rising further over the coming months. Elsewhere in the region, the sharp jump in inflation in …
Dilma Rousseff’s triumph in last month’s Brazilian presidential election made it a hat-trick of victories for incumbents in Latin America this year. Meanwhile, in Uruguay the Frente Amplio party is on course to retain power later this month. But in this …
5th November 2014
September’s Brazilian industrial production data suggest that the sector remained a drag on the overall economy in the third quarter and, with both domestic and external demand set to remain weak, it is unlikely to take over as a driver of growth in the …
4th November 2014
October’s PMI survey suggests that Brazilian manufacturing will continue to contract in year-on-year terms as we head into 2015. By contrast, the survey offers further evidence that Mexican manufacturing growth will build momentum over the coming months. …
3rd November 2014
Interest rates in Colombia were left unchanged at 4.50% last night and with economic growth slowing and inflation unlikely to pose a problem for policymakers, further interest rate hikes now seem unlikely. In fact, to the extent that rates are changed in …
31st October 2014
The surprise decision by Brazil’s central bank to raise interest rates now, rather than waiting for Dilma Rousseff’s new government to take shape, is an early sign that tackling inflation could be given greater priority in Dilma’s second term. The focus …
30th October 2014
Data for September suggest that conditions in some parts of Chile’s economy – notably manufacturing – improved following a weak performance in August. But the bigger picture is that GDP growth appears to have slowed even further in Q3 as a whole – perhaps …
29th October 2014
After a rollercoaster campaign that at times had promised to deliver a much-needed shift in economic policy, presidential elections in Brazil ultimately delivered more of the same. Dilma Rousseff was returned to office by the slimmest of margins and the …
28th October 2014
Dilma Rousseff's narrow victory in yesterday’s presidential run-off in Brazil has dented hopes that the elections might deliver much-need economic policy reforms. Growth in Ms. Rousseff’s first term in office was already the weakest under any president …
27th October 2014
The slowdown in Latin America over the past year is more likely to be the start of a new phase of weaker growth than a temporary blip. We expect regional GDP growth to remain stuck at 2-3% for the next decade and for interest rates to remain low for a …
24th October 2014
Capital outflows following the Argentine government’s default probably contributed to the slump in economic activity in August, leaving the economy on course to contract by 1-2% this year. Unless the government can solve the economy’s shortage of foreign …
On the face of it, the Venezuelan government’s restructuring of petro-loans from China should boost foreign currency revenues and ease the economy’s severe dollar drought. But in reality, the deal will only offset the impact of recent oil price falls, …
23rd October 2014
The latest polls suggest that this weekend’s run-off in Brazil’s presidential election is still too close to call, which we suspect favours the incumbent, Dilma Rousseff, over the challenger, Aécio Neves. In this Election Watch we outline what a victory …
Following last month’s broad sell-off in “risky” assets, in which financial markets in Latin America were hit across the board, the performance this month has been more mixed. While equities have extended their losses, currencies and bonds have fared …
22nd October 2014
Interest rates in Chile were cut by 25bp to 3.00% last night and, although the accompanying statement suggests that we may be nearing the end of the easing cycle, we expect further cuts over the next couple of quarters. We’re sticking to our forecast for …
17th October 2014
The biggest loser from the drop in oil prices within Latin America will be Venezuela and, although the government may make its debt servicing obligations this month, a default seems more likely than not in the next couple of years if oil prices remain at …
16th October 2014
Activity data for August contain some evidence that conditions in Brazil’s beleaguered economy may have started to improve. But as things stand it seems the best we can hope for is that GDP in the third quarter as a whole was broadly flat in q/q terms. …
Fresh falls in global commodity prices in recent weeks have stoked concerns about how Latin America will fare as the tailwinds from the global commodities boom fade. The short point is that regional growth will be much weaker in the years ahead. But while …
13th October 2014
Interest rates in Peru were left unchanged at 3.50% last night but with economic growth still weak and inflation likely to remain within target over the coming months, we are comfortable with our forecast for at least one more 25bp rate cut in the current …
10th October 2014
Stronger investment spending looks set to underpin faster economic growth in Mexico over the coming years. So in contrast to Brazil where weak investment has caused capacity constraints to build and looks set to leave growth stuck at around 1.5% in …
9th October 2014
The latest rise in Brazilian inflation, which has pushed it further above the upper bound of the central bank’s target range, will give further ammunition to Aécio Neves ahead of his run-off against President Rousseff later this month. It also strengthens …
8th October 2014
The Venezuelan government may have gathered enough foreign currency to meet its debt obligations this month, but with the economy crippled by a shortage of foreign currency and oil prices now falling it is only a matter of time before the public finances …
3rd October 2014
No candidate looks set to secure a majority in the first round of voting in Brazil’s presidential election this Sunday, meaning that the race is all but certain to extend to a second round run-off between the two leading candidates on 26 th October. The …
2nd October 2014
The resignation of the Governor of the Argentine central bank (BCRA) opens the door for even more unorthodox economic policy. With no end in sight to the government’s debt dispute, and policymaking heading in the wrong direction, the economy looks set to …
The September manufacturing PMI for Brazil gives little hope that the economy snapped out of recession in the third quarter. Meanwhile, in Mexico, PMI surveys both at home and in the US continue to suggest that the manufacturing sector is on course for a …
1st October 2014
Markets in Latin America have been hit particularly hard in the latest EM sell-off. A combination of factors has been responsible, including falling commodity prices and a renewed focus on the likely effects of policy tightening by the Fed. But in the …
30th September 2014
Interest rates in Colombia were left unchanged at 4.50% on Friday and we do not expect rates to rise in the near term. There may be one more 25bp increase to 4.75% next year if domestic demand remains strong and inflation rises. But the bigger picture is …
29th September 2014
The past month has seen renewed concerns about the growth outlook for much of Latin America. GDP in the region grew by just 1.1% y/y in Q2 and the available data so far point to a similar pace of expansion in Q3. In response, the authorities in several …
26th September 2014
Some commentators have argued that the deterioration in Brazil’s public finances in recent years has raised the risk of a fiscal crisis during the next presidential term, which runs from 2015 to 2019. We’re not so sure. The fiscal position has certainly …
The Argentine economy was extremely weak in the second quarter and, with the government since defaulting on its debt, it seems that the situation will only get worse in the second half of this year. As such, GDP may contract by as much as 2% this year, …
25th September 2014
The latest opinion polls suggest that Brazil’s presidential election is going to go down to the wire, with support for President Rousseff stabilising in recent weeks. From the perspective of the markets, we fear that investors are overplaying the …
24th September 2014
Colombia’s economy has been a rare bright spot in Latin America so far this year but, while we don’t expect growth to collapse, we do expect it to slow over 2015-16. This in turn is likely to mean that interest rates do not rise as far as most currently …
23rd September 2014
Today’s weaker-than-expected Colombian GDP data, which showed that the economy grew by 4.3% y/y in Q2 (from 6.4% y/y in Q1), are likely to tip the balance in favour of interest rates being left on hold at 4.5% at next Friday’s meeting. And with growth …
16th September 2014
The Argentine government has introduced various measures in recent weeks to increase the availability of foreign currency in a bid to stem the depreciation of the peso in both official and unofficial markets. While the measures may give some short term …
15th September 2014
Interest rates were cut by 25bp in both Chile and Peru last night and policymakers have room to reduce rates further if growth continues to slow. With little chance of a significant rebound in growth over the coming years, we expect rates in both …
12th September 2014
Today’s data provide yet further evidence that Mexican industry is turning the corner. With rising demand from the neighbouring US set to boost the manufacturing sector, and the government’s fiscal stimulus likely to feed into stronger construction …
11th September 2014
The economic programme put forward by presidential hopeful Marina Silva is a step in the right direction insofar as it addresses many of the problems that have contributed to a general decline in macroeconomic management over the past couple of years. But …
10th September 2014
Rampant inflation, a weakening currency and falling foreign exchange reserves mean that Venezuela has all of the ingredients for a balance of payments crisis. We expect GDP to contract by a cumulative 5% in 2014-15, but there is a growing risk of a much …
9th September 2014
Economic growth in Latin America slowed further in the first half of 2014 and we see little chance of a strong rebound over the coming quarters. The key props to strong growth in the past decade are crumbling. Rapid credit growth will have to cool, while …
8th September 2014
The Central Bank of Brazil kept interest rates on hold at 11% last night and the accompanying statement gave a strong signal that rates are likely to be left unchanged over the coming months. We don’t expect a big move in rates in 2015 either. … Brazil …
4th September 2014
August’s manufacturing PMI suggests that while conditions in Brazilian industry may have stopped getting worse, there is little evidence to suggest that manufacturers will lead a rapid rebound from the economy’s recession in the first half of this year. …
1st September 2014
Colombian policymakers increased interest rates by 25bp to 4.50% on Friday but we think that the current tightening cycle is drawing to a close. The pace of economic growth is likely to slow over the coming quarters, while inflation is unlikely to breach …
Second quarter GDP data showing that Brazil has fallen back into recession will add to pressure on the central bank to loosen policy in order to support the ailing economy. But we suspect that policy stimulus – either in the form of cuts in reserve …
29th August 2014
The past month has brought signs that Mexico’s economy is finally turning the corner. latest data suggest that the Mexican economy has turned the corner. GDP expanded by a seasonally-adjusted 1.0% q/q in the second quarter, accelerating from +0.4% q/q in …
28th August 2014
The ongoing Argentine debt dispute continues to disrupt local markets, but so far there has been no contagion to the rest of the region. Equities have performed well so far in August, while it has generally been a poor month for the region’s currencies. …
26th August 2014
With hopes of a swift resolution to the Argentine debt dispute fading, capital flight appears to be picking up. As a result, the damage to the real economy is likely to be greater than we had initially anticipated. We now think that the economy will …
22nd August 2014
