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The fact that the annual rate of Mexican GDP growth slowed to just 1.6% in the second quarter (from 1.9% in Q1) will probably grab the headlines, but the bigger picture is that q/q growth accelerated in Q2 for the second consecutive quarter. With the …
21st August 2014
The Argentine government’s plan to swap exchange bonds into local law, if successful, may enable the authorities to exit the current default and limit any damage to the real economy from the debt crisis. At the same time, however, it makes a settlement …
20th August 2014
The further slowdown in Chilean GDP growth in Q2 adds to the evidence that the economy is set for a prolonged period of weaker growth. We continue to expect GDP growth of just 2.8% this year. … Chile stuck in the slow …
18th August 2014
The death last week of Socialist Party presidential candidate Eduardo Campos and the likelihood that he will be replaced at the top of the party’s ticket by Marina Silva, a former Environment Minister, has changed the dynamics of Brazil’s presidential …
The release of June’s activity data allows us to firm up our estimate of Q2 GDP in Brazil – and the news isn’t good. We think that GDP may have contracted by 0.5% q/q in the second quarter. And with the economy weakening once again, a pre-election …
15th August 2014
Policymakers in Chile cut interest rates by 25bp to 3.50% last night and gave a clear indication that there is more monetary easing to come. If economic growth does not pick up as we expect , the risks to our forecast for just one more 25bp cut to 3.25% …
Negative comments from holdout creditors suggest that a solution to the Argentine debt dispute involving private banks has fallen through. That, along with interest rate cuts and monetisation of the government’s budget deficit, threatens to spark capital …
14th August 2014
Data on vehicle production released over the past month suggest contrasting fortunes for Latin America’s two largest economies. While Mexico seems to be turning a corner and growth over the second half of this year looks set to accelerate, Brazil’s …
13th August 2014
Interest rates in Peru were left on hold at 3.75% last night and we think that above-target inflation and a large current account deficit mean that policymakers are likely to resist aggressive interest rate cuts. For now, we expect rates to remain at …
8th August 2014
Last week’s default by the Argentine government is yet another unwanted headwind for the beleaguered economy. Fears of a re-run of 2002’s economic meltdown are overblown. But the messier that the default becomes, the greater the downside risks to our …
7th August 2014
There are a number of ways in which the winning candidate in October’s presidential elections could help to turn around Brazil’s struggling economy. But efforts will need to be targeted on structural reforms to raise productivity. In contrast, any attempt …
6th August 2014
The pace of private sector lending growth in most parts of Latin America has continued to cool this year, but the credit boom of the past decade means that vulnerabilities persist in a few places. At a country-level, we are most concerned about Brazil, …
5th August 2014
Brazilian industrial production contracted sharply in June and July’s weak manufacturing PMI suggests that there could be more bad news in the pipeline. By contrast, the outlook for Mexican industry continues to improve. … More bad news for Brazilian …
1st August 2014
Policymakers in Colombia hiked interest rates by another 25bp to 4.25% last night but we do not think that the current tightening cycle has much further to run. Inflation is unlikely to pose a problem for the authorities in the foreseeable future, while …
We do not expect Argentina’s default to trigger a prolonged ripple of contagion in the rest of Latin America. There may be some turbulence in the region’s financial markets, but we suspect that the actions of the Fed will continue to have a much larger …
31st July 2014
Confirmation that Argentina has officially fallen into default after failing to agree a deal with holdout creditors is likely to rattle local markets and has the potential to do significant damage to the domestic economy. But we suspect that contagion to …
Chile’s activity data for June point to GDP growth of just 2.3% y/y in Q2, an outturn that would mark the third consecutive quarter of sub-3% growth. With the economic outlook unlikely to improve in the near-term, it seems increasingly likely there will …
30th July 2014
The Argentine government seems increasingly likely to default on sovereign debt repayments due at the end of this month but the reaction in both local markets and markets in the region more generally has so far been limited. Looking ahead, while a default …
28th July 2014
With talks between Buenos Aires and holdout bondholders seemingly having stalled, it appears increasingly likely that Argentina will be prevented from making an interest payment that is due on previously restructured debt later this month – and will thus …
25th July 2014
Judge Griesa’s refusal today to grant the Argentine government a stay in the ongoing debt dispute meansthat it is increasingly likely that the authorities will default on 30th July. Default is another headwind thatwill prevent a quick recovery from the …
22nd July 2014
Data to the middle of this month suggest that inflation in Brazil is likely to breach the upper bound of its target range for July as a whole but, with the pace of monthly price rises now slowing, also provide a glimmer of hope that inflation may be …
Policymakers at the Brazilian central bank (BCB) left interest rates unchanged at 11.0% last night and we do not foresee any rate hikes until after October’s presidential election. But with high inflation still creating headaches for policymakers, we have …
17th July 2014
T he Chilean central bank cut interest rates last night and with policymakers clearly more concerned about weak growth than above-target inflation, we expect more reductions in the coming months. We are revising our forecast and have pencilled in 50bp …
16th July 2014
A lack of progress in negotiations between the Argentine government and the holdouts from the 2001 debt default means that there is an increasing chance that the authorities will be forced back into default on 30 th July. That is likely to quash any hopes …
15th July 2014
Nicolas Maduro has so far failed to reverse any of the damage to the Venezuelan economy caused by his predecessor, Hugo Chavez. Rather than continue to tinker with exchange rate mechanisms, we think that he needs to unveil radical supply-side reforms if …
We doubt that last night’s interest rate cut in Peru signals the start of an aggressive easing cycle. Inflation looks set to remain above target while a large current account deficit suggests that domestic demand is already too strong. Accordingly, we …
11th July 2014
The latest FX intervention programme announced by Colombian policymakers is unlikely to reverse the recent appreciation of the peso against the US$. Accordingly, we expect a strong currency to distort economic growth and prevent aggressive interest rate …
10th July 2014
The latest opinion polls suggest that October’s election remains President Rousseff’s to lose. But although support for her has edged up in the latest polls, following a sharp fall earlier this year, success will depend on whether she is able to attract …
9th July 2014
The fact that the Peruvian government has responded to weaker economic growth with reforms rather than populist spending is positive. But we do not believe it will deliver the large boost to growth that policymakers expect. Accordingly, while the …
8th July 2014
The Venezuelan economy remains in the grip of a dollar drought, and it seems that the government maysoon abandon its disastrous experiment with a multi-tiered exchange rate. But even if a new unifiedbolivar exchange rate is introduced and devalued to over …
3rd July 2014
June’s business surveys suggest that manufacturing in Brazil is doing little more than stagnating. By contrast, the outlook for Mexican manufacturers is much brighter – the latest survey data suggest that growth could accelerate to 5% y/y or more over the …
1st July 2014
Following a failure to make an interest payment on restructured bonds yesterday, the Argentine government appears to be heading towards another default unless it can reach agreement with holdouts within the next 30 days. A default may have little …
So far at least, financial markets in Argentina have largely shrugged off the fact that, barring a last minute deal with holdout creditors, the government now seems destined to enter a technical default on some of its debt obligations. As it happens, even …
30th June 2014
The 2014 Football World Cup is proving to be a welcome distraction from yet more downbeat news on Brazil’s economy over the past month. Our GDP Tracker suggests that, after dropping to just 1.9% y/y in Q1, growth has slowed further in Q2. Meanwhile, the …
27th June 2014
First quarter GDP data released yesterday showed that the Argentine economy was already in recession even before the latest wrangle with the holdouts from 2005’s debt restructuring. As such, we continue to expect GDP to contract by at least 1% this year. …
24th June 2014
A series of statements from Buenos Aires over the weekend provide hope that Argentina’s government might be able to find common ground with “holdout” creditors. Reaching a mutually agreeable solution will still be difficult, but the worst-case scenario …
23rd June 2014
Policymakers in Colombia hiked interest rates by another 25bp to 4% on Friday night and we expect the tightening cycle to remain gradual. Inflation is unlikely to be a major headache, while we expect the pace of economic growth to slow. As a result, we …
Strong government spending ahead of Colombia’s presidential elections appears to have supported rapid growth of 6.4% y/y in Q1, but we doubt that the current pace of expansion will be sustained. As such, we expect GDP growth to cool from 4.5% this year to …
19th June 2014
Latin America’s economy looks set to remain stuck in the slow lane over the next couple of years. The drivers of strong growth over the past decade – including rapid credit growth and strong global demand for the region’s commodities – are weakening. At …
The re-election of Juan Manuel Santos as the president of Colombia will ensure the continuation of peace talks with the FARC, but is unlikely to signal a shift away from the economy’s reliance on commodity-driven growth. With the global commodities boom …
16th June 2014
Policymakers in both Chile and Peru left interest rates unchanged at 4% last night and we expect above target inflation to restrict the room for rate cuts in the second half of the year. On balance, we think the easing cycle in Chile is over, while we …
13th June 2014
After a torrid 2013, financial markets across Latin America have enjoyed a decent run over the first half of 2014, with most equity markets up by around 5% and bond yields edging down too. However, the relative stability in financial markets contrasts …
11th June 2014
An improving outlook for inflation in Mexico suggests that Friday’s surprise interest rate cut is unlikely to be reversed in a hurry. We expect interest rates to remain at their new historic low of 3.0% for at least a year, after which some gradual hikes …
9th June 2014
The larger-than-expected rise in Brazil inflation in May leaves it on course to breach the upper bound of its target range over the coming months. This would be a major blow to the central bank. Either it would have to resume hiking interest rates ahead …
6th June 2014
The latest data do not contain much evidence of a pre-election giveaway in Brazil but President Rousseff’s slide in the opinion polls since the start of the year, coupled with a stagnant economy and a drop in consumer spending in Q1, has raised the …
3rd June 2014
Today’s manufacturing PMI data for May add to the evidence that the Brazilian economy continued to struggle in the second quarter. Meanwhile, although the US ISM manufacturing index unexpectedly fell last month, it still points to strong Mexican …
2nd June 2014
Colombian policymakers have indicated that they expect interest rates to continue rising gradually over the coming months. As such, we are revising up our forecast. But with growth set to slow and inflation unlikely to rise substantially above target, we …
First quarter GDP data released over the past month suggest that the region’s economy slowed further at the start of this year, with growth dipping to just 2.0% y/y in Q1, down from 2.2% y/y in Q4. That was the second worst performance since the region …
The slowdown in Brazilian GDP growth, from 2.2% y/y in Q4 to 1.9% y/y in Q1, is further evidence that Latin America’s largest economy is still struggling for momentum and could increase pressure on the government to loosen the purse strings ahead of …
30th May 2014
Brazil’s central bank (BCB) called a halt to its tightening cycle last night and now seems unlikely to make any changes in interest rates until after October’s presidential elections. However, it’s possible that policymakers might resume tightening once …
29th May 2014
