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A highly favourable external backdrop has transformed Peru into one of the region’s undoubted growth stars over the course of the past decade, but the latest GDP data suggest that the tide has now turned. In contrast to the consensus, we expect the recent …
25th November 2013
We expect Mexico’s poor performance in the third quarter to be the low point for the economy. While GDP growth will struggle to top 1.2% this year, it remains on course to accelerate to over 4% during 2014-15 making it one of Latin America’s relative …
21st November 2013
We remain sceptical about the ability of the Venezuelan government to service its mounting foreign currency debt over the medium term. Default remains a clear risk, especially if oil prices fall. … Default remains a genuine concern in …
Several high profile changes to Argentina's cabinet have reawakened speculation that the country is on the brink of formalising a multiple exchange rate system. If the experience of Venezuela is anything to go by, changes of this nature will do little to …
20th November 2013
Chile’s central bank (BCC) lowered its policy rate by a further 25bps last night in response to fresh signs that domestic demand is cooling. With growth and inflation set to remain weak for the foreseeable future, additional easing is probable. We expect …
Chilean Q3 GDP data were stronger than expected, but this was largely driven by a rebound in mining exports which is unlikely to be sustained. With investment weakening and the current account deficit uncomfortably wide, Michelle Bachelet – who won the …
18th November 2013
Latin American currencies have tumbled against the US dollar since mid-October and in many cases they are close to the lows that they reached during the height of this summer’s market sell-off. Uncertainty about the timing of Fed tapering will remain a …
15th November 2013
The sharp pick-up in Brazilian growth in the second quarter of this year seems to have fizzled out in the third quarter. Indeed, it's possible that GDP data due to be released early next month will show that the economy contracted on a quarter-on-quarter …
14th November 2013
This weekend’s Chilean Presidential Election may go down as the most one-sided affair in recent memory, with former president Michelle Bachelet set to sweep to a second term in office. But while the outcome of Sunday’s poll has never been in doubt, …
13th November 2013
The Mexican economy has had a year to forget, but the worst should now be behind it. While GDP growth may struggle to top 1.2% this year, we expect it to accelerate to over 4% y/y in 2014-15. This would make it one of Latin America’s top performers. … …
12th November 2013
Peru surprised markets with an interest rate cut last night, becoming the latest in a line of Latin American central banks to launch into easing mode in 2013. Although the timing of yesterday’s rate cut was a little sooner than we had originally forecast, …
8th November 2013
Slowing food inflation dragged headline inflation in most of Latin America last month, but that masks significant differences in the underlying outlook for inflation within the region. While inflation looks set to remain relatively low in Mexico and …
7th November 2013
Our new Indicator of Global Conditions suggests that most of the fluctuations in Latin American GDP growth over the past few decades can be explained by changes in the global macroeconomic backdrop. If we're right to expect external conditions to become …
4th November 2013
October’s manufacturing PMIs rose to exactly the same level in both Brazil and Mexico. But of the two economies, we suspect the recovery is more likely to be sustained in Mexico. … Mexico’s industrial recovery likely to outshine …
1st November 2013
The monetary easing cycle in Colombia appears to now be over but, by the same token, interest rate hikes are probably still some way off. We expect rates to remain lower for longer than most expect and have pencilled in only small hikes from 3.25% …
31st October 2013
Our Argentina Activity Indicator points to decent growth for Argentina’s economy in Q3. However, this is partly the result of a further loosening of the public purse strings in the run-up to last Sunday’s mid-term election. With fiscal support set to fade …
Having picked up in several countries in the early part of this year, inflation has slowed in most of Latin America in recent months and is now back within its target range in each of the region's major economies. In most cases, the decline has been …
29th October 2013
The Central Bank of Mexico (BANXICO) lowered interest rates to a new record low today but its accompanying statement gave a heavy hint that this would be the last cut in the easing cycle. With the outlook for growth slowly improving, we are sticking to …
25th October 2013
The decision by Brazil’s central bank to respond to what has been a relatively modest rebound in the real over the past month by scaling back some of its support for the currency suggests that policymakers may be more tolerant of a weaker exchange rate …
Several recent developments, including the growing prospect of a political regime change, have combined to send Argentine asset prices soaring. But gains in Argentina's equity market are also symptomatic of a broader underlying problem - namely, a rapid …
24th October 2013
Lending growth has continued to cool in most parts of Latin America over the course of 2013. Although the credit boom of the past decade has yet to be reflected in a significant rise in default rates, a large overhang of private sector debt remains a …
23rd October 2013
Plans to run a substantially wider budget deficit in 2014 have raised concerns that the Mexican government is losing fiscal discipline. But while a spending splurge is a major risk to an otherwise bright outlook for 2014-15, the government's plans as they …
21st October 2013
While the timing of last night’s interest rate cut in Chile was a little unexpected, it nonetheless confirms our long-held belief that the central bank would begin trimming its benchmark rate by the end of 2013. Further monetary easing appears very likely …
18th October 2013
The continued disappointing performance of the Mexican economy makes it is increasingly likely that last month’s interest rate cut was not a one-off. We have now pencilled in a 25bp reduction to 3.5% at this month’s monetary policy meeting and would not …
17th October 2013
The sharp pick-up in Brazilian retail sales over the past couple of months has fuelled hopes that the country’s consumer-led growth model has kicked back into gear. We’re not so sure. While spending on small-ticket items (which is covered by the retail …
15th October 2013
Inflation in Venezuela may now be close to peaking, but it will remain between 30-50% for the foreseeable future - comfortably the highest rate in Latin America. This in turn will remain a major constraint on economic growth, leaving Venezuela gripped by …
Peru’s central bank (BCRP) extended its long pause on interest rates last night and gave few hints that a change of policy is on the cards. Following a recent downgrade to the BCRP’s 2013 growth forecast, the Bank has now come into line with our own …
11th October 2013
With mid-term elections approaching and Cristina Fernàndez’s hold on power seemingly slipping,some are betting on Argentina’s economy to roar back. This is premature – in fact, in the near term,a more uncertain policy environment will only increase the …
10th October 2013
Brazil raised interest rates by 50bps to 9.5% last night and the accompanying statement gave no hint that the recent falls in inflation might prompt policymakers to slow the pace of tightening. A further hike to 10% looks all but guaranteed at the next …
So far there is no evidence that weak currencies are pushing up inflation in Latin America. Inflation edged down in both Brazil and Mexico in September and it should fall further over the next six months as the recent food price shock continues to unwind. …
9th October 2013
It’s still early days, but on the basis of the latest data we remain sceptical that Uruguay’s recently revamped monetary policy will be any more successful at bringing inflation under control than the previous one. In the absence of major structural …
4th October 2013
September’s manufacturing PMIs provide further evidence that the decent start to the year for Brazilian industry was a false dawn. By contrast, Mexican industry appears to be finding its feet after a terrible first half of 2013. … PMIs add to evidence …
1st October 2013
Our GDP tracker suggests that the recent slowdown in Ecuador’s economy abated in Q2. But this has come alongside a sharp widening of the fiscal deficit. With external financing options limited, we are concerned about the potential for balance of payments …
Relatively subdued GDP growth looks set to ensure that interest rates in Colombia will remain lower forlonger than most expect. We think that the benchmark rate is likely to remain unchanged at 3.25%during the next twelve months or so, before rising to …
30th September 2013
Latin American financial markets have bounced back in September, snapping a three-month losing streak. While the US Fed’s decision to delay tapering does little to change our fundamental view on the outlook for the region’s markets, it is a source of …
26th September 2013
The raft of official GDP data released over the past month confirmed that, having slowed sharply since the start of 2012, growth in Latin America picked up pace in the second quarter of this year. We estimate that regional growth accelerated to just over …
25th September 2013
The improvement in Brazil’s current account in August was due entirely to seasonal factors and does not alter the bigger picture that the deficit has widened sharply since the start of the year. Brazil’s external financing requirement looks manageable, …
Argentina’s Q2 GDP data give a misleading impression of the health of the economy. While it is true that activity has recovered following last year’s stagnation, the official figures drastically overstate the extent of the rebound. What’s more, growth has …
23rd September 2013
With fears of a ‘hard landing’ in China receding, the economic outlook for Peru and Chile has brightened a little in recent months. As it happens, both countries appear fairly well placed to deal with the gradual slowdown in Chinese growth that most still …
20th September 2013
Stronger-than-expected second quarter GDP growth in Colombia may temper expectations of interest rate cuts at next week’s monetary policy meeting. We continue to expect rates remain unchanged at 3.25% for an extended period. … Colombia: Strong Q2 growth …
The Venezuelan government is expected to launch a new foreign exchange mechanism over the coming days, but past form suggests that it is unlikely to ease the shortages of foreign currency that have crippled the economy over the past few years. There …
18th September 2013
All eyes will be firmly fixed on today’s US FOMC meeting in anticipation of the announcement that the Fed will begin scaling back its programme of asset purchases under QE3. But for the economies of Latin America, the outcome of this evening’s meeting has …
The depreciation of exchange rates across Latin America since May only goes part of the way to restoring external competitiveness that has been lost over the past five years. As such, we suspect that talk of a renaissance in the region’s manufacturing …
16th September 2013
The stronger tone of recent data means that the case for monetary easing in both Chile and Peru is less convincing than it was only a few months ago. Nonetheless, policymakers in both countries will retain an easing bias and in the case of Chile we think …
13th September 2013
A warning from US economist Robert Shiller about the recent sharp rise in Brazilian house prices has revived fears of a property bubble in Latin America’s largest economy. Our position remains that, while there are several reasons why we would have …
12th September 2013
The package of tax reforms announced over the weekend by the Mexican government is the most significant in recent history, but will still leave the authorities highly reliant on oil as a source of revenue. This could ultimately stifle the government’s …
9th September 2013
We do not think that today’s unexpected interest rate cut by the Mexican central bank signals the onset of an aggressive easing cycle. Indeed, with forward-looking indicators suggesting thateconomic growth will be stronger in the second half of this year, …
6th September 2013
Brazil’s beleaguered manufacturing sector came back from the dead to give the economy a muchneededboost in Q2. But hopes for a sustained recovery in industry this year are likely to bedisappointed. In fact, we think that Q2 could prove to be as good as it …
Today’s IMACEC activity indicator revealed that Chile’s economy picked up pace at the start of Q3. This is unlikely to signal a turn in the economic cycle following two quarters of slowing growth, but it does suggest that the deceleration that we expect …
5th September 2013
The latest manufacturing PMI survey for Brazil suggests that, having been responsible for stronger-than expected GDP growth in Q2, industrial production is likely to weaken again in the second half of this year. By contrast, after a terrible start to …
2nd September 2013
