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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
The dovish tone of the Colombian central bank’s monetary policy announcement supports our view that interest rates will remain lower for longer than most expect. We would not rule out further rate cuts, especially if the external environment takes another …
Strong second quarter GDP growth and further signs of rebalancing in the Brazilian economy are good news. But with consumption set to remain weak and domestic savings low, we continue to expect GDP growth to fall short of the 5% rates observed in recent …
30th August 2013
The recent increase in manufactured exports may be the first sign that Latin American industry is beginning to feel the benefit of weaker currencies. Nominal exports grew by 2.2% y/y in July, having contracted by an average of 0.9% y/y in the first half …
29th August 2013
Brazil’s decision to hike interest rates by a further 50bp last night will have been bolstered by the extent of the recent slide in the real. But the rise in market rate expectations over the past month looks more difficult to justify. While another …
Surprisingly strong Q2 data have left Venezuelan GDP on course to grow by 0.5% this year, but severe underlying problems in the economy have not been solved. If oil prices fall over the coming years, as we think is likely, the economy will fall into …
28th August 2013
The threat of a fresh sovereign debt default continues to cast a long shadow over Argentina, following last Friday’s US Appeals Court ruling. But in the real economy things are looking somewhat brighter. We estimate that GDP growth accelerated to 3.0% y/y …
27th August 2013
Peru’s economy picked up pace in Q2, but the scope for a further acceleration of GDP growth from here looks extremely limited. In contrast to the consensus, we believe that the trend will be towards a slower growth rate in the coming years as the mining …
The $60bn currency intervention programme announced by Brazil late last night represents one of the boldest attempts yet by an EM central bank to shore up its currency following the rout of recent weeks. … Brazil FX intervention plan looks big by EM …
23rd August 2013
Latin America has not been spared in the latest emerging market sell-off, with currencies and bonds tumbling over the past few weeks. However, in contrast to May’s sell-off, equity markets have so far been remarkably resilient, thanks in large part to a …
21st August 2013
Weak Q2 GDP data was the last thing that Mexican markets needed after the rout of the past few days. That being said, we suspect that Q2 will mark the low point for the economy and that growth will accelerate from here. Although we now think that GDP …
20th August 2013
The sell-off in the Brazilian real over the past month has triggered a sharp upward revision in market expectations for interest rates over the next year. In this month’s Watch we explain why, although rates are likely to rise further over the coming …