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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 …
2nd September 2013
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 …
Today’s GDP data confirm that Chile’s economy is cooling and is likely to settle at a slower trend pace in the coming years. Given the current resilience of domestic demand, we do not foresee a collapse in growth in the months ahead. Nonetheless, the …
19th August 2013
Yesterday’s central bank meeting in Chile revealed that policymakers are taking a cautious approach to changes in interest rates despite evidence of a slowing economy. We remain comfortable with our view that the next move in rates will be down, but …
14th August 2013
The Mexican government’s plan to open up the oil industry to foreign investment could boost annual GDP growth by 0.3%-pts over the next decade and also give a substantial boost to tax receipts. This is another reason to expect the economy to outperform …
13th August 2013
By all accounts this week’s interest rate decision in Chile is set to be a close call. We’re forecasting a 25bp cut to 4.75% but acknowledge that a slightly firmer tone to the recent economic data could easily keep the central bank on hold for another …
12th August 2013
Last night’s central bank meeting in Peru has done little to alter our baseline view that interest rates are going nowhere this year. We expect the economy to weaken in the coming months, however efforts to support it are more are more likely to come via …
9th August 2013
July’s data will help to allay inflation concerns in Latin America’s two largest economies – Brazil and Mexico. Inflation fell back to within target range in both countries and looks set to remain there for the foreseeable future. This supports our view …
8th August 2013
Argentina’s public finances have deteriorated by more than meets the eye under Cristina Fernández. Increased monetisation and the transfer of resources from public institutions have prevented the deficit from blowing out despite a rapid acceleration of …
7th August 2013
Both the Mexican and Brazilian manufacturing PMIs fell in July but the similarities end there. In Brazil, the PMI has a fairly good relationship with actual activity data and suggests that the improvement in industrial production in the first half of the …
1st August 2013
Latin American central banks have taken divergent paths in 2013. Whereas Brazil started to hike interest rates in April, both Colombia and Mexico have trimmed their benchmark rates this year. Meanwhile, policymakers in Peru and Chile have remained on the …
31st July 2013
Our Argentina Activity Indicator suggests that GDP growth picked up by more than we had initially expected in Q2. And with the fiscal purse strings set to be loosened further ahead of October’s mid-term elections, the recovery is likely to continue into …
30th July 2013
Latin American growth fell to its slowest rate since 2009 in the first half of this year and, while some countries are likely to see a rebound over the coming quarters, we think that for most this marks the start of a new era of weaker growth. The …
29th July 2013
Latin American financial markets have steadied in July after a sharp sell-off over the previous couple of months. We suspect that markets will stay under pressure in the near term. However, the worst of the recent sell-off looks to be behind us. … …
26th July 2013
The freeze to some areas of government spending announced by Brazil’s government last night amounts to further fiddling around the edges at the expense of more fundamental fiscal reforms needed to help return the economy to health. Brazil is now paying …
23rd July 2013
The re-launch of foreign exchange auctions in Venezuela, coupled with an increase in the public debt ceiling, is unlikely to solve the country’s dollar drought. We continue to think that GDP will contract this year and suspect that a sustained fall in oil …
22nd July 2013
This year’s revival in Argentine vehicle production stands out against the backdrop of an otherwise moribund manufacturing sector. But we doubt that this is an early indicator of better times ahead for local industry, and think that deep-seated structural …
18th July 2013
The poor performance of the Mexican economy so far this year has been one of the biggest disappointments in Latin America. In this Watch we explain why, in contrast to Brazil, the slowdown owes more to cyclical rather than structural factors, and thus …
16th July 2013
Despite a poor start to the year there are still good reasons to expect Mexican manufacturing to strengthen over the second half of 2013 and support a period of relatively strong growth in the wider economy over the next couple of years. This has less to …
15th July 2013
The Central Bank of Chile left its benchmark interest rate unchanged at 5.0% last night, but gave the clearest signal yet that a rate cut is on the cards in the coming months. Elsewhere, the prospect of monetary easing is also growing in Peru however, …
12th July 2013
The decision last night by Brazil’s central bank (BCB) to raise interest rates by 50bps to 8.5% was expected, but the accompanying statement suggested that further hikes are likely over the coming months. At this point, we have to put our hands up and say …
11th July 2013
When all’s said and done, the commodity price boom of the past decade will probably go down as a wasted opportunity for the economies of Latin America. Rather than saving and investing their windfall, the region – and in particular Brazil – embarked on a …
9th July 2013
Today’s activity data provide further evidence that Chile’s economy is losing speed. Yet while the headline numbers will grab most of the attention, we are more concerned about the relentless widening of imbalances in the drivers of growth. Notably, the …
5th July 2013
The recent depreciation of the peso does not appear to have fully reversed the loss of competitiveness suffered by Colombian industry during the past decade. As a result, while the worst of the currency sell-off may now have passed, the peso looks set to …
4th July 2013
The shift towards tighter monetary policy in the developed world combined with the drop in most commodity prices that we forecast over the next year or so threatens to expose key vulnerabilities in Latin America’s growth model. Our proprietary indicator …
3rd July 2013
There’s not much to cheer in June’s PMI data for Latin America. Brazilian industry appears to be treading water, while the Mexican manufacturing sector is still slowing. Instead, the glimmer of hope comes from the US, where manufacturing is showing signs …
1st July 2013
Argentina’s new certificate of deposit (CEDIN) is yet another stopgap measure aimed at alleviating a growing shortage of dollars. Without deeper reforms to economic policy, Argentina’s slow-burning balance of payments crisis is set to continue and the …
Latin America’s financial markets have borne the brunt of the recent global sell-off since the US Fed signalled its intent to scale back its asset purchases under QE3 and evidence of weaker Chinese growth has emerged. While the biggest falls may now have …
28th June 2013
Latin American bonds, equities and currencies have slumped over the past month after the US Fed signalled its intention to taper its asset purchases under QE3 later this year. But while financial markets across the region have taken fright, the economic …
27th June 2013
The response of Brazil’s government to recent unrest suggests a willingness to engage with protestors’ concerns, but also reveals a fundamental misdiagnosis of the underlying issues. The problem lies with poor governance rather than a lack of spending. …
26th June 2013
The sharp falls in Latin American currencies over the past month mean that many are now below our end-year targets, which looked extremely bearish only a few months ago. But while we think the trend over the next couple of years will be towards further …
25th June 2013
The protests that have spread across Brazil over the past week have so far had a limited impact on financial markets and so – in contrast to Turkey – are unlikely to have immediate implications for central bank policy. Nonetheless, many of the protestors’ …
19th June 2013
The murky world of Brazil’s public finances has come under increased scrutiny in recent weeks, after ratings agency S&P downgraded the nation’s sovereign debt outlook. In this Watch we take a fresh look at Brazil’s public finances and explain why, …
18th June 2013
Chile’s central bank (BCC) held its interest rate at 5% last night, in spite of weaker growth and inflation data which had led some analysts (including ourselves) to forecast a cut. Going forward, rate cuts still appear more likely than not over the next …
14th June 2013
Changes to Uruguay’s monetary policy regime, including a shift towards monetarism, are unlikely to be a panacea for the country’s inflation problems. Without tighter economic policy and efforts to reduce wage indexation, headline CPI is likely to remain …
11th June 2013
Another devaluation of the bolivar would do nothing to solve Venezuela’s shortage of foreign currency. Until or unless the government changes tack and adopts a more market-friendly economic framework, it seems that shortages will worsen and the risk of a …
10th June 2013
Two developments over the past week make this an ideal opportunity to revisit our forecasts for Brazil. On the one hand, weak Q1 GDP data support our long-held view that the economic recovery will disappoint. But on the other, the decision to raise …
6th June 2013
The Chilean peso recently weakened to over 500/US$ and, with support for rate cuts within the central bank growing, we expect it to fall to around 520/US$ by year-end. Meanwhile, Brazil’s decision to remove its IOF tax on foreign investor inflows suggests …
5th June 2013
May’s manufacturing surveys suggest that the Brazilian and Mexican manufacturing sectors both weakened further last month. But while Brazilian industry will probably continue to struggle over the coming years, the outlook for Mexican firms remains far …
4th June 2013
The Venezuelan economy may already be in recession and we continue to expect GDP to contract by 1% this year. With the authorities running out of hard currency, and oil prices unlikely to rebound over the coming months, there is a growing risk of a …
3rd June 2013
Economic growth across Latin America was weaker than expected in Q1. We estimate that regional GDP increased by about 2.2% y/y, down from 2.8% y/y in Q4 of last year – the slowest pace since 2009. There may be some recovery over the coming months as …
31st May 2013
