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The recent weakness of Latin American stock markets has continued unabated in May, with returns well below those of developed and emerging market equity benchmarks. Going forward, we expect stocks to remain under pressure as GDP growth disappoints and …
30th May 2013
Brazil’s central bank raised interest rates by a larger-than-expected 50bps last night, sending out a strong message that it has not gone soft on inflation. Further hikes are possible in the months ahead. But with inflation set to fall back from mid-year …
The strong performance of Brazilian investment in Q1 is promising, but it will have to be maintained for a sustained period in order to significantly ease the economy’s supply constraints and rebalance growth. In the mean time, growth is likely to be …
29th May 2013
Our Argentina Activity Indicator shows some improvement in April and has prompted us to nudge up our 2013 GDP growth forecast to 1.5%. Even so, growth remains slow by the standards of recent years and uneven in scope. Indeed, the two biggest sectors of …
The fact that the Mexican current account deficit has doubled over the past year is not as alarming as it appears. The deficit remains small and there are no signs of a consumer import binge comparable to elsewhere in the region. That being said, the …
28th May 2013
The weakness of today’s Peruvian GDP data supports our belief that the economy is entering a phase of permanently slower growth as the mining boom of the past decade fades. Ample scope for a policy stimulus should, at least, help to ensure a soft landing …
23rd May 2013
Latin American GDP growth slowed to its lowest rate since 2009 in the first quarter of this year and, while we expect to see a gradual recovery over the coming quarters, mounting vulnerabilities will prevent a strong economic rebound. Weaker growth in …
22nd May 2013
The renewed focus of the Brazilian authorities on raising investment suggests a growing acceptance that the slump in growth over the past year or so has been driven in part by structural factors. Raising investment will be crucial to restoring growth to …
21st May 2013
Chile’s economy stumbled in Q1 as investment spending slipped back from the robust rates of the past few quarters. With copper prices now falling and credit conditions tightening, GDP growth is likely to slow by more than most expect in 2013 and rate cuts …
20th May 2013
Q1 data revealed that the Mexican economy expanded at its slowest annual rate since emerging from recession in 2009, but we suspect that the slowdown was just a blip rather than the start of a trend. On the contrary, we continue to expect output to expand …
17th May 2013
The Central Bank of Chile (BCC) left its benchmark interest rate unchanged at 5.0% last night, however the accompanying statement was a little more dovish in tone than in recent months. We continue to expect the BCC to cut rates by around 50bps by …
Argentina remains on a collision course with the IMF over the accuracy of its consumer price data. The Fund has threatened to impose sanctions if corrective measures are not taken by 29th September and, by way of a response, the Argentine authorities have …
16th May 2013
The Mexican economy has hit a soft patch in recent months, but we would caution against being too pessimistic. Growth is likely to accelerate in the second half of the year as inflation pressures subside and demand from the US recovers. But if we are …
13th May 2013
Last night’s central bank meeting in Peru offered little to suggest that policymakers are considering a near-term change in interest rates. Going forward, we expect the monetary policy bias to shift gradually towards easing as growth and inflation slow, …
10th May 2013
Brazil is unlikely to meet its ambitious targets for oil production, but crude output could still increase by at least one million barrels per day from current levels by 2020. This would add to booming global supply from both conventional and new sources …
9th May 2013
Contrary to popular belief, Uruguay’s stubbornly high inflation rate is partly structural in nature and not simply the result of overheated demand. Bringing inflation down permanently will require far-reaching policy reforms, for which we doubt that the …
The drop in Brazilian inflation last month was a bit smaller than expected but still sufficient to bring it back within the central bank’s target range. Looking ahead, we expect inflation to fluctuate around the upper bound of the target range over the …
8th May 2013
The recent slump in retail sales in Brazil probably overstates the true weakness of consumer spending. Nonetheless, putting to one side the volatility of the monthly data, there are signs that Brazil’s consumer boom is starting to fade. And while this may …
7th May 2013
The drop in the manufacturing PMI for April adds to evidence that Brazil’s recovery has faltered in recent months and is another reason to think that the current monetary policy tightening cycle will be smaller and shorter than the markets expect. … …
2nd May 2013
There appears to be some truth to claims that discrepancies in Chile’s consumer price data have lowered inflation artificially. Even so, the overall impact on headline CPI has been relatively small. Instead, it is food and energy prices that have been key …
The past month has brought further signs that the recovery in economic growth in Latin America that began in mid-2012 is now running into headwinds. Admittedly, calendar effects have probably exacerbated the weakness of the very latest activity data. But …
30th April 2013
Latin American equities have mostly sold off over the past month, compounding an already weak start to the year. Hardest hit have been the large mining firms based in the Andes, many of whom appear to be feeling the effects of a slowdown in Chinese …
29th April 2013
The Colombian government’s stimulus package may boost industry at the margin, but it is unlikely to solve the problem of an overvalued peso and widening economic imbalances. As a result, we doubt that the interest rate hikes to 4.5% that the consensus …
We suspect that the Mexican central bank (BANXICO) is set for another prolonged period of inactivity. High inflation will prevent additional rate cuts in the near term, while a rebound in economic growth in the second half of the year will remove the need …
26th April 2013
The recent falls in global copper prices add further weight to our belief that GDP growth in Chile will be slower than most expect this year. Even so, this is unlikely to be a disaster for the economy. Indeed, to the extent that a moderate fall in metals …
The softer tone of recent economic data, coupled with signs that support for the government’s reform programme may be fraying, have dented some of the optimism over the outlook for Mexico. Even so, while growth looks set to slow in the first half of 2013, …
25th April 2013
Our Argentina Activity Indicator shows that while GDP growth accelerated in Q1, the underlying pace of economic activity remained lacklustre. Moreover, the very latest data suggest that the recent recovery may already be faltering. … Argentina Activity …
23rd April 2013
The slump in commodity markets last week has raised questions over how exposed Latin America is to a period of lower prices. While the risks vary from country-to-country, the bigger picture is that the consumption boom that has propelled the region’s …
22nd April 2013
The past week has seen renewed concern that a slowdown in China will drag on growth in the rest of the emerging world, including Latin America. We think these concerns are justified. But while Latin America as a whole is vulnerable to weaker growth in …
18th April 2013
The decision by Brazil’s central bank to raise interest rates by 25bps – as opposed to the 50bps that was priced into the market – suggests that the tightening cycle is likely to be less aggressive than many seem to expect. In fact, we think it will be …
The Mexican economy has slowed since the start of the year, taking some of the shine off of one of Latin America’s more positive growth stories. Nonetheless, we expect the economy to rebound later this year, and continue to believe that Mexico will …
16th April 2013
Despite hopes for a new pragmatism, there is little evidence to suggest that Nicolas Maduro’s victory in yesterday’s Venezuelan presidential election will herald the dawn of an era of improved economic policymaking. Indeed, we think that the coming years …
15th April 2013
The central banks of Chile and Peru left their respective policy rates unchanged last night and offered little to suggest that a near-term rate move is on the cards. In the case of Chile, though, it is looking increasingly probable that the authorities …
12th April 2013
Brazilian inflation breached the upper bound of its target range last month, tipping the balance in favour of a hike in the benchmark Selic interest rate at next week’s COPOM meeting. Nonetheless, it remains a close call and even if rates are raised next …
10th April 2013
We suspect that the interest rate cutting cycle in Colombia has come to an end. Admittedly, to the extent that there are changes in the next 6-9 months, rates are more likely to fall than rise. But our central scenario is for rates to remain on hold at …
8th April 2013
Various changes to regulated prices, coupled with general uncertainty over the path of food inflation, mean that it has become increasingly difficult to predict month-to-month changes in Brazilian inflation. Our view is that inflation is now close to …
4th April 2013
Argentina’s final offer to ‘holdout’ bondholders looks set to fall well short of the level required to reach an agreement, leaving the government closer than ever to a technical default. With the holdouts due to deliver their verdict on the debt offer …
3rd April 2013
The latest PMI surveys suggest that Latin America’s manufacturing recovery lost a little steam in the final month of Q1. At a country level, Mexico continues to outperform Brazil. … Manufacturing recovery …
2nd April 2013
Time is running out for Argentina to find a workable solution in a US court case which threatens to trigger a messy sovereign default. While the country’s fate is still technically in its own hands, the chances of an agreement being struck with ‘holdout’ …
28th March 2013
Growth in Latin America has continued to rebound in recent months. But while the economy is on course to expand by about 3% y/y in Q1, the pace of growth remains far below the 5-6% y/y rates that were registered in 2010-11. What’s more, the drivers of …
27th March 2013
Our Argentina Activity Indicator suggests that the modest rebound in growth witnessed in late 2012 has continued in the early months of 2013. Even so, we are sceptical about the chances of a sustained recovery this year. One key reason for this is the …
26th March 2013
We suspect that the decision by the Colombian central bank to reduce interest rates by 50bps to 3.25% was an attempt to front-load rate cuts rather than the start of a more aggressive easing cycle. Nonetheless, the move supports our view that rates will …
25th March 2013
Latin American assets and currencies have sold off over the past month as a weaker pace of emerging market growth and fears of an escalation of the euro-zone debt crisis have weighed on investor sentiment. The major exception is the Mexican peso which has …
Today’s Colombian GDP data were strong, but they also signal that a boom in the natural resources sector is harming other parts of the economy – notably industry. As a result, we doubt that GDP will expand by much more than 3.5% this year while interest …
21st March 2013
Latin America’s recent lending boom continues to deflate, strengthening our belief that credit can’t be as big a driver of growth going forward as it has been in recent years. With household balance sheets in many countries already looking stretched, …
20th March 2013
Venezuela’s new foreign exchange system will do nothing to reduce the economy’s reliance upon high oil prices and petro-loans from China. If either of these props give way, “Chavismo” will quickly unravel and the economy could be plunged into a balance of …
19th March 2013
Monetary policy in Latin America has suddenly become interesting. Having kept interest rates on hold for over three years, Mexico unexpectedly cut borrowing costs earlier this month. Meanwhile, Brazil appears to be gearing up to hike rates in the near …
Chile posted another quarter of robust GDP growth in Q4, but we remain concerned about the extent to which growth has become dependent on the strength of domestic demand. Meanwhile, the latest data confirm that Argentina’s economy is on track for a modest …
18th March 2013
We expect the Mexican peso to continue to outperform its peers over the coming months. But while the peso may appreciate towards 12/$ this year, we doubt that the central bank (BANXICO) is about to make a belated entrance into the so-called global …
Chile’s central bank (BCC) stopped short of announcing measures to weaken the peso at last night’s policy meeting, but its accompanying statement revealed mounting concerns about the strength of the currency. Even if the BCC does resume dollar purchases …
15th March 2013
