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The rise in soybean prices since early June will limit any further downside to Argentine growth but is unlikely to set the economy up for the rapid rebound that many are predicting. In the absence of deep reforms to the policy environment, we doubt that …
26th September 2012
In contrast to much of Latin America, which has undergone a credit-fuelled boom in recent years, bank lending in Mexico has been more restrained. As a result, while many countries in the region are now likely to see credit growth slow, this is not …
25th September 2012
The most striking thing about Argentina’s Q2 GDP data is that the upward bias to growth, which has been evident in the official figures since mid-2007, seems to have eased. Even so, there are no signs of a more credible turn in the official inflation …
24th September 2012
Second quarter GDP data from Colombia are not as strong as they seem at first sight. Almost all of the pick-up in growth to 1.6% q/q was driven by a sharp rise in construction output, which tends to be fairly volatile component of GDP. Indeed, we estimate …
20th September 2012
Latin American credit growth has slowed a little over the past few months, but remains uncomfortably strong in a number of places. We suspect that the biggest threat to financial stability in the region is not a tightening of external financing …
19th September 2012
A victory for Hugo Chávez in next month’s presidential election could culminate in an economic crisis in Venezuela at some point during the next six year term. By contrast, a win for the Opposition’s Henrique Capriles Radonski offers the greatest chance …
17th September 2012
Claims that large-scale foreign currency purchases have caused the Brazilian Central Bank to unwittingly engage in a form of quantitative easing are wide of the mark. But it does seem that during 2010 and 2011 monetary policy was kept too loose in the …
It is not clear that the first two rounds of QE by the Fed provided much of a boost to financial markets in Latin America and we doubt that a third dose of the same medicine will be any different. So while markets have rallied in response to yesterday’s …
14th September 2012
With external risks receding, the likelihood of near-term Chilean rate cuts has fallen. Even so, we remain sceptical about the chances of a sustained recovery in global growth and are sticking to our call for monetary easing in Chile, although we now …
2012 has been a year of mixed fortunes for Latin America’s largest economies. In Chile and Peru, growth has bounced back following a minor wobble in late 2011 and both countries are currently expanding at close to trend rates. By contrast, the economies …
13th September 2012
It is difficult to square the recent statement by the Colombian Finance Minister, Mauricio Cárdenas, that the economy grew by 4.7% y/y in Q2 with the latest activity data. The release of the official figures next week will give a clearer picture, but for …
12th September 2012
According to our estimates, the cuts in electricity tariffs announced by Brazil’s government last week should broadly offset any pick-up in food inflation that is likely to follow the recent spike in global agricultural prices, meaning that headline …
10th September 2012
Peru kept rates on hold last night, but a moderate tightening bias may emerge in the months ahead. As it happens, we suspect that rates will remain unchanged for the rest of 2012 as a stronger growth-inflation outlook is weighed against a delicate …
7th September 2012
Despite government efforts to stimulate the economy, there is scant evidence of a rebound in Argentine growth. Rampant inflation is eating into real wage growth and squeezing household spending, while controls on access to dollars have led to a collapse …
5th September 2012
Mexican industry remains in good shape for now, but forward looking indicators suggest that activity is likely to slow towards the end of the year. This supports our view that GDP growth will slow from about 4% y/y in Q2 towards 3% y/y next year. … …
4th September 2012
The Manufacturing PMI survey for Brazil continued its steady improvement in August, but remains at levels broadly consistent with a stagnation in industrial production. To compound matters, last month’s survey also contained early signs that inflation …
3rd September 2012
The Brazilian economy should fare better in the second half of this year, but we doubt that any rebound will be as brisk as policymakers expect. Indeed, with supply constraints holding back growth, we are sticking to our below-consensus forecast for GDP …
31st August 2012
Growth is still unbalanced in many parts of Latin America. The resilience of domestic demand against a weak global backdrop has helped to bolster service sector activity, even as local industry languishes. Nonetheless, in a few countries the limits to …
30th August 2012
The Brazilian Central Bank (BCB) lowered interest rates by a further 50bps last night and hinted that the end of the current easing cycle may now be very close. We think that the consensus expectation for a strong rebound in growth over the next 6-12 …
There has been some improvement in the outlook for the Colombian economy in recent weeks, but interest rates will probably still fall further. Indeed, with the euro-zone crisis set to deepen and commodity prices likely to reverse their recent rebound over …
28th August 2012
While Peru’s economy held up better than most of its peers in the first half of this year, the drivers of growth are becoming increasingly unbalanced. With domestic demand starting to show signs of overheating, the authorities must be careful to avoid a …
The next 12 months are shaping up to be the most challenging since the 2008-09 global financial crisis for Latin America. A combination of weaker external demand, falling commodity prices and tighter local credit conditions means that regional growth will …
21st August 2012
Chile’s economy surpassed expectations in the first half of this year but a period of slower growth now beckons. We think that weaker domestic demand will reduce the pace of GDP growth to a below-trend 3.5% in 2013, from 5.5% currently, and expect only a …
20th August 2012
The Mexican economy slowed in the second quarter of this year, and growth is likely to ease further over the next 6-12 months as the external environment deteriorates. Even so, in relative terms at least, Mexico looks well placed to weather a renewed …
16th August 2012
Measures unveiled by the Brazilian government this afternoon are good news insofar as they will help tackle some of the supply side problems that are holding the economy back. But any impact will be felt over a period of years rather than months. We …
15th August 2012
Barely three months have passed since a bout of global market jitters sent policymakers scrambling to protect their currencies, but in some countries the pendulum has already swung back towards intervention in order to weaken exchange rates. As it …
The rapid turnaround in fortunes for Brazil’s economy has provoked much head-scratching from policymakers and investors alike. We think the key point is that the slowdown in growth owes as much to problems on the supply side of the economy as it does to …
13th August 2012
The dust has yet to settle on the Mexican general election and so it is probably too soon to draw any firm conclusions as to what the outcome will mean for policymaking. That said, the early signs from president-elect, Enrique Peña Nieto, and his PRI …
9th August 2012
The resilience of private consumption has been the key reason why Chile’s economy has outperformed its larger neighbours in recent months. But we doubt that the current pace of household spending will be sustained and continue to expect GDP growth to ease …
8th August 2012
The whole of Latin America would be worse off as a result of lower commodity prices, but sharp falls would exacerbate clear divisions in the growth outlook within the region. Chile, Colombia and Peru would suffer the greatest losses in export revenues, …
7th August 2012
The modest increase in industrial output in June does not alter the fact that Brazil’s economy and its manufacturers in particular are still struggling. Further stimulus measures seem likely over the coming weeks, but with Brazil’s problems driven as much …
1st August 2012
The key question for Peruvian policymakers is not so much ‘will inflation continue to fall back in 2012?’, but rather ‘will the recent spike in grains prices trigger a rebound in 2013?’. Although we would not discount the risks of a pick-up in food CPI …
The economic outlook for Argentina just keeps getting worse. Not only do we think that the country fell into a recession in Q2 but, judging by the extent of the recent slowdown, it now appears unlikely that Latin America’s third-largest economy will see …
31st July 2012
The decision on Friday night by the Colombian Central Bank (BANREP) to cut interest rates followed deterioration in the performance of the economy. The Bank’s dovish comments suggest that rates could fall further than we had previously anticipated, …
30th July 2012
The Brazilian economy continues to struggle. Having expanded by a meagre 0.2% q/q in the first quarter of this year, there are few signs that growth picked up in Q2. Elsewhere in the region, growth has also started to slow, albeit to a far lesser extent …
27th July 2012
Ollanta Humala’s first year as Peru’s president has been a bittersweet one. While markets have warmed to the ex-army officer’s emergence as a pragmatic centrist, his poor rural support base appears to be rapidly losing faith. We are cautiously optimistic …
26th July 2012
With the outcome of the Venezuelan presidential election still delicately balanced, the authorities are taking steps to pump economic growth. But while that raises the chance that President Chavez will be returned to office in October, paradoxically it …
23rd July 2012
The Mexican Central Bank (BANXICO) left interest rates on hold at 4.5% this afternoon. Strong economic growth and a recent pick-up in inflation mean that the three-year pause may last a while longer. But with external headwinds brewing, we continue to …
20th July 2012
The latest activity data from Colombia indicate that the economy slowed further in Q2. As a result, while policymakers may await concrete evidence that the recent consumer credit boom has ended, it seems increasingly likely that interest rates will be cut …
Judging by the latest data, Argentina’s new Central Bank Charter has cemented the BCRA’s role as a state-financing vehicle. With the economy on the brink of recession, we suspect that the government will tighten its grip on the BCRA’s resources, eroding …
19th July 2012
Having been one of the darlings of the international markets over the past 18 months or so, Colombian equities have had a torrid time in recent weeks. But they remain amongst the best performing in the past year and they should continue to outperform over …
18th July 2012
While there was little doubt that Chile and Peru would leave interest rates unchanged last night, we continue to believe that both countries will lower rates before year-end. On balance, we feel that rate cuts are likely to come slightly sooner in Chile …
13th July 2012
Last night’s decision by the Brazilian Central Bank (BCB) to cut interest rates was widely expected. With policymakers struggling to revive the economy, and external headwinds brewing, we think that interest rates will remain at historically low levels …
12th July 2012
A sharp jump in some agricultural commodity prices has stoked fears of a renewed spike in inflation in Latin America. But we think that those concerns are misplaced. Indeed, we expect the agricultural price shock to prove to be temporary and think that …
11th July 2012
If Mexico’s President-elect, Enrique Peña Nieto, is to achieve 6% GDP growth he will have to press ahead with reforms. However, with the PRI falling short of a majority in Congress, he will need to gain the support of opposition parties if he is to be …
10th July 2012
Argentina’s tightly managed exchange rate is not compatible with the expansive macro policies that have driven inflation up to double-digit levels. Nonetheless, the authorities seem determined to have it both ways. Against this backdrop, the most …
9th July 2012
The recent data support our belief that Latin America is heading for a period of below-trend economic performance. Imbalances in the drivers of growth have left many countries increasingly exposed to falling commodity prices and weaker global risk …
5th July 2012
The current pace of credit growth in Brazil remains unsustainable – and the longer it continues, the bigger the risk of a messy ending further down the line. … Brazil’s looming credit …
4th July 2012
Structural rigidities mean that inflation will be slower to fall back in Uruguay than in the rest of the region this year. As a consequence, policymakers have less space to support growth via monetary easing than their Latin American peers. We continue to …
