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We expect the Mexican economy to outperform by recent standards over the next couple of years. By contrast, growth in Brazil – which until now has been the star performer out of Latin America’s two largest economies – is likely to be relatively …
27th November 2012
Colombian interest rates will probably fall further next year as external headwinds cause GDP growth to slow. By contrast, a weaker global economy could be helpful for Peru, where the latest economic data have revealed some early signs of overheating. … …
26th November 2012
Yesterday’s ruling by a US judge implies that if Argentina continues to play hardball on its holdout debt it will find itself in technical default within a matter of weeks. This may not be the economic disaster that some expect, but it has the potential …
22nd November 2012
The economies of Latin America will continue to outperform their peers in the developed world over the coming quarters, but growth is set to slow in 2013 and will be lacklustre by the standards of the past few years. The region’s recent resilience in the …
21st November 2012
Mexico’s labour market reforms are unlikely to lead to a swift acceleration in GDP growth in the very near-term. But with the re-election of the PRI seemingly having ended the political deadlock that has hampered the economy’s development for more than a …
20th November 2012
Chile’s economy posted another quarter of solid GDP growth in Q3, as an acceleration of consumption and investment offset export weakness. But a sharp rise in the current account deficit suggests that the current pace of growth will be difficult to …
19th November 2012
Mexico’s economy slowed by more than expected in Q3 and the latest monthly activity data suggest that growth in Q4 is likely to be even weaker. This should end speculation that the central bank might hike interest rates in the face of above-target …
16th November 2012
September’s activity data show that Peru remains among the region’s fastest growing economies and it seems that GDP probably grew by 6.5% y/y in Q3. We expect Peru to be one of Latin America’s best performers in 2013, but looser fiscal policy poses a …
15th November 2012
The Capital Economics Argentina Activity Indicator suggests that Argentina’s economy pulled out of recession in Q3 and is on course to register modest growth in Q4. But this turn-around has been largely driven by a weather-related improvement in …
14th November 2012
A combination of quick-fix remedies may enable the Venezuelan economy to withstand the loss of exports revenues if oil prices fall over the next couple of years. But with the authorities running out of financing options, there is a growing risk of an …
13th November 2012
Data released later this month are likely to show that after having stagnated for much of the past year, Brazil’s economy roared back to life in Q3 on the back of substantial policy stimulus. But while GDP looks on course to expand at a decent pace in Q4 …
12th November 2012
Last night’s central bank meeting in Peru provided further evidence that policymakers are not considering rate hikes despite vigorous domestic demand and credit growth. Instead, concerns over the strength of the sol and lending in dollars suggest that …
9th November 2012
The recent seizure of a handful of small Brazilian banks and a Colombian brokerage underline the extent of financial excesses in parts of the region in recent years. While there may be additional bank failures in the future, the authorities have the …
8th November 2012
Increased savings and investment levels have fuelled a surge in construction activity in Latin America’s Andean economies, helping to raise their long-run growth potential. But in a few countries, higher savings have been driven by terms of trade gains …
7th November 2012
We estimate that an increase in motor vehicle exports to the US could add around 0.5% to Mexican GDP in each of the next four years. This supports our expectation that the Mexican economy is comparatively well placed to overcome the global headwinds that …
6th November 2012
The sharp fall in Brazilian industrial production in September is partly a payback from the large monthly increases in output seen in July and August. The bigger picture is that policy stimulus has kick-started growth in industry, but that the pace of …
1st November 2012
A series of hawkish comments from Mexican policymakers has fuelled speculation that the central bank may finally be on the cusp of hiking interest rates – having kept them at record lows for the best part of four years. But we’re not convinced. Inflation …
31st October 2012
A recent ruling by a US court has raised questions over whether Argentina will be pushed into a fresh debt default. On closer inspection, the issue remains one of willingness to pay rather than ability to pay. Nonetheless, a combination of populist …
30th October 2012
Chile’s latest economic activity data are not as bad as they first appear. Much of the weakness in retail sales and manufacturing can be put down to the extended independence holidays. That said, we still expect growth to ease over the coming months and …
The Colombian central bank (BANREP) appears to have signalled that further interest rates cuts are contingent upon a deterioration in the global environment. We think that a deepening of the euro-zone debt crisis and sharp falls in commodity prices will …
29th October 2012
Fears that the ‘pesofication’ of foreign currency debt by one Argentine province earlier this month will lead to a wave of local government defaults are overdone. Even so, the provinces face a funding squeeze in the coming years as slower economic growth …
25th October 2012
The strength of local currencies is once again starting to trouble policymakers across Latin America. But while there has been a tendency to blame exchange rate appreciation on a third round of quantitative easing by the US Fed, strong currencies are …
24th October 2012
The fact that over half of FX transactions in Venezuela have already been forced onto the black market – where the bolivar trades at much weaker rates – means that the country has already seen a sharp fall in its “effective” exchange rate. Even so, we …
22nd October 2012
Chilean policymakers kept interest rates on hold last night amid growing concerns over the strength of the peso. The resilience of domestic demand means that rates should stay unchanged in the near-term, but we are sticking with our non-consensus call for …
19th October 2012
There are some parallels between the money printing being undertaken by Argentina’s central bank (BCRA) and quantitative easing policies in the West. But in contrast to the developed economies, Argentina’s monetary transmission mechanism does not appear …
18th October 2012
Development of the Colombian oil sector will provide an important prop to economic growth over the coming years, but it is not unambiguously good news, particularly for non-commodity exporters. So while GDP should continue to expand by 4-5% per year, it …
17th October 2012
The Central Reserve Bank of Peru (BCRP) kept interest rates at 4.25% last night and is unlikely to make any changes to its benchmark rate until well into 2013. Concerns about the strength of the currency mean that any near-term tightening is more likely …
12th October 2012
Last night’s decision to cut Brazilian interest rates by 25bps to a new record low of 7.25% probably marks the end of the current easing cycle. But while most forecasters now expect the authorities to start hiking interest rates next year, we think they …
11th October 2012
The surge in Brazilian property prices seen over the past few years appears to be slowing, but the housing market still looks significantly overvalued – perhaps by as much as 30-50%. In this month’s Watch we explain why. … Brazil's housing market: …
9th October 2012
The Capital Economics Argentina Activity Indicator points to a slight improvement in Argentine growth over the past month or so. Even so, we think that GDP probably contracted by around 1.5% y/y in Q3. … Argentina Activity Indicator …
Hugo Chávez’s re-election as President of Venezuela is likely to result in a sharp sell-off in the bond market over the coming days and a 40-50% devaluation of the bolivar before year-end. More importantly, it means a continuation of policies that have …
8th October 2012
The latest data confirm that Ecuador’s recent commodity boom has faded in 2012. With elections looming early next year, the main risk is that attempts to revive growth via looser fiscal policy will leave the economy even more vulnerable to a sharp drop in …
The announcement of labour market reforms in Mexico is a step in the right direction and should help to raise productivity growth over the coming years. That, along with Mexico’s already strong competitive position in comparison to the rest of Latin …
5th October 2012
As things stand, the spike in global food prices since early June is likely to push up annual inflation in Latin America by around 0.5-1.0%-pts over the next six months or so. But while this is likely to delay any policy easing in response to a weaker …
3rd October 2012
The Colombian central bank’s (BANREP) decision to keep interest rates on hold does not necessarily signal the end of the easing cycle, but it does suggest that further cuts may be punctuated by pauses. We continue to expect rates to fall by another 50bps …
1st October 2012
The pick-up in September’s manufacturing PMI adds to recent evidence suggesting that policy stimulus is starting to take effect in Brazil. We suspect that the turnaround in the real economy will ultimately be more lacklustre than most now expect, but even …
The Uruguayan Central Bank’s decision to hike interest rates by 25bps is unlikely to do much to tackle stubbornly high inflation. Strong price pressures are largely due to structural rigidities in the domestic economy, which limit the effectiveness of …
There are signs that policy stimulus is starting to take hold in Brazil. Retail sales are growing, car sales hit a record high in August and even output in the beleaguered industrial sector has started to pick up. On the basis of the (albeit limited) data …
27th September 2012
The Mexican government’s decision to hedge its oil revenues for next year will keep the fiscal position on a stable footing in the near-term. Nonetheless, a heavy reliance on oil revenues casts doubt over the medium-term sustainability of the public …
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
