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A recent drop in regional export growth can be attributed to a number of factors, of which slowing Chinese commodity demand may be the most prominent. We expect export revenues to come under further pressure in the short-to-medium term as commodity prices …
15th June 2012
Increased intervention by the Colombian authorities in the foreign exchange market may halt the appreciation of the peso, but it is unlikely to significantly weaken it. Instead, a drop in commodity prices remains the most likely trigger for a weaker …
14th June 2012
Concerns that Latin America might be spiralling towards a new era of protectionism have emerged in 2012. But while it is true that the region as a whole has seen an increase in protectionist trade measures, these have been largely confined to Argentina …
13th June 2012
While overall credit growth in Colombia is slowing, consumer lending remains uncomfortably strong. The deepening crisis in Europe will probably prevent policymakers from raising rates over the next few months, but we still think that interest rates could …
11th June 2012
Today’s decisions by Peru and Mexico to leave interest rates unchanged support our belief that, in the near-term, most of the region’s policymakers will await clearer evidence on the health of the global economy before adjusting monetary policy. Further …
8th June 2012
In line with our forecast, inflation has eased across most of the region in 2012 as the effects of last year’s food price shock work their way out of the annual comparison. We expect this trend to continue over the remainder of the year, pushing inflation …
6th June 2012
A weather-related collapse in agricultural production is the main reason for Brazil’s desperately weak growth in the first quarter of this year. These effects will be temporary and should reverse over the course of this year. But even so, our …
1st June 2012
The latest opinion poll in Mexico suggests that the left-leaning Andrés Manuel López Obrador has made a late charge ahead of July’s presidential election. That has coincided with a sharp sell-off of the peso. However, Enrique Peña Nieto is still on course …
Last night’s decision by the Central Bank of Brazil to slow the pace of interest rate cuts suggests that we are getting close to the end of the easing cycle. Nonetheless, we continue to expect the benchmark Selic rate to be lowered further over the coming …
31st May 2012
Argentina’s ample foreign reserves and tight capital controls mean that the government will not be forced into allowing the peso to devalue sharply in the near-term. That said, the current managed exchange rate regime is not sustainable and, unless …
30th May 2012
A strong recovery in investment spending has helped to boost Peru’s economy so far this year. Despite concerns from some quarters about the pace of domestic demand growth, we think that the threat of overheating remains fairly contained at present. … …
28th May 2012
Our previous analysis, suggesting that Brazilian and Argentine equities would be most vulnerable to a general spike in risk aversion, has been borne out in the recent sell-off. Mexican markets, on the other hand, have been a touch more resilient than we …
25th May 2012
Financial markets across the whole of Latin America have been hammered over the past month by a euro-zone related flight to safety but amid the sell-off the collapse in the Brazilian real stands out. It has weakened by over 5% against the US dollar this …
We were one of the first forecasters to predict a recession during the Fernández government’s second term. Even so, the extent of the recent slowdown has been greater than even we had anticipated, and it now seems more likely than not that Argentina will …
23rd May 2012
The recent sale of debt by the Venezuelan authorities will help to bolster economic growth ahead of October’s presidential election. But the fact that the debt issuance has effectively been monetised by the central bank will increase inflation pressures …
We think that first quarter GDP growth in Brazil will be somewhat stronger than the monthly economic activity indicator produced by the central bank (BCB) suggests. But there is no sign yet of a much needed rebalancing of growth towards investment and …
22nd May 2012
The Chilean economy registered strong growth in Q1, but we doubt that the impressive performance can be maintained. With copper prices already down by about 10% so far this month, and likely to fall further as global headwinds intensify, we expect GDP …
18th May 2012
The direct exposure of Latin American banks to the deepening crisis in Spain is not as great as it seems at first sight. Even so, there are at least three ways in which the region’s banks could be hit by financial contagion from the euro-zone’s debt …
Mexican Q1 GDP growth was not only stronger than expected, but the drivers of the increase were broad-based. Although the economy may lose some of its steam over the coming quarters, it is well placed to withstand external shocks. That reinforces our view …
17th May 2012
Not content with waging a “currency war” against the rest of the world, Brazil’s government is now doing battle with its own banks over the high interest rates charged on loans to consumers and businesses. Various factors explain the high lending spreads …
Renewed fears about the future of the euro-zone have sparked a retreat from all risky assets in recent days, and Latin American currencies have been no exception. For now, the risks remain skewed to the downside and it is not inconceivable that, in an …
16th May 2012
Relative to the rest of the world, at least, the immediate outlook for Latin America remains good. Nonetheless, vulnerabilities are starting to emerge in a number of the region’s economies, which are likely to result in a period of below-trend growth over …
14th May 2012
History indicates that it is very difficult for a country to get rich purely through the extraction of natural resources. In order to meet President Piñera’s target of becoming a developed nation, Chile needs to diversify its productive base by creating …
9th May 2012
The emergence of a political consensus in favour of opening up the oil industry in Mexico has increased the likelihood that the winner of July’s presidential election will take steps to increase the participation of the private sector. We estimate that …
8th May 2012
Protectionist trade controls in Argentina are already taking a toll on growth in neighbouring countries, with Paraguay and Uruguay hardest hit. In the longer-term, however, it may be Argentina that pays the greatest price as a result of disruptions to …
In contrast to most other emerging markets, the Mexican IMEF manufacturing survey rose in April. With the relatively cheap peso maintaining the competitiveness of exports and demand from the US relatively robust, Mexican industry looks set to outperform …
3rd May 2012
April’s manufacturing PMI survey for Brazil contains little in the way of good news. Not only does the drop in the headline index suggest that industrial output is falling once again, but the forward looking components of the survey suggest that a …
2nd May 2012
An improvement in the global backdrop helped Peru’s economy to gather pace in Q1. This has led to the re-emergence of some familiar concerns over the strength of domestic demand and credit growth. Despite this, we think rate increases are fairly unlikely …
1st May 2012
We are making some small tweaks to our forecast for interest rates in Latin America. If the global economy weakens later this year, as we expect, it is still likely that most central banks in the region will loosen policy. But in the meantime it seems …
30th April 2012
Last week’s news that Argentina is to nationalise YPF has helped to deflect attention from further signs that the economy is slowing sharply. A growing dependence on temporary fixes to prop up an unsustainable growth model reinforces our expectations for …
27th April 2012
The decision by Brazil’s central bank earlier this month to cut interest rates once again has raised concerns in some quarters about the outlook for inflation over the rest of this year. As it happens, inflation in most countries (including Brazil) has …
25th April 2012
History suggests that the nationalisation of YPF may do little to deter FDI in Argentina’s energy sector. Nevertheless, we suspect that it will have a more significant impact on investment flows into the wider economy, making the current ‘model’ …
24th April 2012
The latest opinion polls suggest that not only does the PRI’s Enrique Peña Nieto have a healthy lead in the race to July’s presidential election, but that his party may also take control of Congress. That would give him a clear path to press ahead with …
20th April 2012
The decision earlier this week by Brazil’s central bank (BCB) to cut interest rates once again – and signal further easing ahead – has revived talk about a “floor” on interest rates in Latin America’s largest economy. At present, the minimum rate of …
It was beginning to feel like somebody had turned the clock back twelve months. With the first quarter of 2012 bringing a renewed sense of calm to global markets and a rebound in activity across the region, the policy debate in Latin America had started …
19th April 2012
The Colombian credit boom appears to be unsustainable. Lending growth has been excessive, while new loans have been increasingly funded via wholesale foreign funding. We expect tighter macroeconomic policy – including interest rate hikes towards 6% – to …
The decision by the Central Bank of Brazil last night to cut interest rates by 75bps to 9% was widely expected. Instead, the critical issue for investors is whether this marks the end of the current easing cycle and, perhaps more importantly, how quickly …
Both Chile and Peru kept interest rates unchanged in April and signalled that moves in either direction are unlikely in the near-term. Further ahead, if we are right in expecting the global economic backdrop to weaken again, Chile looks the more likely to …
18th April 2012
The recent slowdown in Brazilian bank lending highlights the unsustainable nature of rapid credit growth in parts of Latin America. Credit risks are greatest in Argentina and Venezuela, while the Colombian financial system has also become more vulnerable …
16th April 2012
Having stagnated over the second half of 2011, the early signs are that Brazil’s economy grew by around 1% q/q in the first quarter of this year. But while Brazil’s return to growth is clearly good news, the economy remains stubbornly “two-speed”. … …
13th April 2012
While Brazilian GDP growth has outstripped that of Mexico in recent years, it has been very unbalanced. That has left Mexico better placed to weather any external shocks. As a result, we expect Mexico to outperform Brazil this year, while its equity …
12th April 2012
There are several reasons why we would have expected to have seen a sharp rise in Brazilian house prices over the past five years. But even so the sheer scale of the recent jump in prices is difficult to justify. As things stand, we estimate that the …
11th April 2012
Argentina’s experience after the collapse of the peso ten years ago supports the view that Greece, and perhaps other peripheral economies, would ultimately be better off leaving the euro-zone rather than struggling on with the current mix of austerity, …
10th April 2012
As the most open and commodity-dependent of the major Latin American economies, Chile benefited from an improvement in global conditions in Q1. The road ahead will not be a smooth one however and, if we are right in expecting the external backdrop to …
5th April 2012
Rumours that Argentina’s largest energy company, YPF, is on the brink of being nationalised have seen the company’s share price plummet and sovereign risk premia spike over the past few days. Not only would such a move be unlikely to relieve strains in …
On the face of it, news that Venezuelan inflation is falling seems to support President Chavez’s claims that price controls will tame inflation. In reality, though, they are not the long-term solution to Venezuela’s inflation problem. Moreover, they risk …
3rd April 2012
The latest survey data suggest that the Mexican economy may have expanded by an impressive 1.2% q/q in Q1. Even so, with the risks to growth and inflation to the downside, policymakers have recently lent weight to our view that interest rates are far more …
The manufacturing PMI survey suggests that after a torrid 2011, Brazilian industry stabilised in the first quarter of this year. But in truth the link between the manufacturing PMI and actual output is not particularly strong. And in any case, signs that …
2nd April 2012
The Mexican presidential election race formally begins today and the latest polls suggest that the PRI’s Enrique Peña Nieto is likely to triumph in July’s vote. But while Mr. Peña Nieto has identified many of the key reforms that are required to boost the …
30th March 2012
Uruguay’s Central Bank (BCU) kept interest rates at 8.75% last night but maintained a hawkish tone on inflation. Based on our outlook for growth to slow by more than most anticipate this year, overheating concerns should fade over the coming quarters and …
