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The rebound in financial markets across Latin America since the start of the year has lost some momentum in recent weeks. Having rallied by 10% or so in the first two months of this year, most of the region’s equity markets have posted more modest gains …
29th March 2012
Latin America is one of the few regions to have benefitted from the $25pb jump in oil prices over the past six months or so: higher prices provide a prop to regional growth and, for now at least, the impact on inflation will be limited. The benefit of …
28th March 2012
Official GDP data continue to overstate the health of Argentina’s economy and we estimate that growth slowed to 4.5% y/y in Q4. The current economic model is reaching its limits, and with little appetite for reform on the part of the authorities, a …
27th March 2012
The latest changes to Argentina’s Central Bank Charter will pave the way for further monetisation of a deteriorating fiscal balance. As such, any remaining hopes that the Fernández government is about to embark on a more orthodox economic agenda appear to …
23rd March 2012
Brazil’s so-called “currency war” has lost a little of its momentum in recent days, as the real – like most EM currencies – has weakened. This provides an ideal opportunity to take stock of the recent escalation of the “currency war” and assess how events …
Following bumper growth in Colombia last year and a strong start to this year, concerns about overheating are likely to resurface. We remain fundamentally upbeat on the economy and expect a soft landing, with GDP growth slowing from 5.0% this year to 3.5% …
22nd March 2012
News that Brazil last year overtook the UK to become the world’s sixth largest economy is further evidence, if any was needed, of the continued rebalancing of global economic power towards the emerging world. But at the same time, the fact that Latin …
20th March 2012
Today’s release of Chilean Q4 GDP data confirms that the economic slowdown in late 2011 was not as marked as many had initially feared. What’s more, the most recent monthly indicators suggest a pick-up in activity in Q1. While this is encouraging news, …
19th March 2012
The Mexican Central Bank (BANXICO) left interest rates on hold at 4.5% this afternoon after the outlook for economy brightened. Rates look set to remain on hold for the time being. But while the market expects rates to rise over the coming year, we …
16th March 2012
The immediate outlook for Latin America has brightened in recent months as fears of a renewed crisis in the developed world have eased. But even so, while the region is likely to outperform most others over the next year or so, the path ahead will remain …
15th March 2012
We remain fundamentally upbeat on the outlook for the Colombian economy. Nonetheless, the recent pick-up in capital inflows has seen a shift away from long-term flows and towards more volatile short-term funding. This, coupled with concerns about the pace …
The outlook for Mexican economy has brightened in recent months. Demand from the US is strengthening, while there are signs that domestic activity is recovering. But even so, we doubt that the current strong pace of growth can be sustained and suspect …
13th March 2012
Uruguay is undoubtedly one of the major losers from a lurch towards protectionism within the Mercosur block. To the extent that there is a silver lining, however, it is that in the near-term these measures will put the dampers on an economy which is …
12th March 2012
Peru’s central bank (BCRP) kept interest rates on hold at 4.25% last night, maintaining a resolutely neutral monetary policy bias. Nevertheless, with inflation set to fall back more sharply in the coming months, we believe that the policy debate will edge …
9th March 2012
The decision by the Brazilian Central Bank (BCB) to accelerate the pace of interest rate cuts reflects mounting concerns among policymakers about the sustainability of Brazil’s “twin-speed” growth model. Further cuts are likely and we now expect the …
8th March 2012
The latest opinion polls suggest that the Mexican presidential election may be closer than expected. Further gains for the left-wing Andrés Manuel López Obrador may spark some turbulence, but in general the market impact should be fairly muted. Rather, it …
7th March 2012
Brazil avoided falling into recession in the fourth quarter of last year by the narrowest of margins, thanks to a renewed pick-up in consumer spending. But while there are signs that growth has accelerated further in Q1 of this year, familiar concerns …
6th March 2012
Large capital inflows to Latin America have resumed in recent months. If we are right in expecting the euro-zone crisis to worsen later this year, then risk appetite is likely to deteriorate and lead to a reversal of capital flows to emerging markets. But …
5th March 2012
The tentative recovery in Brazilian industry is already running into headwinds in the form of a resurgent currency. But while the latest set of measures aimed at stemming the rise in the real are unlikely to do much harm, neither are they likely to have …
1st March 2012
Recent headlines questioning the validity of Argentina’s official data tell us little we don’t already know. Nevertheless, the fact remains that government manipulation is widening distortions in the real economy and we continue to expect this to be the …
Peru’s economy was one of Latin America’s standout performers in 2011, expanding by 7%. Looking ahead, the country’s solid macro fundamentals, combined with ample space for a policy response in the event of a relapse of external demand, imply that growth …
28th February 2012
Having shown signs of slowing in the second half of last year, Brazilian credit growth appears to have picked up again in recent months. But while this should give a boost to overall GDP growth in the first quarter of this year, the bigger picture is that …
27th February 2012
The Central Bank of Colombia (BANREP) increased interest rates by 25bps to 5.25% on Friday night. With concerns about the strength of the peso and unbalanced growth coming back onto the agenda, we doubt that there will be further aggressive rate hikes. …
Venezuelan markets have rallied in recent days on the back of renewed speculation that the President, Hugo Chavez, will not be able to stand in October’s elections. A victory for the Opposition’s Henrique Capriles Radonski would brighten the economic …
24th February 2012
Activity in much of Latin America appears to have picked up over the past couple of months, following the slowdown seen over the second half of last year. But while worries about the overall pace of growth are easing, concerns about its unbalanced nature …
22nd February 2012
Recent data suggest that Mexico made a decent start to Q1. However, growth remains vulnerable to a deterioration in external conditions, particularly in the US, and while we are more upbeat than a few months ago we are not convinced that the pick-up can …
21st February 2012
Evidence of a deceleration of economic growth in Q4 2011 may signal the start of a more protracted slowdown in Argentina. Without a concerted near-term tightening of policy, it seems unlikely that a hard landing will be avoided further ahead. … …
17th February 2012
Whereas all of Latin America’s equity markets would be hit by a renewed bout of investor risk aversion, some appear to be more vulnerable than others. Specifically, Brazilian, Argentine and Mexican equities look likely to underperform in times of …
Despite cutting some R$55bn in spending from its 2012 budget, Brazil’s government may still fall short of its fiscal target for this year. That would not necessarily be a disaster from the point of view of the health of the public finances – but it will …
16th February 2012
Hopes are rising that further unconventional monetary easing by Western central banks – be it a third round of quantitative easing (QE) by the Fed, or Long Term Refinancing Operations (LTROs) by the ECB – will provide a boost to financial markets in Latin …
Chile’s central bank (CBC) kept interest rates unchanged at 5.0% last night in response to a small rebound in domestic economic activity and a temporary recovery in global market sentiment. The latest move appears to be consistent with our expectation for …
15th February 2012
Recent data have given mixed messages on the outlook for inflation in Latin America. On the one hand, inflation seems to be firmly on a downward path in Brazil and Peru. Yet the drop in Chilean inflation has been far more modest and in Mexico inflation …
14th February 2012
The opposition coalition in Venezuela (MUD) has selected Henrique Capriles Radonski to face Hugo Chavez in October’s presidential election. While the outcome of the vote is too close to call at this stage, it is clear that the onset of gradual economic …
13th February 2012
Signs that Chile’s economy regained some momentum heading into 2012 should prompt the central bank (CBC) to keep rates on hold at this month’s meeting. Nevertheless, if the bright start to the year in global markets fizzles out – as we think possible – …
8th February 2012
The close links between Mexican banks and the euro-zone have raised fears that the break-up of the monetary union will trigger a banking crisis in Mexico. But while we would caution against dismissing such concerns altogether, Mexican banks appear well …
7th February 2012
The economies of Asia and Latin America should be able to weather any financial contagion stemming from Europe’s debt crisis. But the economies of emerging Europe – notably Hungary, Turkey and the Balkan countries – look far more vulnerable to possible …
6th February 2012
On past form at least, the latest set of measures announced by Colombia and Brazil to curb currency strength are unlikely to have a lasting impact on foreign exchange markets. Instead, fiscal reforms hold the key to preventing excessive currency …
Although symptoms of overheating remain evident in Uruguay, these concerns should take a back seat in 2012 as inflationary pressures fade and demand from Brazil and Argentina slows. The key point is that a weaker external environment may help to induce a …
3rd February 2012
The rise in January’s manufacturing PMI adds to recent evidence that Brazil’s economy has turned the corner. We expect interest rates to be lowered by a further 100bps to 9.5% over the next couple of months, but any cuts beyond this will depend on the …
1st February 2012
The Central Bank of Colombia (BANREP) last night surprised the market once again by hiking interest rates by 25bps to 5.0%. But while this latest decision has cast some doubt over view on interest rates will be reduced, we continue to expect a …
31st January 2012
Growing imbalances in the drivers of Chilean growth leave the economy vulnerable to a deterioration of its terms of trade, particularly via falling metals prices, over the year ahead. With this in mind we expect to see a further 100bps of rate cuts in …
30th January 2012
The IMF’s forthcoming consultation with Argentina on a new inflation methodology seems unlikely to succeed where previous missions have failed. But with balance of payments strains growing, the allure of a return to global capital markets is getting …
27th January 2012
Financial markets in Latin America have made a flying start to 2012 following a recovery in global risk appetite and an improvement in the incoming economic data. Nonetheless, we would caution against getting too carried away. If the euro-zone begins to …
26th January 2012
The recent rebound in commodity prices has eased concerns about growth outlook for Latin America. But the key point remains that the windfall from high prices has been spent, rather than saved, leaving the region vulnerable to slower growth if commodity …
Initial fears that the election of Ollanta Humala would mark a departure from the orthodox economic policies of his predecessor, Alan García, have proven to be wide of the mark. Even so, satisfying both ends of the political spectrum in the face of a …
25th January 2012
Following break-neck Q3 GDP growth in Colombia, there have been some concerns that the economy is overheating. But the recent activity data suggest that the pace of growth is now easing, while inflation is falling. With the external environment set to …
20th January 2012
This is the first edition of our new monthly publication Latin America Watch. This will analyse major talking points in the region and preview key data and events. In this issue we look at the impact a slowdown in China could have on Latin America, and …
19th January 2012
There were few surprises from Brazilian policymakers last night as they cut interest rates by 50bps to 10.50% and signalled further easing to come. Despite tentative signs that the economy has picked up a little in recent months, there is nothing here to …
Data released today provided further evidence of a moderation in Peru’s economic activity in late-2011. Going forward, growth is likely to slow further, but ample space for policy stimulus will prevent a collapse. We are forecasting a below-consensus 4% …
16th January 2012
Although a flurry of protectionist policies may provide some temporary relief from strains in Argentina’s balance of payments, these measures will ultimately prove self-defeating. The problem is that the current “model” is dependent on Argentina running a …
