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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 …
The Central Bank of Chile (CBC) trimmed its benchmark interest rate by 25bps to 5.0% last night following recent signs of a slowdown in growth. By contrast, Peru’s strong consumer activity and rising inflation prompted policymakers to keep rates on hold …
13th January 2012
Brazilian retail sales grew by far more than expected in November. But the strong performance is unlikely to have prevented the economy from slipping into a mild recession in the second half of last year as the industrial sector continued to contract. …
12th January 2012
After the Venezuelan government devalued the official exchange rate peg against the dollar in January of both 2010 and 2011, speculation has been mounting that it will do so again soon. But while devaluation at some point this year seems inevitable, we …
10th January 2012
While Mexican inflation has risen in recent months, the increase appears to have been due to higher food prices and not the sharp depreciation of the peso. With the economy set to slow this year, and food inflation likely to fall back, we continue to …
9th January 2012
Ecuador’s oil-dependent economy showed clear signs of slowing in Q3 2011 as crude prices fell. A sizeable current account deficit and limited external financing options make the dollarised economy vulnerable to further weakness in global oil markets over …
Perhaps a little against the odds, the Brazilian Central Bank (BCB) just about met its inflation target last year as headline inflation slowed to 6.5% in December. Although it may be sticky, inflation should continue to ease over the course of this year …
6th January 2012
While Brazilian industry finally returned to growth in November, we doubt that the increase will mark the beginning of a sustained pick-up in industrial activity. Indeed, the relatively weak outlook for the economy suggests that the sector will struggle …
5th January 2012
A minor upturn in Chile’s November economic activity does little to alter the overall trend towards slower growth heading into 2012. With external demand set to deteriorate further over the course of this year, rate cuts appear highly probable before the …
The latest survey data suggest that the Mexican economy ended 2011 in decent shape. But while the economy may have expanded by about 4.0% last year, we continue to think that this year will be much more challenging and have pencilled in GDP growth of just …
4th January 2012
Uruguay and Argentina both delivered impressive growth in Q3. Nevertheless, while they will both inevitably suffer over the coming quarters as the world economy slows, the key difference is that Uruguay’s relatively solid fundamentals should permit a …
21st December 2011
Growth concerns will increasingly dominate Latin American policymakers’ agendas as we move into 2012. With many of the world’s advanced economies headed towards recession, and China’s economy beginning to cool, external demand for the region’s commodity …
20th December 2011
The Colombian economy has outperformed much of the region in recent quarters and is on track to expand by 5.5% this year. But while it should continue to do relatively well next year, it seems inevitable that the pace of growth will slow as global …
The past month has brought yet more evidence that Brazil’s economy has come rapidly off the boil. Indeed, it seems likely that the country may now, in technical terms at least, be in recession. For now, the rest of the region appears to be holding up …
15th December 2011
Chile’s central bank (CBC) kept interest rates at 5.25% last night. With the euro-zone debt crisis set to escalate in 2012, the CBC could be the next central bank in Latin America to commence rate cuts. By contrast Colombian policymakers, who meet on …
14th December 2011
The looming downturn in the US next year means that Mexican growth will slow in the run-up to July’s presidential elections. The task of raising economic performance therefore looks set to dominate the pre-election debate and, in an environment of weak …
13th December 2011
This report is only available as a PDF. Click to download. … How would a crisis in Europe hit Latin American banks? …
8th December 2011
Recent signs of a more orthodox approach to policymaking in Argentina are encouraging. But there is still no decisive evidence of a shift away from the prevailing economic “model”. Whatever the outcome, growth looks set to slow significantly and we are …
We broadly agree with the consensus view that most emerging economies will hold up well in 2012. But with the US set to slow and the euro-zone heading towards break-up, the path ahead is going to be bumpy. Here are five developments that emerging market …
7th December 2011
In light of our revised assumption on the timing of the euro-zone break-up, we have revised our equity markets forecasts. We think that all of the region’s markets will fall next year, and expect them to underperform their developed market equivalents. …
The Brazilian economy stagnated in Q3 and looks set to contract in Q4. As we said it would be at the time, the central bank’s decision to cut interest rates early has been fully vindicated and the Selic will probably fall further – perhaps to 9.5% in the …
6th December 2011
Recent indicators suggest that the pace of growth in Chile has continued to slow in Q4 as external demand weakens. There is probably now a 50/50 chance of a rate cut in December but, either way, interest rates look set to fall from their current level …
5th December 2011
Balance of payments strains in Venezuela are showing no signs of easing. While President Chavez’s short-term fixes may ultimately enable him to squeeze through October’s presidential election, the whole economic model is unsustainable. As a result, the …
2nd December 2011
The Brazilian Central Bank (BCB) cut interest rates by 50bps to 11.0% last night. The ongoing global turmoil, and subsequent negative impact on Brazilian growth, means that further rate cuts are likely. Indeed, we now expect the Selic rate to fall into …
1st December 2011
Data released today confirmed that Peru was among the region’s star performers in Q3 and is on track to expand by 7.0% this year. Nonetheless, with the outlook for the global economy deteriorating, the risks to our forecast for growth to slow to 4.0% next …
28th November 2011
The past month has brought further signs that growth in Latin America has started to slow in response to the deepening crisis in the euro-zone, the turmoil in world markets and weaker demand from China. Admittedly, Mexican growth surprised on the upside …
The Central Bank of Colombia (BANREP) bucked the regional trend and raised interest rates by 25bps to 4.75% on Friday night. Nonetheless, with inflation now likely to have peaked, we suspect that this marks the last hike in the current cycle. Indeed, …
The relative resilience of Brazilian credit growth when measured in annual terms masks the fact that lending growth has slowed fairly sharply when measured on a month-on-month basis. Industry has borne the brunt of the slowdown, but consumer credit …
24th November 2011
While Colombia is unlikely to avoid the global slowdown altogether, we think it will outperform the likes of Brazil and Mexico next year. We expect GDP growth of 3.0% in 2012 and the strength of the economy means that Colombia may be the last in the …
In a recent visit to the UK, the President of Colombia, Juan Manuel Santos, underlined his ambitious plans for the expansion of his country’s burgeoning commodities sector. But while that may support GDP growth in the near-term and ensure that the economy …
23rd November 2011
Today’s better-than-expected Mexican GDP data present upside risks to our growth forecasts and mean that the economy may now expand by 4.0% this year. Even so, with the outlook for the global economy set to deteriorate over the coming months, it still …
22nd November 2011
The deepening crisis in the euro-zone, coupled with fears of a slowdown in China, has meant that concerns about overheating in Latin America’s major economies have quickly given way to worries over the outlook for growth. The good news is that while Latin …
21st November 2011
The fact that growth accelerated in Venezuela in Q3 but slowed in Chile paints a false picture of the relative strengths of each economy. Both are vulnerable to the drop in commodity prices that we expect over the next year, but the Chilean authorities …
18th November 2011
A combination of weak growth and deepening debt crises in the G7 and softer demand from China means that the economies of Latin America are likely to slow by more than most expect over the next few quarters. But falling inflation will provide room for …
The Central Bank of Chile (CBC) kept its policy rate at 5.25% for a fifth successive month last night. While policymakers in Chile and Peru will continue to exercise caution by not rushing into easing mode, a deteriorating external growth outlook will …
16th November 2011
Initial measures aimed at reducing Argentina’s growing subsidy bill are too small to make a meaningful difference to the public finances. Nevertheless, the commitment to review the entire subsidy system could potentially be far more significant. We remain …
14th November 2011
Policy makers in Peru left interest rates unchanged at 4.25% last night. In the very near-term strong domestic conditions, rising inflation and a planned fiscal stimulus will deter rate cuts, despite a rapidly deteriorating external backdrop. Nonetheless, …
11th November 2011
The official release of October’s inflation data this morning confirmed what yesterday’s leak from the statistics agency had suggested – Brazilian inflation has peaked. We expect it to fall back to within its target range by early next year, calming fears …
Ecuador’s rapid pace of recent growth has been built on rising prices in global oil markets. With energy prices more likely to fall back than rise over the next 6-12 months, we expect the economy to slow substantially in 2012. … Ecuador’s current pace …
9th November 2011
Three months after the sell-off of the peso began, there are still few signs that the weaker currency has passed through to higher inflation. Indeed, we continue to expect inflation to remain close to the Central Bank’s 3% target for the foreseeable …
