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Brazilian industrial production expanded at its fastest pace in a year in Q1 but the outlook for Q2 and beyond is less promising. The bigger picture remains that Brazilian growth is still being driven by consumer spending and that manufacturers are being …
4th May 2011
Peruvian markets have been hammered since Ollanta Humala, the left-wing candidate, won the first round of the Presidential election last month. There are several parallels to Brazil’s experience during the emergence of President Lula in 2002 and the to …
3rd May 2011
The past month has brought further evidence of rising inflation in Latin America. For the most part, this is still being driven by higher food and energy prices, which in turn are a reflection of the spike in global commodities. But in some countries – …
27th April 2011
Last night’s decision by the Brazilian Central Bank (BCB) to raise interest rates by a smaller-thanexpected 25bps illustrates the bind that policymakers currently find themselves in: how do you tackle rising inflation without stoking speculative capital …
21st April 2011
Concerns over rising inflation have displaced fears about speculative capital inflows and excessive currency appreciation at the top of the list of policy priorities. Interest rates look set to rise further over the coming months in most countries (with …
20th April 2011
One of the questions that we are most frequently asked is why are Brazilian interest rates so high? We think that the answer lies in the fact that fiscal policy is too loose and, more generally, that Brazil’s savings rate is very low by international …
18th April 2011
The Central Bank of Chile (CBC) hiked interest rates by 50bps to 4.5% last night. With the near-term outlook for growth still very good and inflation likely to top 5% in Q4, further policy tightening is on the way. We are revising up our forecast and now …
13th April 2011
It appears that the Presidential election in Peru is heading for a second round of voting between Ollanta Humala and Keiko Fujimori on 5th June. While a victory for Ms. Fujimori would perhaps be the most market-friendly outcome, comparisons between Mr. …
11th April 2011
President Rousseff's trip to Beijing this week is likely to produce a welter of statistics illustrating how both countries have benefitted from each other's respective development in recent years. But while it's true that Brazil has been one of the …
The fact that the Central Reserve Bank of Peru (BCRP) raised interest rates by 25bps last night, rather than the 50bps that had seemed possible, suggests that policymakers will continue to tighten policy in small steps for now. Nevertheless, with growth …
8th April 2011
If recent evidence is anything to go by, Brazil’s latest effort to stem the rise in the real is unlikely to have a lasting impact on the markets. While rising inflation should mean that the authorities become more tolerant of a stronger currency in the …
7th April 2011
The IMF is in Buenos Aires this week on its second technical mission to assist the development of a new inflation index. It is difficult to accurately assess the starting point for discussions, but the balance of evidence suggests that inflation is …
6th April 2011
The increase in the Mexican IMEF manufacturing index last month suggests that the industrial sector has continued to benefit from stronger demand in the US. But while the Mexican industrial sector should continue to perform well in the short-term, growth …
5th April 2011
The sharp jump in Brazilian industrial production in February, coupled with the rise in the March’s trade surplus, should help to ease concerns about the unbalanced nature of recent growth and will no doubt revive calls for more aggressive hikes in the …
1st April 2011
The recent spike in commodity prices is a double edged sword for Latin America. Given that most countries are net commodity exporters, there will be some boost to growth. But at the same time, higher commodity prices will also help to maintain upward …
29th March 2011
Presidential election races in Peru have a history of being unpredictable. What initially seemed to be a three-way battle to succeed the outgoing Alan Garcia, now appears to be a five-way tussle ahead of the first round of voting on 10th April. The …
The recent spike in global commodity prices is a much bigger problem for policymakers in Latin America than it is for policymakers in the developed world. This is for two reasons. First, food and energy account for a much larger share of household …
25th March 2011
We are nudging up our end-year forecast for Colombian interest rates to 4.5% (from 4.0%) in response to the recent spike in global commodity prices. … Nudging up our forecast for Colombian …
21st March 2011
The minutes from this month’s interest rate setting meeting in Mexico, released earlier today, were unambiguously hawkish. But while the chances of an interest rate rise in the next few months have clearly increased, we don’t think that it is a done deal …
18th March 2011
Q4 GDP data show that the underlying pace of growth in Chile has started to ease. Nonetheless, it is the unbalanced nature of growth – and principally the strength of domestic demand – that is the big concern for policymakers. Inflation will accelerate …
The growth outlook for Latin America remains good but inflation looks set to accelerate over the coming quarters. Further policy tightening is likely in most countries, although in most cases the aggressive interest rate hikes priced into the market are …
16th March 2011
Last night the Central Reserve Bank of Peru (BCRP) hiked interest rates by 25bps to 3.75%, as expected. With the outlook for inflation deteriorating interest rates look set to rise further over the coming months. We expect rates to rise by an above …
11th March 2011
Mexico’s labour market is on the mend. But while employment has picked up and the quality of new jobs seems to be improving, this has yet to translate into a pick-up in pay growth. … Mexico's job recovery yet to feed into higher …
10th March 2011
The recent pick up of commodity prices, notably food, will probably drive inflation higher than we had previously expected this year. The good news is that the effects of the commodity price shock should prove to be temporary. The bad news is that, with …
9th March 2011
The recent spike in oil prices will impact on different economies within Latin America in different ways. Although it is difficult to say with any great precision, the biggest winner is likely to be the Venezuelan government while the biggest loser will …
7th March 2011
Brazil’s economy grew at a slower-than-expected pace in Q4 but the more worrying news is that the drivers of growth are becoming increasingly unbalanced. … Brazilian consumers still going …
3rd March 2011
The modest rebound in Brazilian industrial production in January is good news and the surveys suggest that output picked up further over the course of last month too. But the bigger picture remains that manufacturers are still struggling to live with a …
2nd March 2011
Last month’s slowdown in Chilean retail sales growth, coupled with a pick-up in the manufacturing sector, will help to ease mounting concerns about the unbalanced nature of recent growth. But in reality this is only one month’s data. The bigger picture …
28th February 2011
As inflation continues its steady rise, policymakers across Latin America are tightening the screw. Interest rates were increased in Chile, Colombia and Peru earlier this month and are likely to be raised once again in Brazil when COPOM meets in early …
Policymakers in Latin America face an awkward choice. Either they must fight inflation with stronger currencies but at the expense of a squeeze on domestic manufacturers, or they can limit currency appreciation but at the risk of higher inflation over the …
24th February 2011
The Venezuelan economy finally returned to positive annual growth in Q4 last year. But while the recent rally in oil prices has eased the country’s dollar drought and should support GDP growth of 1% or more this year, we expect the relief to be temporary …
23rd February 2011
Mexico’s Q4 GDP data (released this afternoon) were stronger than expected. With renewed fiscal stimulus in the US likely to give a further boost to the recovery over the coming quarters, we are revising up our forecast for GDP growth this year to 4.3%. … …
21st February 2011
The Central Bank of Chile (CBC) hiked interest rates by 25bps to 3.5% last night. Growing economic imbalances and the threat of higher inflation mean that rates will rise further over the coming months. But we still expect concerns about peso appreciation …
17th February 2011
While the rest of Latin America is experiencing bumper capital inflows, Venezuela is gripped by a dollar drought. With President Chavez seeking re-election in December 2012, there is a growing risk that the government will default on its foreign debt. …
It is tempting to attribute the stagnation in Brazilian retail sales in December to recent efforts to curb credit growth but in truth the impact of these measures is unlikely to show up in the data until later this quarter. Instead, the bigger picture is …
15th February 2011
Peru released monthly GDP data for December this afternoon which suggest that output increased by 9% last year. With the economy carrying plenty of momentum we are revising up our forecast and now expect it to grow by 7% this year (6% previously). …
The Central Reserve Bank of Peru (BCRP) hiked interest rates by 25bps to 3.5% last night. With the economy booming and inflation pressures building, further rate hikes will probably follow over the course of this year. But currency concerns should prevent …
11th February 2011
Last night’s announcement of budget cuts worth R$50bn (1.3% of GDP) should mean that Brazil’s government meets – or perhaps even betters – its ‘official’ target for the primary budget surplus of 3% of GDP this year. But the ultimate success of the planned …
10th February 2011
Data released this morning show that rising global commodity prices continue to be the main driver of inflation in both Brazil and Chile. But while these effects may fade over the course of 2011, booming domestic demand means that core price pressures are …
8th February 2011
The drop in Mexico’s IMEF Manufacturing Index last month stands in stark contrast to the recent strength of industrial surveys elsewhere in the world, notably the US. The good news is that the relationship between the IMEF and actual activity data is …
4th February 2011
The near-term outlook for Brazil remains extremely good, in part due to the strength of capital inflows and a boom in domestic lending. But we are becoming increasingly concerned that both factors will become a source of vulnerability over the next few …
2nd February 2011
The pick-up in January’s PMI suggests that after a torrid second half to 2010, Brazilian manufacturers have enjoyed a decent start to 2011. Unfortunately, it seems that producers have had to squeeze their margins in order to compete with cheap imports. … …
1st February 2011
The Central Bank of Colombia (BANREP) held interest rates at 3.0% last night, as expected. But the accompanying statement was more hawkish than in previous. There is a risk that interest rates will begin to rise sooner than we currently expect, but even …
Inflation is on the rise throughout most of Latin America. For now at least, this has been driven almost entirely by an increase global commodity prices, which has quickly passed through to headline inflation by virtue of the comparatively large weights …
28th January 2011
The minutes from this month’s meeting of the Brazilian Monetary Policy Committee (COPOM) were unequivocally hawkish and should banish any lingering concerns about a shift in policy priorities under the BCB’s new Governor, Alexandre Tombini. In the …
With the notable exception of Mexico, containing inflation remains the immediate challenge for policymakers in Latin America. Although the pick-up in inflation looks set to be driven by food and energy prices in the near-term, we think that core price …
24th January 2011
As expected, the Central Bank of Mexico (BANXICO) held interest rates at 4.5% this afternoon. Speculation is mounting that rising food prices could trigger a rate hike over the coming months but the bigger (and often overlooked point) is that last …
21st January 2011
Last night, the Brazilian Central Bank (BCB) hiked interest rates by 50bps to 11.25%. Rates will probably be increased by another 50bps at March’s meeting too. But if rumours of a fiscal tightening worth 1.5% of GDP prove to be true, rates are unlikely to …
20th January 2011
Latin America’s financial system is still in good shape, especially when compared to that of the developed world. Nevertheless, lending has accelerated throughout the region and default rates, notably in Brazil, have begun to pick-up. Although the large …
18th January 2011
Last night, the Central Bank of Chile (CBC) held interest rates at 3.25% but highlighted the need for further monetary tightening. Accordingly, we are sticking to our below-consensus forecast for rates to rise to 5% by year-end with increases in bank …
14th January 2011
