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Mexico dodges tariffs… for now The world was convulsed at the start of the week by President’s Trump’s tariff threats on Canada and Mexico, which were postponed for 30 days through last minute deals whereby both countries pledged to beef up border …
7th February 2025
Banxico steps up easing as it adopts a more dovish tone Mexico’s central bank stepped up the pace of monetary easing to 50bp at today’s meeting, lowering the policy rate to 9.50%, and the overall communications were dovish. While a tariff-induced drop in …
6th February 2025
Ecuador’s presidential election on Sunday is set to be a tight race, with a second round run-off in April likely to be needed to separate the two leading candidates. Among the next government’s multiple challenges are improving the security situation and …
President Donald Trump’s eleventh-hour decision to delay the 25% tariffs he had threatened to impose on Canada and Mexico is a good reminder of his unpredictable nature. We don’t think Trump’s U-turn necessarily means he’s bluffing about other tariffs – …
5th February 2025
Trump hits Canada, China & Mexico with tariffs President Donald Trump’s decision to impose 25% tariffs on Canada and Mexico and an additional 10% tariff on China from this coming Tuesday, (with the only partial exemption for Canadian energy imports that …
2nd February 2025
Something’s coming… Latin America has been at the forefront of President Trump’s tariff latest threats. These included a (short-lived) announcement that he would slap punitive measures on Colombia, reports that the US will press ahead with a 25% import …
31st January 2025
GDP collapse argues for larger 50bp cut The much larger-than-expected 0.6% q/q drop in Mexico’s GDP in Q4 is likely to strengthen the argument for a 50bp interest rate cut, to 9.50%, at next week’s Banxico meeting. That now looks like the most likely …
30th January 2025
Copom sticks to its promise Brazil’s central bank delivered on its pledge to deliver another 100bp hike to the Selic rate, to 13.25%, and another 100bp increase at March’s Copom meeting is all but certain. For now, we are sticking with our view that that …
29th January 2025
Donald Trump’s return to the White House has sent jitters across the region, with Mexico most vulnerable to his tariff threats while Central American economies could be heavily impacted by his migration plans. Elsewhere in the region, the main impact will …
27th January 2025
This Update answers some key questions about the likely implications of the US imposing 25% tariffs against Canada and Mexico. Our current forecasts are based on the assumption of a 10% universal tariff and hence growing speculation about more aggressive …
The Trump administration’s first week has given policymakers in Latin America – and Mexico in particular – plenty to fret about. Unsurprisingly, migration has been a major focus for President Trump so far. His inauguration speech mentioned “returning …
24th January 2025
Inflation eases, but Copom still set to deliver 100bp hike next week Brazil’s headline inflation rate eased to 4.5% y/y in the first half of January, but signs that underlying price pressures continued to build mean that Copom will press ahead with …
We held an online briefing yesterday on Mexico’s economy and how it may be impacted by the Trump administration. (Listen to the on-demand recording here .) This Update answers some the key questions that came up. How do you interpret the threatened 25% …
23rd January 2025
Easing inflation makes February cut highly likely The fall in Mexican inflation in the first half of January, to 3.8% y/y, means that Banxico is likely to continue its easing cycle next month. But with the Fed set to pause its pause its cutting cycle and …
President Trump’s threats to retake ownership of the Panama Canal reflects its importance for US trade and the country’s strategic interests. It’s possible that these threats are simply another attempt to gain concessions, such as lower fees charged to …
The “America First Trade Policy” White House memorandum makes it clear that tariffs are coming, although we still have little clarity on the timing. There are some signs that a universal tariff could come later than in the second quarter as we have …
21st January 2025
Peso a Damocles sword over stabilisation process This week’s CPI data marked another victory for Argentinian President Javier Milei. Inflation came in at 2.7% m/m in December, the third consecutive sub-3% reading, prompting the government to announce a …
17th January 2025
The Shape of the Fractured World in 2025 The share of the fracturing global economy that is accounted for by China and its geopolitical allies contracted in 2024, leaving it under a third the size of the US bloc at the start of 2025. This fall was in part …
Mexico is arguably the most vulnerable economy to US trade protectionism. This in-depth analysis maps out economic and financial linkages between Mexico and its northern neighbour to provide a clearer sense of how tariffs would affect the economy and how …
15th January 2025
Mexico is once again bracing for trade protectionism in the US. And while it staved off tariffs in the first round of the trade war, on balance we don’t think it’s in as strong a negotiating position this time round. We’ve written extensively on what a …
14th January 2025
If Donald Trump were to impose a universal 10% tariff on US imports, we wouldn’t expect widespread reshoring of manufacturing production back to the US. And if it were accompanied by a 60% tariff on Chinese imports, the main beneficiaries would be other …
The Brazilian real plunged in 2024, due to fiscal risks. While we suspect that further piecemeal austerity measures will prevent another leg down in the currency, with investors’ fiscal fears unlikely to be fully addressed and Brazil’s terms of trade set …
13th January 2025
Trump has his eyes on the Canal When Donald Trump won the US election back in November, the last thing we thought we’d be writing about in this Weekly – just 10 days before his inauguration – was the Panama Canal. But the big news in the region this week …
10th January 2025
Copom to press ahead with more hikes despite fall in inflation The fall in Brazil’s headline inflation rate in December, to 4.8% y/y, coupled with the rebound in the real over the past couple of weeks, won’t be enough to stop Copom following through with …
Fall in inflation paves the way for further easing The larger-than-expected fall in Mexico’s headline inflation rate, to 4.2% y/y in December keeps the door open for another 25bp cut at Banxico’s February meeting. But a lot will hinge on moves on the …
9th January 2025
Brazil’s recent period of rapid growth is likely to come an end this year. Sovereign debt concerns will almost certainly rumble on, but further piecemeal austerity measures will probably prevent another rise in bond yields or leg down for the real. In a …
8th January 2025
The Cold War was defined by geopolitical blocs – the Soviet or Eastern bloc against the Western bloc. Geopolitics retreated with the collapse of the Soviet Union. The period from the early-1990s to the early-2010s was instead an era of globalisation: most …
7th January 2025
Donald Trump’s second term could redraw the global geopolitical map. A sustainable “Grand Bargain” with China, warmer relations with Russia, or a breakdown in the relationship between the US and its traditional allies could each reshape supply chains and …
Fall in inflation paves the way for further easing The fall in Mexican inflation in the first half of December, to 4.4% y/y, gives Banxico room to continue to ease monetary policy. But we expect Banxico to continue to cut in 25bp steps, rather than step …
23rd December 2024
Anatomy of a (self-inflicted) crisis Brazil this week was on the precipice of a crisis – if not in one already. The real continued to tumble, hitting a record low of 6.3/$ on Wednesday – down around 10% against the dollar since late October. 10-year local …
20th December 2024
Banxico cuts, but pace of easing unlikely to be stepped up Mexico’s central bank unanimously decided to deliver another 25bp interest rate cut, to 10.00%, at today’s meeting and the statement flagged that the easing cycle will continue in the coming …
19th December 2024
The region recorded robust growth in Q3 but we think that tight policy, worsening terms of trade and US trade protectionism will keep GDP growth in Latin America below consensus expectations in the coming years. Fiscal risks have intensified, in …
17th December 2024
Milei has reason to cheer Tuesday marked Argentinian President Javier Milei’s first year in office, and he had plenty to celebrate. He’s made much more progress than we (and most other analysts) had thought would be possible. Inflation came in at 2.4% m/m …
13th December 2024
Overview – Tight policy, deteriorating terms of trade and, in Mexico’s case, US trade protectionism will keep GDP growth in Latin America weak and below consensus expectations in the coming years. Fiscal risks will remain in the spotlight as governments …
12th December 2024
The Brazilian central bank’s aggressive interest rate hike yesterday may help ease concerns that fiscal dominance will take hold. But we think that measures to keep government debt servicing costs artificially low will ultimately form part of the solution …
Fiscal fears and overheating economy trigger a bumper hike Brazil’s central bank stepped up the pace of tightening with a larger-than-expected 100bp hike, to 12.25%, to the Selic rate and made clear that there will be at least two more 100bp increases, to …
11th December 2024
Rising inflation points to Copom stepping up tightening tomorrow The further rise in Brazil’s inflation rate, to 4.9% y/y, in November alongside the weakness in the real and strong economic growth mean that Copom is nailed on to step up the pace of …
10th December 2024
Fall in inflation gives Banxico room to deliver another 25bp cut The fall in Mexico’s headline inflation rate, to 4.6% y/y in November, combined with the relative resilience in the peso since the US election means that Banxico is likely to press ahead …
9th December 2024
Brazil’s overheating eroding bumper trade surplus Brazil’s Q3 GDP figures released this week showed that the economy is overheating and unbalanced. Consumption and investment growth accelerated compared with Q2. Headline GDP growth was only weaker than …
6th December 2024
Another strong quarter points to larger Selic hike The strong 0.9% q/q expansion in Brazil’s GDP in Q3 will add to the central bank’s concerns that the economy is running too hot. Alongside rising inflation and the sell-off in local financial markets in …
3rd December 2024
Mexico in Trump’s crosshairs President-elect Donald Trump fired the opening salvo in the next round of the trade war this week, threatening to impose a 25% tariff on all imports from Mexico (as well as from Canada, plus a separate tariff on China) on day …
29th November 2024
We held an online session on US import tariffs on 26th November. (See a recording here ). In this Update we answer the questions we were most asked. What are Trump’s motives for threatening tariffs and will he follow through? Trump has spoken about using …
The fiscal tightening measures announced by Brazil’s finance minister late yesterday failed to live up to expectations and reinforce the idea that political commitment to stabilising the public finances is lacking. One consequence is that the central …
28th November 2024
Latin American (LatAm) markets have been generally resilient in the aftermath of the US election, possibly because investors were already pessimistic about the region’s prospects. But we think domestic and global headwinds will translate into LatAm assets …
26th November 2024
President-elect Donald Trump’s first threatened tariffs since the election are designed to extract concessions on drug trafficking and illegal border crossings, which means it may be possible for the countries targeted – Canada, Mexico and China – to head …
Inflation jumps, Selic heading higher The rise in Brazil’s headline inflation rate, to 4.8% y/y, in the first half of November was partly driven by a further increase in underlying core services inflation and means that Copom is likely to raise the Selic …
We discussed the global impact of higher tariffs in a Drop-In on Tuesday, 26th November. Click here to watch the 20-minute online briefing. In this Focus, we construct a framework to explore the channels through which an import tariff works, which we use …
25th November 2024
Currencies across Latin American have held up well in the wake of the US election, but we think that they will come under pressure as the dollar strengthens on the back of Trump’s policy proposals. The Mexican peso looks particularly vulnerable to sharp …
Mexico: meeting fiscal targets will be a tall order Mexico’s draft 2025 budget had been widely anticipated given the recent sharp deterioration in the country’s public finances – the deficit is set to come in at a multi-decade high of 5.0% of GDP this …
22nd November 2024
Fall in inflation leaves door open for December cut The larger-than-expected fall in Mexican inflation in the first half of November, to 4.6% y/y, alongside easing core price pressures and the relative resilience in the peso mean that Banxico is likely to …