Filtered by Subscriptions: Latin America Economics Use setting Latin America Economics
Chile’s constitutional re-write process starts The vote by Chileans this weekend to elect members to a convention tasked with re-writing the constitution will set in motion a process that is likely to have far-reaching consequences for the economy and …
14th May 2021
Colombian peso to stay weak as fiscal risks linger The mass protests against austerity have increased the risks around Colombia’s fiscal position and we think that local financial markets and the currency will remain on the backfoot in the coming …
7th May 2021
Colombia: tax reforms not so easy after all It was always going to be a tough ask for Colombia’s government to push through tax hikes during the current crisis, and the mass protests this week have made the challenge even harder. To recap, the government …
30th April 2021
Third time isn’t a charm in Chile The third pension withdrawal bill currently in the pipeline in Chile would support its recovery in the near term. But it is another concerning sign of a gradual shift towards populist policymaking. To recap, the two …
23rd April 2021
Bolsonaro’s budget problems coming to a head Brazil’s 2021 budget crisis – in which the president faces a trade off between potentially falling foul of the country’s fiscal laws and losing support in congress – is likely to come to a head next week. To …
16th April 2021
Populist shifts in Peru & Ecuador? Voters head to the polls in Peru and Ecuador on Sunday which could lead to a populist shift in both. The first round of Peru’s general election is a big unknown. The latest opinion polls suggest that no presidential …
9th April 2021
BCCh signals tightening is coming Chile’s central bank (BCCh) was notably less dovish at its meeting this week, as it appeared to lay the groundwork for a rise in interest rates later this year. The decision to leave its policy rate at 0.50% came as no …
1st April 2021
Copom point to front-loaded tightening Investors’ expectations for Brazil’s Selic rate have shifted up even further following last week’s rate hike, but we think that they have gone too far. The analyst median forecast, published in the central bank’s …
26th March 2021
Colombia: investment grade rating in the balance A tax reform bill in Colombia, that will be sent to Congress next week, has slipped under the radar but this legislation could have a major bearing on the country’s sovereign investment grade rating. This …
19th March 2021
Brazil’s fiscal discipline wavering Events over the past week have raised fresh concerns that Brazil’s public debt will be put on an unsustainable path, suggesting that sovereign bond yields could rise further. Yesterday, Brazil’s congress approved a …
12th March 2021
Amlo’s electricity roll-back a warning sign The Mexican government’s bill to partly reverse reforms encouraging private participation in the electricity sector threatens to open up a Pandora’s box of legal wrangling and will further damage the prospects …
5th March 2021
Banxico: slim chance of additional easing Mexico has been one of the hardest hit EMs during the recent rout in global bond markets. The 10-year local currency government bond yield has jumped by almost 60bp to 6.30% this week. Meanwhile, the peso has …
26th February 2021
Tex-Mex blackouts hits industry The energy crisis in Texas has had a major knock-on effect on Mexico, although the economy should be able to make up some lost ground. Natural gas is used to generate about 60% of Mexico’s electricity supply and the country …
19th February 2021
Brazil’s central bank gains independence The Brazilian Chamber of Deputies’ approval of a bill to grant the central bank (BCB) formal independence this week could, over the longer term, help to reduce inflation and lower longer-term bond yields. (For more …
12th February 2021
Ecuador’s new president must talk a good game Sovereign debt risks in Ecuador will remain high regardless of Sunday’s election result and we think that another debt restructuring is likely in the medium term. But for those with strong stomachs, there …
5th February 2021
Brazil’s hawks looking at the labour market One takeaway from the minutes to this month’s Brazilian central bank meeting is that the hawkish contingent on Copom is larger and more vocal than had been anticipated. But there are reasons to think their views …
29th January 2021
Ecuador: another default on the cards? Comments from left-wing Ecuadorian presidential candidate, Andrés Arauz, caused ructions in the bond market this week and reinforce our view that another debt restructuring may be on the cards. It’s still unclear who …
22nd January 2021
Brazil’s near-term prospects take a hit The Brazilian government’s announcement that it will (finally) begin vaccinations on 20 th January couldn’t come any sooner. The country’s COVID-19 outbreak has continued to worsen and the discovery of a new variant …
15th January 2021
Positive news on vaccines… There is a glimmer of hope for economies across Latin America as vaccines are being rolled and procurement is stepping up. Currently Mexico, Chile, Costa Rica and Argentina are leading the region’s vaccine race. All four started …
8th January 2021
Vaccine rollout: the good, the bad and the ugly Policymakers in much of the region are stepping up efforts to launch vaccination campaigns, which could start within a few weeks. But there are early signs that this will be a difficult process, particularly …
18th December 2020
Banxico’s traditional hawkishness set to fade? The approval of Galia Borja Gómez as a deputy governor of Banxico is likely to mark a dovish shift at the central bank. Admittedly, not much is known about the monetary policy views of Ms. Borja. But she will …
11th December 2020
Brazil: benefitting from fiscal largesse… The activity data out of Brazil this week confirmed that its economy has suffered much less than others in Latin America. Q3 GDP figures showed that output was down 3.9% y/y (compared with 8-10% y/y elsewhere) and …
4th December 2020
Solid current account to support MXN This week’s data dump from Mexico showed a sharp drop in inflation to 3.4% in early November , and a small upward revision to Q3 GDP from the provisional estimate (+12.0% q/q to +12.1% q/q). Perhaps the most …
27th November 2020
Pension withdrawals 2.0 in Peru and Chile The recent political storm in Peru has calmed after centrist Francisco Sagasti was sworn in as the third President in just over a week. Local financial markets and the sol have reversed their earlier losses. The …
20th November 2020
Vaccine hopes, but Lat Am will suffer scarring The news of the successful trial of Pfizer’s COVID-19 vaccine has raised hopes that effective vaccines could soon start to be distributed. At this stage, there is a lot of uncertainty. Much will depend on the …
13th November 2020
US election: Goldilocks scenario for Lat Am? Joe Biden looks set to win the US election and will probably face a divided government in the Senate. That may be the best outcome for Latin American economies. For Mexico, Biden will probably take a less …
6th November 2020
Brazil: inflation concerns look overdone Concerns about the recent rise in inflation in Brazil have grown this week, with some suggesting that the IPCA-15 figure published in the previous week showed signs of a rise in underlying price pressures. There …
30th October 2020
Chile: The long road to a bigger state? Political uncertainty is now the main certainty in Chile. Indeed, Sunday’s landmark referendum on constitutional change could be the start of a long and complex process to alter its political landscape. The latest …
23rd October 2020
Mounting pressure for the ARS to fall This week Argentine President Fernández and Economy Minister Guzmán poured cold water on the idea that the peso would be devalued. But with the central bank (BCRA) struggling to manage the currency, policymakers may …
16th October 2020
IMF wades in on fiscal policy... The IMF made headlines this week with the suggestion in its latest Fiscal Monitor that governments across the globe should continue to spend to support economic recoveries. It’s giving a similar message to Mexico. Indeed, …
9th October 2020
BCRA heading in the right direction Argentina’s central bank (BCRA) announced a new monetary policy strategy in which it will allow a ‘managed float’ of the peso. It’s a promising step in the right direction, and should allay fears of a slide towards the …
2nd October 2020
Lat Am currencies likely to recover The recent drop in global risk appetite, linked to fears over second waves and fading chances of additional US fiscal support, have put EM currencies in the firing line. At the time of writing, Latin American currencies …
25th September 2020
Argentina clamping down on dollars Argentina’s central bank has tightened capital restrictions (“ el cepo ”) to try to regain control over the peso. The strategy is just a short-term fix, though, which may come back to bite in a few years’ time. One of …
18th September 2020
A way out of Brazil’s fiscal straitjacket? Brazil’s congress will reportedly receive a plan for the Federative Pact reform next week, which could ease concerns about the public finances. The essence of the Pact is that it will shift spending …
11th September 2020
Brazil & Mexico’s PMIs diverge The manufacturing PMIs for August published this week were surprising, both for the strength they implied in Brazil’s economy and the weakness in Mexico’s. But in both cases, the surveys are painting an exaggerated picture …
4th September 2020
Argentina & the IMF: Take 22… Barring any unexpected hiccups, $66.2bn of Argentina’s international sovereign bonds will be restructured next Friday. As will $41.7bn of local-law FX bonds. Now the government wants to tackle the debts owed to its historic …
28th August 2020
Brazil at a fork in the road Fears that Brazil’s economy minister, Paulo Guedes (the linchpin of the government’s reform agenda), might resign have flared up again this week, and we think that there is now a political risk premium of around 20bp on …
21st August 2020
Brazil: reformists losing hope A growing dispute over the direction of fiscal policy in Brazil threatens to derail the reform agenda and worsen the country’s public debt problem. Two secretaries in the Economy Ministry resigned this week, reportedly due …
14th August 2020
Argentina’s restructuring: more challenges ahead After months of back and forth, Argentina’s government and major bondholders (finally) reached a deal to restructure $65bn of international sovereign bonds. But, as we argued was likely , this agreement …
7th August 2020
Colombia next in line for early pension access The bill sent to Colombia’s congress this week that would allow citizens to tap up to 10% of their pension savings is similar to those recently passed in Chile and Peru. We analysed the implications of such a …
31st July 2020
AMLO presents new pension system This week, President López Obrador unveiled a plan to revamp Mexico’s pension system in a rare coalition with business leaders and unions. There are two main facets to the reform, which is expected to enter into law next …
24th July 2020
Underwhelming regional rebound underway The easing of lockdowns across Latin America generally allowed economic activity to improve in May. For instance, industrial production rose on the month in Brazil, Colombia and Argentina. But the overall picture is …
17th July 2020
Debt restructurings may be required…again Sovereign debt restructurings in Argentina and Ecuador came into focus this week, and while there are reasons for optimism, we remain concerned about fiscal sustainability in both countries. In Argentina, …
10th July 2020
Lockdowns battering Lat Am labour markets Data this week painted a clearer picture of the recent hit to Latin American labour markets. On a seasonally adjusted basis, unemployment rates jumped by 5-10%-pts in Colombia and Peru (data for the Lima …
3rd July 2020
Fiscal paths point to diverging recoveries The governments of Brazil, Colombia and Chile have recently outlined plans that shed light on the path of fiscal policy beyond this year, which is likely to result in diverging recovery prospects. At one end of …
26th June 2020
Chile’s push for QE gains momentum Chile’s central bank took a further step into unconventional territory this week, after announcing what appears to be the first QE programme in the region. (See our Update for more.) While few details were released at …
19th June 2020
Brazil’s Covid data now part of the problem Brazil’s handling of the crisis has come under even greater scrutiny after the government decided to halt publication of coronavirus statistics last weekend, before making a U-turn on the request of a supreme …
12th June 2020
Relief for the region’s currencies The improvement in global risk appetite has lifted financial markets in Latin America by more than most other regions. Indeed, the region’s currencies have been some of the best performers in the emerging world over the …
5th June 2020
Banxico gives clues of significant easing This week Banxico released its first Quarterly Report of the year, and the minutes of its May 14 th meeting. Three points stand out from these pieces. First, Banxico’s GDP views look (plausibly) downbeat. It …
29th May 2020
Virus spread worsens growth outlook Brazil has hit the headlines this week amid a rapidly developing political crisis and the rampant spread of coronavirus in the country. The number of new cases per day is nearing that in the US. But Brazil is not the …
22nd May 2020