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Real tumbles as political turmoil worsens Brazilian financial markets suffered further sharp falls this week as concerns about the political crisis mounted. We looked at justice minister Sérgio Moro’s resignation in detail a few weeks ago. (See here .) …
15th May 2020
Window closing for Argentina & bondholders This week brought further evidence that the Argentina’s government and bondholders remain far apart on a restructuring deal and, unless both sides thrash out something quickly, talks could get bogged down and …
7th May 2020
Political troubles add to Brazil’s problems Despite the growing public health crisis and collapse in the global economy, Brazilian politics ended up dominating the news in the region. Local markets collapsed late last week after the resignation of Justice …
1st May 2020
Oil price collapse another major headwind The dramatic drop in oil prices earlier this week will deal yet another blow to the region’s oil producers – none more so than Venezuela – where the humanitarian crisis will get even worse. President Maduro’s …
24th April 2020
Containment dispute in Brazil… The coronavirus has thrust Brazilian politics into the spotlight this week after President Bolsonaro fired health minister Luiz Mandetta amid an ugly dispute about containment measures. President Bolsonaro has since called …
17th April 2020
Infections rising sharply in Brazil & Mexico The number of cases of the coronavirus has continued to rise across Latin America. On the plus side, there are some early signs that the infections curve may be flattening in Argentina, Peru and Chile (see …
9th April 2020
Mexico collapsing The early data for March supported our view that Mexico’s economy is suffering a dramatic fall in output. The production components of the IMEF surveys suggest that conditions were at least as bad as they were during the depths of the …
3rd April 2020
Brazil’s response lagging Confirmed cases of the coronavirus have surged to nearly 3,000 in Brazil over the past week, and the stumbling response from the presidency could deepen and prolong the economic damage. The governments of some of the largest …
27th March 2020
Regional GDP to fall We now think that the growing economic damage caused by the coronavirus will result in falls in GDP across the region. Interest rates will be lowered much further too. The economic headwinds facing the region have increased …
20th March 2020
Revising down our growth forecasts Latin American countries have, so far, suffered relatively few confirmed cases of the coronavirus. At the time of writing, containment measures have generally been limited to quarantines for travellers from afflicted …
13th March 2020
Brazil: disappointment in 2019 The Brazilian Q4 GDP data released this week confirmed that 2019 was another year in which the economy fell short of expectations. (See here .) Output rose by 1.1% in 2019; expectations had started the year at more than 2%. …
6th March 2020
Bolsonaro-Congress tensions rising Mounting global coronavirus fears this week, including the first reported case in Brazil, has put the real and Bovespa under pressure. But this is only part of the story. The real in particular was underperforming its EM …
28th February 2020
Brazil: BCB showing concerns about growth Moves by Brazil’s central bank (the BCB) this week suggest that policymakers are shifting their attention to the weakness of the economy. On Thursday, the BCB announced that it would lower the required reserve …
21st February 2020
Further falls in store for the real Intervention by the Brazilian central bank seems to have stemmed the fall in the real over the past 24 hours. But even if the recovery continues in the next few weeks, we think the currency will end the year weaker than …
14th February 2020
Bad week for Argentine policymakers Policymakers in Argentina faced two setbacks this week, which have weakened their hand in debt restructuring talks with creditors. First, the province of Buenos Aires (PBA) made a $250mn capital payment on Wednesday, …
7th February 2020
Brazil: BCB governor opens door to another cut Dovish comments from Brazil’s central bank governor and the continuing shift in market expectations have prompted us to pencil in a 25bp interest rate cut next Wednesday. At the last meeting in December, …
31st January 2020
More clues on Argentina’s restructuring There were three key signs this week that the Argentine government’s deadline of March 31 st for a sovereign debt restructuring is unlikely to be met. First, a debt swap on over $1bn worth of peso-denominated …
24th January 2020
The gloss coming off Brazil The latest Brazilian activity data have taken some of the shine off the economic recovery. Industrial production figures released last week showed that output fell in November, and other data published in the last few days also …
17th January 2020
Chilean peso weakens, will gain later this year While most EM currencies tumbled this week following the assassination of Iranian General Qassem Soleimani, the Chilean peso fell furthest. Having strengthened from a trough of 837/$ to 750/$ over the course …
10th January 2020
Argentine policymakers resorting to old tricks There is a sense of déjà vu about recent Argentine policymaking. Deficit monetisation is back, despite Economy Minister Martín Guzmán’s warning last month that it is a destabilising tool. The central bank has …
3rd January 2020
Argentina: Maturity extensions not bold enough The government stated today that it will postpone around $9bn of upcoming payments on Treasury bills (known as Letes) until August 2020. This is not hugely surprising. Most upcoming payments were due on …
20th December 2019
Argentina: Still more questions than answers Reassuring comments from newly inaugurated President Fernández and his economy minister Martín Guzmán helped to drive a small rise in Argentine bond prices this week. Both said that the government seeks a …
13th December 2019
The big reveal for Argentina’s Economy Minister Recent reports suggest that Alberto Fernández, who takes office on Tuesday, has selected Martín Guzmán as his economy minister. That’s unlikely to inspire much investor confidence; IMF-backed policy …
6th December 2019
Brazil: Real’s fall doesn’t rule out a final cut The Brazilian real continued to tumble this week, hitting a record low of 4.27/$ and prompting the central bank to sell FX. The currency has regained ground over the past 48 hours, but is still down by 5% …
29th November 2019
Ecuador: Dollar bonds likely to rebound Legislators’ rejection of President Lenín Moreno’s latest fiscal reform bill caused a sharp sell-off in Ecuadorian bonds this week. But we think that investors have gone too far. The spread of government dollar …
22nd November 2019
Chilean markets recover on government offer The Chilean peso rallied against the US dollar today after lawmakers accepted protestors’ demand that a constituent assembly will play a role in writing a new constitution next year, which may help to …
15th November 2019
Brazil: Reforms accelerate, oil auction stalls President Jair Bolsonaro’s government announced new constitutional reforms this week, which we think will improve the management of fiscal policy. The plans would rebalance the distribution of resources …
8th November 2019
Argentina: Fernández uncertainty a bad sign The victory for Peronist Alberto Fernández in Argentina’s presidential election on Sunday provoked a small negative shock in local financial markets. The peso has held up, though, largely due to the drastic …
1st November 2019
Brazil: Pension law unlikely to launch reform wave President Jair Bolsonaro won a major victory this week when the senate gave final assent to his pension reform bill. The new law, which imposes a higher retirement age and increases workers’ …
25th October 2019
Mexico: Counting the cost of the GM strike The knock-on effects of the strike by GM auto workers in the US mean the Mexican manufacturing figures due in the coming months will make for grim reading. But if GM’s deal with striking workers is approved, the …
18th October 2019
Crisis in Ecuador rages on Intensifying anti-austerity protests in Ecuador caused bond spreads to widen this week and threaten to dilute the government’s agenda. For now, though, we think that the government will be able to navigate this turmoil with …
11th October 2019
Peru’s constitutional crisis easing, for now The political turmoil that erupted in Peru earlier this week now seems to be fizzling out. President Martín Vizcarra swore in a new cabinet on Thursday and the electoral authority has announced the date of new …
4th October 2019
Brazilian households on the rise… Figures published this week support our view that Brazilian households should help to drive a modest economic recovery over the coming quarters. The first positive surprise in the incoming data came from the payrolls …
27th September 2019
Argentina’s Q2 GDP figures largely moot Data released this week showed that Argentina’s recession eased in Q2, but more timely figures point to a sharp downturn in Q3 and Q4. The headline from Thursday’s Q2 GDP release – that the pace of contraction eased …
20th September 2019
Mexico waking up to Pemex’s problems The $5bn cash injection for Pemex announced by Mexico this week adds to signs that policymakers may finally be starting to acknowledge the gravity of the problems at the state energy company. (For more on these issues, …
13th September 2019
Argentina: Capital controls raise painful memories The introduction of capital controls last weekend seems to have stabilised Argentina’s official exchange market. After losing 24% of its value against the US dollar over the preceding three weeks, the …
6th September 2019
No joined-up thinking raises risk of more surprises The Argentine government’s debt reprofiling plan has been greeted with some scepticism, and we think markets will remain under pressure unless investors see evidence of joined-up thinking between Alberto …
30th August 2019
Brazil’s sluggish recovery Data due next week are likely to show that Brazil’s economy stagnated in the second quarter and, while there are signs that activity strengthened at the start of Q3, the economy remained extremely weak. The Q2 GDP figure (due on …
23rd August 2019
Argentine debt default becoming inevitable The Argentine peso has stabilised over the past few trading days but the collapse earlier this week has made a sovereign debt default highly likely. At the risk of blowing our own trumpet, recent events have left …
16th August 2019
Argentina elections: your primer on the primaries Argentine markets are likely to take their cue from the outcome of Sunday’s primary election when they open next week, but the vote doesn’t always foreshadow the presidential election outcome. Argentina’s …
9th August 2019
Large Mexico stimulus raises fiscal risks The large fiscal stimulus unveiled by Mexico’s new finance minister this week will support activity, but it raises medium-term fiscal risks. We always argued that the change of finance minister last month was …
2nd August 2019
Mexico: avoiding a recession…just Mexico’s preliminary Q2 GDP figures due next week are likely to show that the economy stagnated, dodging a technical recession. But whether the growth figure is above zero or not, the key point is that the economy is …
26th July 2019
Mexican government unwilling to fix Pemex The Mexican government’s underwhelming business plan for Pemex, announced this week, reinforces our view that it is not willing to implement the reforms necessary to stabilise oil production. Against that …
19th July 2019
Banxico likely to begin cutting rates next month The minutes to the last Mexican central bank meeting, published yesterday, revealed a more dovish shift on the Bank’s Board than we had expected. We now think that an interest rate cut at the next meeting …
12th July 2019
Pension reform progressing but hurdles remain Brazil’s much-vaunted pension reform passed an important legislative hurdle this week, although the bill is likely to come up against more substantial resistance in the coming weeks. After various delays and …
5th July 2019
Brazil pension reform: glass half…empty? It’s been a noisy week in Brazilian politics but, while the chances of some kind of pension reform being approved this year have risen, the flipside is likely to be smaller fiscal savings. Reports at the start of …
28th June 2019