Filtered by Subscriptions: Latin America Economics Use setting Latin America Economics
The latest polls ahead of Mexico’s election on 2 nd June suggest that Claudia Sheinbaum, protégée of incumbent President Andrés Manuel López Obrador (Amlo), is likely to become the country’s next leader. She’s widely expected to continue with Amlo’s …
17th April 2024
Concerns about escalating tensions in the Middle East and the impact on global oil supplies increase the likelihood that the US will renew its sanctions waiver on Venezuela when the current one expires on Thursday. A rise in key oil exports would help the …
16th April 2024
Media reports that Brazil’s government is already seeking to water down the latest fiscal rule (which has been in place for less than a year) reinforces the point we made when the rule was first unveiled that the Lula administration would be unable to hit …
9th April 2024
The more cautious tone of the Monetary Policy Report released by Chile’s central bank today confirms that policymakers have been spooked by the inflation surprises at the start of the year and has prompted us to nudge up our year-end rate forecast to …
3rd April 2024
The sharp narrowing in Colombia’s current account deficit last year to its lowest level since the aftermath of the Global Financial Crisis looks encouraging, but it was entirely a result of the weakness of domestic demand. As the economy recovers, the …
4th March 2024
Mexico’s President López Obrador’s cloak of fiscal prudence is being shed this year as Morena tries to bolster its support ahead of June’s election. As some of the factors supportive of the public finances in recent years also fade, the debt-to-GDP ratio …
27th February 2024
Headline inflation in Brazil has declined in recent months, but a deeper dig into the data shows that underlying price pressures are starting to build again. Although another 50bp cut in the Selic rate at the next central bank meeting in March is nailed …
20th February 2024
Argentine President Javier Milei’s ambitious economic reform plans have quickly run into political obstacles. There’s still plenty of fiscal tightening that Milei is likely to undertake and there have been some areas of success such as the peso …
15th February 2024
Moody’s downgrade of Pemex at the end of last week reinforces the view we set out last year that the next government in Mexico will prove to be less supportive of the troubled state energy company. Ultimately, we think this will force Pemex to seek a …
12th February 2024
The large rise in the Brazilian government’s budget deficit, to 8.9% of GDP, over 2023 as a whole should partially reverse this year. But the key point is that the underlying sovereign debt dynamics are worsening. And unless the government pulls out all …
7th February 2024
Inflation in Mexico has dropped back over the past year but rapid wage growth continues to fuel strong underlying price pressures and means that the headline rate won’t return to Banxico’s 2-4% tolerance band until late-2024. Coming alongside pushback …
1st February 2024
While Latin American central banks seemed to act in unison when raising interest rates (albeit with Brazil a bit ahead of the pack), the raft of interest rate decisions in the region yesterday highlighted that, on the way down, policymakers have very …
Panama’s time as a Latin American growth star is set to come to an end this year. This will have a knock-on effect on the government’s revenues and means that the public debt ratio is set to rise further. That could put Panama’s coveted investment grade …
31st January 2024
Headline and primary budget balances across Latin America generally improved over the course of 2023 (Brazil was a key exception). But it seems unlikely that this will be sustained, and debt-to-GDP ratios will return to an upwards trajectory over 2024-25. …
18th January 2024
We think that most major currencies in Latin American will fall against the US dollar this year. As a result, the relatively poor returns that we expect from equities in the region in local-currency terms are likely to be even worse in US dollar terms. …
12th January 2024
The IMF’s approval of the next disbursement of Argentina’s current deal will provide the government with the necessary funds to make upcoming repayments (due to the Fund itself). And the fact that the Fund endorsed the new administration’s policies marks …
11th January 2024
The decisions yesterday by Colombia’s central bank to kick off its easing cycle and by Chile’s to accelerate the pace of easing appears to have been driven by the substantial improvement in the external environment. We expect both central banks to …
20th December 2023
At face value, the Argentine central bank’s (BCRA’s) decision yesterday to switch (and essentially lower) its policy rate seems at odds with the goal of tackling the country’s severe inflation problem. But the move appears to be aimed at shifting the …
19th December 2023
The economic reform measures announced yesterday by Argentina’s Economy Minister Luis Caputo, including a large devaluation of the peso and fiscal tightening, mark a clear change in policymaking from the previous Peronist administration. But this wasn’t …
13th December 2023
Brazil’s first sovereign ESG bond arrived last month amid much fanfare, but the reality is that any “ESG premium” looked fairly limited to us. And we think ESG bond premia, in general, will likely remain low. Brazil’s government issued its 7-year US …
4th December 2023
In this Global Economics Update , we describe eight of the biggest risks to our economic forecasts for 2024. The unusual nature of this cycle and uncertainties surrounding the transmission of monetary policy mean that the biggest risks relate to central …
30th November 2023
A close look at the data suggests that the boom in investment in Mexico this year is due to a surge in transport infrastructure construction on the Yucatán Peninsula rather than a boom in nearshoring-related investment. With these projects nearing …
27th November 2023
Javier Milei’s victory in the final round of Argentina’s presidential election yesterday will bring about a major shift in economic policymaking. We suspect that some of his more radical proposals – namely dollarisation – may not materialise given limited …
20th November 2023
Growing external and domestic headwinds suggest to us that Brazilian financial markets will come under pressure over the short term and are unlikely to resume their outperformance beyond that. Brazilian assets have fared relatively well amid the ongoing …
15th November 2023
Protests against a large copper mine have raged in Panama over the past few weeks. If mine production ceased, there would be noticeable impact on global supply but the risk of this happening is small. The mine is a key part of Panama’s economy and is only …
9th November 2023
The Vaca Muerta shale formation will alleviate some of the pressure on Argentina’s fragile balance of payments position by substantially reducing the country’s gas import bill and raising oil export revenues. While this is good news for the crisis-ridden …
8th November 2023
Growth in Costa Rica is likely to slow by more in 2024 than officials currently expect amid weaker growth in the US, high commodity prices and tight fiscal policy. Further ahead, though, a burgeoning medical goods sector, robust FDI inflows and the …
7th November 2023
Brazil’s central bank (BCB) cut the Selic rate by 50bp, to 12.25%, at yesterday’s Copom meeting and signalled again that further similar reductions lie in store over the next few meetings. Even so, with strong wage growth set to keep inflation above …
2nd November 2023
We think the Chilean peso is poised for a rebound in 2024 as the headwinds from the narrowing interest rate differential and the terms of trade deterioration reverse. The Chilean peso has underperformed nearly all other major emerging market currencies …
26th October 2023
The strong showing for Peronist candidate and current Economy Minister Sergio Massa in Sunday’s presidential election in Argentina means that the run-up to the second round vote in November is likely to see further pre-election fiscal giveaways. But these …
23rd October 2023
There are mounting signs that labour market conditions in many parts of Latin America are starting to loosen, but wages are still rising at a rapid pace and it will take time for wage growth to return to levels that are consistent with central banks’ …
19th October 2023
Argentines face the choice between a shock-therapy style approach to tackling the country’s economic issues or more of the same unorthodox policymaking when they head to the polls in Sunday’s presidential election. The latest polls suggest that, while …
17th October 2023
The reported deal that is close to being reached to lift US sanctions on Venezuela’s oil sector in return for competitive elections would help to raise the country’s oil output from very depressed levels. But the sector requires enormous investment to …
16th October 2023
Tightness in Mexico’s labour market continues to fuel wage pressures, with real wages now rising at their fastest pace since the early 2000s. But this isn’t being matched by productivity growth and, in turn, threatens to keep inflation above Banxico’s …
11th October 2023
The sell-off in bond markets has taken a breather today, helped in part by softer data on the US labour market. However, the scale of the moves over the past week has invoked comparisons to previous financial crises that have been caused by sharp moves in …
4th October 2023
The drivers of Brazil’s recent period of rapid growth seem to be the subject of a heated debate at the central bank – and policymakers’ conclusions will play a big role in determining the pace and scale of the easing cycle. For our part, we think the key …
28th September 2023
There’s little evidence in the investment and trade data so far to back up the commonly-cited narrative that Mexico is experiencing a “nearshoring” boom. The one sector where there are some signs of this is industrial real estate, which suggests that it’s …
12th September 2023
The more cautious tone of the Monetary Policy Report released by Chile’s central bank today supports our view that, once the large falls in inflation are behind us in early 2024 and the economy recovers, the easing cycle is likely to shift down a gear. We …
6th September 2023
Having ballooned during the post-pandemic recovery, Colombia’s current account deficit has started to narrow and should continue to do so in the coming quarters. This, alongside the shift in financing towards more stable FDI inflows, leaves the peso less …
5th September 2023
Fixed investment has been the weak spot in Colombia’s strong post-pandemic recovery and it is likely to remain subdued over the next couple of years due to a combination of the fragile political backdrop, lower oil prices and weakness in the housing …
31st August 2023
Equities in Latin America have generally returned more than those in the rest of the world so far this year for US dollar-based investors willing to shoulder the currency risk. We think that is set to change. The total return in US dollars from the MSCI …
22nd August 2023
The Dominican Republic recorded an impressive post-pandemic recovery, but we think that a combination of a fading boost from tourism, weakness in the US and tight fiscal policy will cause growth to slow by more than most expect this year and next. The …
21st August 2023
Emerging economies whose currencies have fallen by 15% or more against the dollar in a single day – as the Argentine peso did yesterday – have fallen into recession in more than 80% of cases in the last 30 years. Sovereign debt defaults occurred after …
15th August 2023
The surprisingly strong showing for far-right self-proclaimed “anarcho-capitalist” Javier Milei in Argentina’s primary elections (known as the PASO) suggests that there is popular appetite for a shock-therapy style approach to deal with the economy’s …
14th August 2023
We’ll be discussing Argentina’s upcoming PASO election and what it means for the economy in a 20-minute online Drop-In on Wednesday 9 th August at 10:00 EDT/15:00 BST. (Register here .) There are some unnerving similarities between Argentina’s current …
3rd August 2023
Recently-announced measures by Argentina’s government are merely stopgap solutions and appear to be aimed at staving off a disorderly devaluation ahead of upcoming elections rather than stabilising the economy. Ultimately, the way out of the current …
26th July 2023
The Mexican peso’s relentless rise against the US dollar and most other major currencies is increasingly at odds with macroeconomic fundamentals. We think the peso is vulnerable to an abrupt fall over the coming months if, as we expect, risk sentiment …
25th July 2023
Mexico’s exports have fared well recently and the current account deficit remains small. But a closer look suggests that the strength of the peso is causing dynamics in the balance of payments to worsen. The Mexican peso has been one of the best …
20th July 2023
Table 1 has been updated to include the latest comments and proposals of the candidates. The latest polls ahead of next month’s primaries in Argentina suggest that the country could buck the regional trend by electing a more market-friendly government. In …
19th July 2023
Note: We’ll be discussing macro and market risks around El Niño’s return in a 20-minute briefing on Wednesday, 19 th July. Click here to register. The likelihood of an El Ni ño event over the second half of the year raises the risk that activity is …
13th July 2023