Filtered by Subscriptions: Latin America Economics Use setting Latin America Economics
The statement accompanying the Brazilian central bank meeting yesterday, at which the Selic rate was hiked by 150bp to 10.75%, made clear that policymakers will slow the pace of tightening from here. But with inflation worries still prominent, we think …
3rd February 2022
After slipping into a technical recession at the back end of 2021, the latest surveys suggest that Mexico’s economy remains in a weak spot at the start of 2022 owing to Omicron-related disruption. Preliminary Mexican Q4 GDP data released this week showed …
2nd February 2022
The surprisingly hawkish shift on Colombia’s central bank board at Friday’s meeting, when the policy rate was increased by 100bp to 4.00%, suggests that the tightening cycle will be more aggressive than we had thought. We now expect the policy rate to …
31st January 2022
The announcement by Argentine President Fernández that the government has reached a new agreement with the IMF, the 22nd in their history, will give some relief to international bondholders in the near term. But this is just the start of a long journey to …
28th January 2022
The decision by Chile’s central bank to deliver a surprisingly large 150bp rate hike yesterday, to 5.50%, supports our view that the tightening cycle will go further than the path it had previously signalled. That said, we think that the dramatic upward …
27th January 2022
Although the Argentine government and the IMF do not fully see eye-to-eye, there have been signs of progress in negotiations and we think it’s most likely that they will sign a fresh agreement within the next few months. That would probably give some …
12th January 2022
We think that Latin American GDP growth will slow by more than most expect in 2022, while inflation will also drop more a bit more quickly than the consensus anticipates. This feeds into our relatively dovish monetary policy views across the region. …
10th January 2022
Gabriel Boric’s victory in Chile’s presidential election is another sign that the country is moving towards greater state intervention in the economy. A radical shift in policymaking seems unlikely. But the public debt-to-GDP ratio looks set to rise much …
20th December 2021
Banxico added to this week’s global central banking bonanza with a surprise 50bp hike, to 5.50%, and the widespread hawkish shift on the Board suggests that policymakers will act more aggressively to tame above-target inflation. We now expect a further …
17th December 2021
Chile’s central bank raised its policy rate by another 125bp yesterday, to 4.00%, and the accompanying statement, alongside today’s Monetary Policy Report , suggest that its tightening cycle will be more aggressive than we’d previously thought. We now …
15th December 2021
The recent batch of GDP figures showed that growth in Latin America as a whole picked up in Q3, but the region’s recovery so far has been one of the weakest in the emerging world. And growth prospects are only deteriorating, suggesting Latin America will …
13th December 2021
Brazil’s central bank gave a clear steer that, even though the economy entered recession in Q3 and shows little sign of growth in Q4, it will follow the 150bp hike in the Selic rate yesterday (to 9.25%) with further aggressive tightening. We now think …
9th December 2021
Chile’s economy has been operating above potential for several months but there are signs that activity is starting to cool. And policy tightening, falls in copper prices and the possibility of more stringent virus restrictions in light of the Omicron …
1st December 2021
The final estimate of Mexican Q3 GDP data was revised down to a 0.4% q/q fall (original -0.2% q/q), but the breakdown showed the contraction was almost entirely due to an outsourcing law that hit services output. Regardless of this statistical quirk, …
25th November 2021
The frontrunners in Sunday’s presidential election in Chile, Gabriel Boric and José Antonio Kast, hold different views on the desired size of the state in the economy, but both advocate relatively loose fiscal policy. This would help to support economic …
18th November 2021
Fiscal balances have generally improved across Latin America this year (barring Chile and Colombia) but we think that governments in most major economies will struggle to implement the substantial austerity needed to stabilise public debt-to-GDP ratios. …
17th November 2021
By next year, Brazil’s public sector interest payments could be almost twice as large (at ~8% of GDP) as they were in 2020, making the challenge of stabilising the public debt-to-GDP ratio all the more difficult. A lot of the focus of the implications of …
15th November 2021
The Mexican central bank’s 25bp rate hike, to 5.00%, and the accompanying statement showed little sign that policymakers are likely to follow their peers in Latin America by upping the pace of tightening in response to strong inflation pressures. The …
12th November 2021
The ruling Frente de Todos (FdT) coalition is likely to lose some of its power in congress in Argentina’s midterm elections on Sunday. Policymaking could subsequently go in one of two ways. Our baseline scenario is that, with electoral concerns out of the …
10th November 2021
We think that the Brazilian real will weaken a bit further against the US dollar over the next year, as fiscal risks and deteriorating terms of trade continue to weigh on the currency. With the exception of the Turkish lira, the real has been the …
4th November 2021
Brazil’s inverted yield curve has raised concerns that the economy may be on the brink of a recession, but it doesn’t have a particularly good track record as a leading indicator for economic downturns in the country. For our part, while downside risks to …
The latest survey data suggest that GDP growth held up relatively well in Brazil and picked up slightly in Mexico in Q4. In the meantime, Chile’s red-hot recovery is continuing which will keep the central bank’s aggressive tightening cycle going in the …
3rd November 2021
Financial conditions in Latin America have tightened sharply this year, most notably in Brazil and Chile, on the back of aggressive monetary tightening and growing political and/or fiscal risks. With these factors likely to persist, tight financial …
28th October 2021
The Brazilian central bank’s decision to up the pace of tightening to a 150bp rate hike (which took the Selic rate to 7.75%) was a clear response to concerns about a looser fiscal stance. With fiscal risks likely to persist, we now expect a 150bp hike in …
The multitude of supply shocks hitting Brazil’s economy are likely to keep inflation at 7-10% well into next year and cause the pace of recovery to slow to a crawl in the next few quarters. Overall, we now expect GDP growth of just 1.3% next year, which …
14th October 2021
The surprisingly large 125bp rate hike delivered by Chile’s central bank yesterday, to 2.75%, suggests that it will continue to front-load its tightening cycle to clamp down on high inflation. We now expect a further 225bp of hikes in this cycle, to …
The threat of energy shortages looms over Brazil once again. The country’s experience with electricity rationing in 2001/02 offers a useful guide about how the situation may pan out. We estimate that this episode knocked about 1%-pt off GDP growth, added …
7th October 2021
There are five key headwinds to Mexico’s economy, including high inflation and shortages in the auto sector, which suggest to us that the recovery will disappoint expectations from here. We now forecast below-consensus GDP growth of 6.0% in 2021 and 2.8% …
5th October 2021
The statement from yesterday’s Brazilian central bank meeting, at which the Selic rate was raised by 100bp (to 6.25%), made clear that Copom is on the warpath to stop inflation expectations rising. With the inflation outlook worsening, we now think that …
23rd September 2021
Following a surge in inflation across the region this year, we think that headline rates are at, or close to, a peak in major Latin American economies. But strong underlying price pressures will prevent inflation from falling below central banks’ targets …
15th September 2021
Yesterday’s larger 50bp rate hike, to 1.00%, delivered by Peru’s central bank (BCRP) suggests it is becoming increasingly concerned about the inflation outlook. With inflation set to stay above the 1-3% target range over the coming quarters, and GDP …
10th September 2021
Brazil’s drought is getting worse and the impact on hydropower production and electricity tariffs will result in higher inflation than we’d previously thought. Fiscal risks could also intensify if the government seeks to cushion the blow to households. …
1st September 2021
The surprise 75bp interest rate hike by Chile’s central bank late on Tuesday (which took the policy rate to 1.50%) underscores policymakers’ concerns about the inflation outlook. Our forecasts for the policy rate had in any case been on the hawkish side, …
We estimate that Brazilian households have ‘excess’ savings worth around 6% of GDP resulting from the pandemic. These should help to cushion consumer spending in the face of headwinds caused by rising inflation and unwinding fiscal support, but we think …
26th August 2021
The sharper-than-expected 2.4% q/q fall in Colombia’s GDP in Q2 was largely due to protest-related disruption in May and masked a strong rebound in output at the end of the quarter. The economic recovery appears to be progressing well so far in Q3, so we …
18th August 2021
Mexico’s central bank hiked interest rates by 25bp, to 4.50%, yesterday but the split vote suggests that the tightening cycle will continue to proceed slowly despite the growing inflation risks. This reinforces our view that the policy rate will continue …
13th August 2021
We expect that most commodity prices will come off the boil, which will weigh on recoveries across Latin America, particularly in Peru and Chile. While the brightening domestic picture will boost overall GDP growth in the very near term, this emerging …
9th August 2021
The hawkish statement accompanying yesterday’s 100bp rate hike by the Brazilian central bank (to 5.25%) means that the Selic rate will increase further than we had anticipated. We now expect it to be raised to 7.50% by year-end (previously 6.50%). The …
5th August 2021
Chile’s central bank fired the starting gun on a gradual tightening cycle yesterday as it hiked its policy rate by 25bp, to 0.75%. While it signalled that monetary policy will remain accommodative over the next two years, we think that Chile’s strong …
15th July 2021
Peru’s president-in-waiting Pedro Castillo seems more moderate than many initially feared, which bears a striking resemblance to former leader Ollanta Humala. The latter’s tenure suggests that, provided there are market-friendly appointments to the new …
1st July 2021
The surprise 25bp rate hike by Mexico’s central bank (to 4.25%) suggests that its reaction function is less dovish that we had expected, as it is now reacting to quell high inflation. With the headline and core rates set to remain above target over the …
25th June 2021
Argentina’s GDP expanded by a stronger-than-expected 2.6% q/q in Q1 and, while the recent third virus wave has dragged down activity in Q2, we are sticking with our above-consensus forecast of 8% growth over 2021 as a whole. One implication is that the …
24th June 2021
Headline Mexican inflation has now peaked and will drop back within Banxico’s 2-4% target range as the earlier spike in fuel inflation unwinds. In contrast, we expect that core inflation will continue to hover at, or just above, this range in the coming …
21st June 2021
The hawkish statement from the Brazilian central bank meeting (at which the Selic rate was raised by 75bp to 4.25%) indicates that policymakers are more confident in the economic recovery but also more worried about energy inflation than we had …
17th June 2021
Chile’s renewed lockdown measures provide further evidence that its rapid vaccination programme has a lot further to run to quash the virus. The good news is that the economy seems resilient to stringent restrictions, and there is evidence that vaccines …
15th June 2021
The latest data suggest that Brazil’s economy has been much more resilient to the latest virus waves than we had anticipated and, as a result, we’re revising up our GDP growth forecast for this year to 4.5% (previously 3.0%). The brighter economic outlook …
3rd June 2021
Sunday’s midterm elections in Mexico are widely seen as a referendum on President López Obrador’s tenure, and a strong result for his coalition could embolden him to pursue more interventionist policies. This Update outlines five key questions (and …
2nd June 2021
Chilean financial assets have been hit hard following the Constitutional Convention election, and this Update outlines three key political risks which could keep local markets under pressure over the coming quarters. These are likely to shape how Chile’s …
27th May 2021
For now, it seems unlikely that the drought affecting Brazil will hit hydropower production hard enough to cause disruptions to electricity supply and broader economic activity. But the drought does pose a risk to the outlook for inflation (and possibly …
19th May 2021
The latest COVID-19 outbreaks in Latin America have passed their peak and the near-term outlook is improving. But, with the probable exception of Chile, the latest developments reinforce the message that the threat of renewed outbreaks will continue to …
18th May 2021