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Rising inflation suggests more rate hikes to come The stronger-than-expected rise in Brazil’s inflation to 10.8% y/y over the first half of February is likely to mean that the central bank’s tightening cycle has much further to run. We expect a cumulative …
23rd February 2022
Oil production in Venezuela has been showing signs of life, and there is probably scope for further gains in the near term. But it would require a lifting of sanctions and significant investment over many years to bring production back to levels seen a …
21st February 2022
Colombia’s recovery: set to lose steam The Q4 national accounts figures out of Colombia this week showed a staggering 4.3% q/q rise in output last quarter, taking GDP back to its pre-crisis trend – making it one of the few EMs in this position (and the …
18th February 2022
Persistently high oil prices would bode ill for current account positions in much of Latin America, adding to the existing vulnerabilities in Chile. It would also keep inflation elevated, leading to more aggressive monetary tightening than we currently …
16th February 2022
Strong end to 2021 but headwinds building The stronger-than-expected 4.3% q/q surge in Colombia’s GDP in Q4 took output back to its pre-pandemic trend, confirming the recovery has been one of the quickest in the region. Although we still think growth will …
15th February 2022
Latin American inflation troubles continue The recent batch of January inflation data across Latin America made for grim reading and, despite the hawkish response by central banks, inflation rates will remain high in the coming months. To recap, there …
11th February 2022
Solid end to 2021 but bumpy road ahead The solid 1.2% m/m rise in Mexico’s industrial production in December was partly driven by a strong rise in auto production as global supply shortages eased. However, Omicron-related disruption will probably cause …
The second successive 50bp hike by Mexico’s central bank (to 6.00%), in another 4-1 split on the Board, suggests that it is maintaining its hawkish stance under the new Governor Victoria Rodríguez. And with inflation set to remain well above target in the …
Fixed investment in Brazil rose at one of its fastest rates in the last 50 years in 2021 which, while a positive development, was driven by factors that are unlikely to be sustained. Fixed investment will probably fall back significantly this year, …
10th February 2022
Rising core inflation to prompt another 50bp hike from Banxico The fall in Mexican inflation to 7.1% y/y suggests that the headline rate has peaked, but the central bank will remain concerned about rising core inflation. As such, we expect another 50bp …
9th February 2022
Brazil and Mexico continuing to struggle While there were some positive signs from the latest activity data for Brazil and Mexico, both economies seem to have started 2022 on the backfoot. The main headline this week was that provisional Mexican Q4 GDP …
4th February 2022
We expect that falls in commodity prices will cause current account positions to worsen across the region this year. While external positions will remain secure in most major Latin American economies, those in Colombia and Chile are an underappreciated …
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
Auto recovery supports rebound in industry A chunky rise in Brazil’s motor vehicle production supported a much stronger-than-expected 2.9% m/m increase in industrial production in December and means that the economy may have just exited from its technical …
Falling into recession The 0.1% q/q fall in Mexico’s GDP in Q4 confirmed that the economy slipped into a recession over the second half of 2021, and we think growth this year will be weaker than most expect. Despite the softness of the economy, we expect …
31st January 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 …
Argentina & the IMF: Devil will be in the details The Argentine government’s agreement with the IMF for a new $44.5bn deal is a positive step to improve macroeconomic stability. But, at first glance, the deal seems to be based on rosy economic …
28th 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 …
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
Another 150bp rate hike almost certain next week The stronger-than-expected Brazilian mid-month inflation reading for January, of 10.2% y/y, means that the central bank is on course to hike the Selic rate by another 150bp (to 10.75%) next Wednesday. That …
26th January 2022
Political risk will be a major theme once again in Latin America this year, although recent developments have given cause for cautious optimism. Chilean President-elect Boric’s appointment of Mario Marcel , the current Central Bank Governor, as the next …
25th January 2022
Inflation peaked but will remain stubbornly high The fall in Mexico’s inflation to 7.1% y/y in the first two weeks of the year gave the first sign that inflation has peaked and we think that it will continue to trend lower over the coming months. That …
24th January 2022
Chile: Boric appoints ‘Super Mario’ Marcel President-elect Boric’s announcement today that (now outgoing) Governor of the Central Bank, Mario Marcel, will be Chile’s next Finance Minister is a clear signal that his government will pursue prudent fiscal …
21st January 2022
Overview – The regional recovery will lag further behind others in the emerging world in the coming years. The Omicron-led surge in virus cases presents a risk to growth in the near term, but we suspect that the economic hit will be small. Larger drags …
20th January 2022
Brazil: Early clues on Lula’s policy stance There have been some recent clues that Brazil’s former left-wing president Lula, the current favourite to win October’s election, may not be as radical as some fear. But there is still a clear risk that he would …
14th 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
Industrial woes continue The disappointing 0.1% m/m fall in Mexican industrial production in November raises the chances that the economy slipped into a recession last quarter. And while auto production looks to have rebounded strongly in December, the …
11th January 2022
Inflation fall won’t stop Copom from hiking further The fall in Brazilian inflation to a four-month low of 10.1% y/y in December confirmed that the recent food and energy inflation spikes are starting to unwind. But with the headline rate still far above …
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
Omicron taking hold in Latin America New virus cases have jumped almost five-fold in Latin America over the past two weeks as the contagious Omicron variant is taking hold, but we suspect that the economic fallout will be limited. Caseloads are …
7th January 2022
Strong inflation to prompt rate hikes in Mexico and Chile Inflation in Mexico stabilised at 7.4% y/y in December and, with price pressures likely to remain strong, we expect Banxico to deliver another 50bp rate hike, to 6.00%, at its meeting in February. …
Industrial recession continued in Q4 The 0.2% m/m fall in Brazilian industrial production in November, taken together with the weak surveys for December, suggests that the sector probably knocked 0.1-0.2%-pts off q/q GDP growth in Q4. There’s a very real …
6th January 2022
High inflation will keep central banks in tightening mode The fall in Brazilian inflation, to 10.4% y/y, in mid-December is likely to be followed by further declines in the coming months. Inflation in Mexico edged up in the same period, to 7.45% y/y, but …
23rd December 2021
Recoveries across Latin America have lost momentum in Q4 even though, unlike in other regions such as Europe, new COVID-19 cases generally remain low and containment measures are still light-touch at this stage. The situation could get worse if the …
22nd December 2021
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
Our hits and misses from a volatile 2021 2021 was another whirlwind year for Latin America. The economic recovery has been bumpy, financial markets have underperformed, and Lionel Messi finally won the Copa América (sorry Brazil fans). In the final Weekly …
17th 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 …
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
Copom waiting for expectations to fall The Brazilian central bank’s (BCB’s) meeting this week was, on balance, a hawkish one. There was another 150bp hike in the Selic rate, to 9.25%, and policymakers didn’t engage in the debate about whether higher rates …
10th December 2021
Auto sector leads a small rebound The small 0.6% m/m rise in Mexican industrial production in October was helped by a rebound in auto production, suggesting the sector may be starting to turn a corner. However, the risk of further global supply …
Early signs of stabilisation The slightly softer-than-expected Brazilian inflation figure, of 10.7% y/y, isn’t going to stop Copom from hiking the Selic rate by another 150bp (to 10.75%) when it meets in early February. But it does provide a sign that …
Inflation hits 20-year high but another 25bp hike still likely The rise in Mexico’s headline inflation to a 20-year high of 7.4% y/y in November will be a concern for Banxico. But it was partly driven by unfavourable base effects which will soon unwind. …
9th 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 …
Multi-year high inflation will prompt further aggressive hikes The further rise in Chile’s inflation to 6.7% y/y – the highest rate since late 2008 – will keep pressure on the central bank to deliver further aggressive monetary tightening. We expect …
7th December 2021
More variants more problems? It goes without saying that the emergence of the Omicron variant presents a key risk to economic recoveries. But, for the time being, we think that central banks across the region will continue to focus on tackling high …
3rd December 2021
Early signs of another contraction in Q4 The surprise 0.6% m/m fall in Brazilian industrial production in October and weakness in the surveys for last month provide early evidence that the contraction in the economy last quarter may be followed by another …
In recession despite re-opening The 0.1% q/q fall in Brazilian GDP in Q3 confirmed that problems in the agricultural and industrial sectors tipped the economy into a technical recession. And with financial conditions tightening, the terms of trade …
2nd 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
