Entries for 'Latin America'
March 20, 2024
Strong activity, supported by nearshoring opportunities, has lifted market sentiment.
Pre-election public spending will complicate fiscal consolidation in 2025. Favorable external conditions should help sustain growth, but we remain cautious about medium-term prospects.
March 14, 2024
We maintain a cautious view on the impact of US sanctions relief on Venezuela's oil sector. Prospects hinge on the extent of sanctions reimposition, including licenses for private oil companies. We project real GDP growth of 4.2% in 2024, amid higher oil production and a decline in inflation.
March 11, 2024
In this episode of Current Account, Clay is joined by IIF's Martin Castellano, Head of Latin America Research, to discuss the present economic state o...
February 22, 2024
External accounts improved last year despite softer commodity prices. Key drivers were remittances, import compression, and services normalization. Manageable external financing needs in 2024 should limit vulnerability, helping attract foreign capital.
January 30, 2024
Disinflation progress will prompt deeper policy-rate-cutting cycles regionwide in 2024. Against a backdrop of non-linear disinflation and sizable risks, the challenge for LatAm central banks will be normalizing the policy stance while maintaining hard-won credibility.
November 6, 2023
In this episode of Current Account, Clay is joined by Kezia McKeague, the Regional Director for Latin America at McLarty Associates, to discuss the cu...
October 11, 2023
Dollarization would require $30-40bn, but the central bank has run out of usable reserves. Raising dollars in the market looks unfeasible amid little foreign investor debt appetite. The bottom line is that rushing into unfunded dollarization would come at the expense of a painful recession.
October 2, 2023
Colombia’s large current account deficit has narrowed this year. Sharp import compression has been driven by monetary policy tightening. “True” FDI, among the highest in LatAm, has continued to finance the deficit.
August 9, 2023
A hard-won agreement with the IMF puts off tough decisions until after the election. We estimate the external financing gap at $16bn in 2023. Thus, the primary election is critical. We expect the opposition to do better than expected, but the situation is highly uncertain and market sensitive.
July 24, 2023
Brazil’s trade surplus has been building steadily in recent years. The decomposition of trade flows shows agricultural export volume as the catalyst. We estimate the trend trade surplus at 2.2% of GDP, up from 1% a decade ago, given productivity and arable land potential driving agricultural growth.
June 12, 2023
Narrowing trade imbalances
May 31, 2023
Crisis risk is on the rise ahead of the October presidential elections. We put the 2023 external financing gap at $15bn amid negative net foreign reserves. Advancing IMF money could help but will require policy corrections. The next administration will be pressed to adopt a stabilization plan.
April 4, 2023
The government submitted to Congress a long-awaited pension reform bill. We survey the main independent and official reviews on the proposal, focusing on the fiscal impact. While the reform introduces improvements in coverage, equity and sufficiency, these gains come at a steep fiscal cost.
March 10, 2023
Initial policy measures suggest a less market-friendly stance than expected by investors. Top concerns are potential meddling in monetary policy, high spending, and subsidized lending. Despite increased state intervention, we believe moderation will prevail, helping avoid more adverse scenarios.
March 2, 2023
Peru’s political and social crisis has continued, undermining governability. Social tensions sprout from idiosyncratic institutional fragilities. While macroeconomic policies have remained remarkably unscathed, we have downgraded our 2023-24 growth forecasts following recent developments.
October 27, 2022
We have increased our 2022 LatAm growth forecast to 3.1% amid a robust H1, despite recent drag from softer commodity prices and forceful monetary tightening. While policy adjustment and global headwinds will weaken activity in 2023, the external environment could encourage LatAm asset allocation.
October 6, 2022
Investors are pricing in more checks and balances post-election. The new political landscape could make the macroeconomic policy framework more resilient. Despite rising transition risk, we do not expect a full-blown crisis. We remain optimistic as incentives for moderate policies have increased.
September 27, 2022
The upcoming presidential election has become more contested. Yet despite rising transition risk, we do not expect full-blown institutional crisis, and a relatively smooth transfer of power could lift investor confidence. Regardless of who wins, the overall economic framework should stay unchanged.
September 8, 2022
Costa Rica’s current account deficit remains manageable, and the external funding outlook is favorable. The real exchange rate has depreciated, favoring external adjustment. However, inflation pressure has intensified, and global bond issuance remains a challenge amid political resistance.
August 22, 2022
Exchange rate flexibility has become a key tool to absorb external shocks in most large LatAm economies despite high inflation. Yet “fear of floating” remains pronounced in highly dollarized economies, increasing vulnerability in Argentina, Ecuador, and much of Central America and the Caribbean.