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Feb 25, 2016 3:30 EDT

LatAm Economic Weekly: Demoted again

iCrowdNewswire - Feb 25, 2016

LatAm Economic Weekly

LatAm Economic Weekly: Demoted again

•   Brazil was downgraded yet again while Mexico surprised markets with an unscheduled rate hike.
•   There was further evidence that growth in Colombia and Chile is slowing down.
•   Argentina took a major step toward resolving its debt dispute. Venezuela announced measures that were below expectations.

Things to Watch Next Week

We forecast Brazil’s IPCA-15 at 1.32% mom and 10.73% yoy in February. We also expect the IGP-M at 1.20% mom and 11.98% yoy in February. In Mexico, we expect bi-weekly CPI at 0.20% and bi-weekly core at 0.13% for 1H February. We forecast the annual bi-weekly at 2.85%. We expect the annual GDP print for 2015 to increase2.5%. We expect GDP at 0.62% qoq sa and IGAE, the monthly GDP, at 3.1% yoy for December.

In Focus: demoted again

Standard & Poor’s downgraded Brazil again, lowering its rating to BB from BB+. Risks are increasing for another budget target miss, illustrating the weak economic conditions. Mexico surprised with an unscheduled 50bp rate hike, a change to its currency intervention mechanism and another round of public spending cuts. All three measures are aimed at supporting the exchange rate, and the first signs look promising with the peso strengthening almost 5% in two days. Argentina took further steps to settle its debt dispute, reaching agreements with about a third of bond holdouts. In Venezuela, President Maduro missed another opportunity by announcing economic policy measures that fall well short of what is required.

(C. Irigoyen, D. Beker, C. Capistran, F. Rodriguez, E. Aguirre, S. Rondeau; page 2)

News and Views

In Brazil, the central bank’s monetary policy director reinforced that the Selic is on hold. Also, economic activity declined 4.1% in 2015. In Colombia, retail sales and industrial production increased 0.3% and 3.9% yoy, respectively. In Mexico, further financial volatility that weakens the MXN may lead Banxico to hike. (page 5)

Today’s Market Movers

In Brazil, focus will be on the unemployment rate. In Colombia, attention will be on the overnight lending rate and the trade balance data.

Data releases, key events
EST Country Data/Event For BofAMLe Cons. Previous
6:00 Brazil National Unemployment Rate Nov 9.00% 9.00% 9.00%
14:00 Colombia Trade Balance Dec -$1,691 -$1,500 -$1,689
14:00 Colombia Imports CIF Total Dec $4,445 -$4100 -$4,243
  Colombia Overnight lending rate 19-Feb 6.25% 6.25% 6.00%
Source: BofA Merrill Lynch Global Research, Bloomberg
Contact Information:

Melissa Anchan
Research Communications
BofA Merrill Lynch Global Research
[email protected]

Via iCrowdNewswire
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