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Latin America Weekly Market Economics Summary (2 - 6 April 2018)

Core Content Overview

This summary provides an analysis of key economic and political events across Latin American countries for the week of 2–6 April 2018. The focus is on industrial production, inflation expectations, central bank actions, and upcoming elections, all of which are critical for understanding regional economic dynamics and market sentiment.

Key Events and Trends

Brazil

• Industrial Production Focus: Industrial production (IP) is expected to decelerate to 4.5% y/y from 5.7% y/y in February, primarily due to base effects.
• Political Developments: The Supreme Court will vote on former President Lula's preventive habeas corpus petition. Lula is ineligible to run for election but can still apply for candidacy by 15 August.
• Economic Indicators:
  • Trade balance for March is expected to show USD4.9bn.
  • Vehicle production and sales data for March will be released, with vehicle exports at 66,314 units.
• Market Monitoring: Markets will closely watch for any signs of economic slowdown, with FX intervention being a key tool for managing inflation.

Mexico

• GFI Forecast: Gross Fixed Investments (GFI) are expected to rise to 5.6% y/y in January, rebounding from a -2.5% Q4 contraction.
• Inflation Expectations: Inflation expectations may moderate due to favorable Q1 data, but the central bank (Banxico) remains concerned about anchored inflation.
• Economic Indicators:
  • PMI Manufacturing for March is forecast at 52.6 by Markit, with a consensus of 51.6.
  • Consumer confidence index for March is expected at 82.0.
  • Exports FOB for February are forecast at USD3.2bn.
• Political Developments: Presidential election campaigning intensifies, with Ricardo Anaya losing momentum and José Meade closing in on him. Leftist López Obrador remains the front runner.
• Trade Concerns: Despite progress in NAFTA talks, global protectionism remains a concern. A 10% drop in US exports could impact the economy by 1pp.

Argentina

• Inflation Expectations: The central bank (BCRA) will release a monthly survey of economists, which will be closely watched for signs of inflation expectations.
• FX Intervention: Recent FX intervention has likely capped inflation expectations, but private inflation gauges suggest elevated price pressures.
• Economic Indicators:
  • Tax revenue for March is expected to be 235.6 billion USD.
  • Vehicle exports for March are forecast at 19,237 units, driven by Brazil's economic growth.
• Political Developments: Markets will monitor Election Tracker updates as Iván Duque (market-friendly) continues to lead in voting intentions.

Colombia

• Inflation and Rate Cuts: The inflation rate for March is expected to decelerate to 3.2% y/y, potentially paving the way for a rate cut by BanRep.
• Inflation Forecast:
  • CPI y/y: 3.19% for March, down from 3.37% in February.
  • Core inflation: Expected to fall to 3.9% y/y in April.
• Trade Balance: The trade balance for February is anticipated to narrow, supported by strong oil prices and goods import recovery.
• Political Developments: Iván Duque remains the leading candidate in the presidential election, with Gustavo Petro as the main rival.

Chile

• Economic Growth: The central bank will release February GDP proxy numbers, with a forecast of 0.5% m/m growth and 5.2% y/y growth.
• Inflation Forecast:
  • CPI y/y: Expected to be 2.00% for March.
  • CPI m/m: Projected at 0.00%, with core inflation at 1.60% y/y.
• Business Confidence: IMCE business confidence for March is expected at 57.38.
• Vehicle Data: Vehicle production and exports for March are forecast at 328,352 units and 275,980 units, respectively.

Economic Calendar Highlights

Summary of Key Views

• Brazil: IP data for February will be a key focus. Lula's legal status is under review, which could impact the political landscape.
• Mexico: GFI is expected to rebound, and inflation expectations may moderate. The NAFTA negotiations are ongoing, with a more positive tone.
• Argentina: Inflation expectations remain a focus, with the central bank on hold. FX intervention has helped control inflation, but private indicators suggest elevated pressures.
• Colombia: Inflation is expected to decelerate, potentially leading to a rate cut. Iván Duque remains the leading candidate.
• Chile: Strong economic growth is anticipated, with inflation likely to slow. Vehicle production and exports are expected to show robust performance.

Additional Notes

• Economic Calendar: The week includes several important data releases across all countries, with a focus on inflation, industrial production, and trade balance.
• Election Tracker: Political developments, especially in Mexico and Colombia, are expected to influence market sentiment.
• Market Coverage: The summary is prepared by the Latam Market Economics team at BNP Paribas and is for professional clients only.

Disclaimer

This document is non-independent research and may be subject to conflicts of interest. It is not investment research and should not be relied upon as authoritative guidance. Indicative prices are not actual terms for transactions and are subject to change. Performance data is illustrative and not indicative of future results.