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Summary of Latin America Weekly Market Economics Report - 23 - 30 April 2018

Core Content Overview

This report provides an analysis of key economic events and data releases across Latin America for the week of 23–30 April 2018, focusing on inflation trends, monetary policy decisions, and political developments.

Key Events and Economic Outlook

Brazil

• Focus: Likely positive credit and external sector numbers.
• Main Highlights:
  • The central bank will release the March external sector report, expecting a current account surplus of USD 0.5bn.
  • FDI net inflow is forecast at USD 4.2bn for March, with a 12-month sum of USD 62bn (3.0% of GDP).
  • Public banks are still contracting their balance sheets as part of the government's strategy to reduce public sector participation in the credit market.
  • Private sector banks are recovering, with lower delinquency rates and monetary policy rates contributing to this trend.
• Inflation: Forecast to cut to 3.0% for 2018 and 3.5% for 2019. Cyclical and structural factors are influencing the decline.
• GDP Growth: Expected to be 3.0% for the year and 3.5% for next year.

Mexico

• Focus: Busy week with economic data and political developments.
• Main Highlights:
  • CPI is expected at 4.7% y/y. Core inflation is forecast to decelerate to 3.6% y/y.
  • The first of three presidential TV debates is scheduled for Sunday, 22 April. Previous debates had little impact on election outcomes.
  • NAFTA talks continue without a clear timetable, with no fast-track expected due to slow progress on key issues.
  • AMLO has softened his stance on NAFTA, supporting the current negotiations and appointing a pro-NAFTA economist as chief negotiator.
• Monetary Policy: Banxico is expected to cut rates in Q4, with minutes likely reinforcing a hawkish tone.
• Economic Activity: Mixed performance in February, with growth at 2.0% y/y. Retail, mining, and construction sectors performed better, while manufacturing and services saw deceleration.
• Unemployment: Expected to drift slightly higher in March to 3.5% sa, but remain near-term lows.

Argentina

• Focus: Central bank policy and the PPP investment program.
• Main Highlights:
  • BCRA is expected to stay on hold in late Q2, with a potential rate hike in late Q2 followed by modest cuts in Q4.
  • A USD 26bn PPP program is set to begin, with the first stage involving USD 6bn in road concessions.
  • Real GDP growth is expected to accelerate in February, reaching 5.6% y/y due to base effects.
  • Economic activity index is forecast to show 2.0% y/y growth for February.
• Inflation: Central bank maintains a hawkish stance, with inflation expected to moderate but not enough to justify rate cuts.

Colombia

• Focus: Presidential elections and monetary policy.
• Main Highlights:
  • The central bank is expected to resume its easing cycle, cutting rates by 25bp to 4.25% pa.
  • The first round of presidential elections is approaching, with Iván Duque leading and Gustavo Petro trailing.
  • Business confidence is expected to show a modest recovery, though not spectacular.
  • The report reinforces a below-consensus 4.0% pa policy rate for the year, citing a narrowing current account deficit and inflation near target.

Key Economic Data and Indicators

Brazil

• Current Account Balance: Expected to be USD 0.5bn for March.
• FDI Inflow: Forecast at USD 4.2bn for March, down from USD 4.7bn.
• Construction Costs: FGV data shows 0.23% m/m growth for April.
• Consumer Confidence: Expected to remain stable, with FIPE CPI at -0.01% m/m and FGV CPI at 0.54% y/y.
• Credit Report: Public banks continue to lose market share, while private banks show recovery.

Mexico

• Retail Sales: Expected to grow at 1.1% y/y for February, with a negative m/m growth of -0.2%.
• Unemployment Rate: Forecast to rise slightly to 3.5% sa for March.
• Trade Balance: Expected to be USD -0.8bn for March, with a 12-month rolling sum of USD -12.4bn.
• Inflation: Biweekly CPI print is expected at -0.34%, leading to a 20bp drop in headline CPI to 4.70% y/y.

Argentina

• Consumer Confidence Index: Expected to be 43.8.
• Trade Balance: Forecast at USD -0.9bn for March.
• National Unemployment Rate: Expected to be 12.6% for March.

Colombia

• Retail Confidence: Expected to be 20.5.
• Industrial Confidence: Expected to be 1.9.
• Monetary Policy Minutes: BanRep will release minutes on Thursday, 26 April.

Market Outlook and Notes

• The week is marked by a mix of economic data releases and political developments.
• Inflation trends are expected to continue moderating, with central banks adjusting rates accordingly.
• The PPP program in Argentina aims to boost investment with minimal fiscal impact.
• NAFTA negotiations remain uncertain, with no clear timetable, but risk perception is being managed.
• Political events, especially in Colombia and Mexico, will have a significant impact on market sentiment and policy direction.

Economic Calendar Highlights

• Mon 23/04: Brazil's FGV CPI IPC-S m/m, Brazil's Central Bank weekly economists survey, Mexico's Economic activity IGAE y/y.
• Tue 24/04: Argentina's Economic activity index, Brazil's FGV consumer confidence, Mexico's Bi-weekly CPI and core CPI data.
• Wed 25/4: Brazil's FGV construction costs, Brazil's PPI manufacturing data, Brazil's credit report.
• Thu 26/4: Mexico's Unemployment rate, Mexico's Banxico minutes, Argentina's consumer confidence index.
• Fri 27/4: Brazil's FGV inflation IGPM y/y, Brazil's trade balance, Colombia's overnight lending rate.

Legal Disclaimer

• This document is non-independent research and is not investment research.
• It is intended for professional clients and eligible counterparties as defined by MiFID and EU regulations.
• BNP Paribas may have financial interests in the mentioned entities and may be involved in related transactions.
• No liability is accepted for any loss arising from reliance on the information contained in this document.