20180122-法国巴黎银行-Latin_America_Week_Ahead_13页_289kb

Summary of Latin America Weekly Market Economics Report (22 - 27 January 2018)

Core Content

This report provides an overview of key economic and political events across Latin America for the week of 22–27 January 2018, with a focus on Brazil, Mexico, Colombia, Chile, and Argentina. It outlines market expectations, forecasts, and potential impacts of upcoming data releases and policy decisions.

Main Events and Forecasts

Brazil

• Lula's Trial: The Appeals Court (TRF-4) will decide on Lula's corruption conviction on 24 January. A unanimous (3x0) decision would bar him from running in the presidential race, while a divided (2x1) verdict would leave uncertainties.
• Inflation Data: The mid-month inflation (IPCA-15) is forecast at 0.43% m/m and 3.05% y/y for January, up from 0.35% m/m and 2.94% y/y in December.
• Current Account Deficit: The external accounts report is expected on Friday, with a current account deficit of USD -3.8bn in December, contributing to a final 2017 deficit of USD -9bn.
• FDI Inflows: FDI is forecast at USD 10.0bn for December, bringing 2017 total to USD 75bn.
• Economic Activity: The economic activity index is expected to remain stable at 1.4% y/y for November, with a potential slowdown in Q4.

Mexico

• NAFTA Talks: The sixth round of NAFTA negotiations resumes on Tuesday. Uncertainty remains over US behavior, which could delay the agreement into 2019.
• Inflation Forecast: January's CPI is expected at 0.46% m/m and 5.74% y/y, a 1.1pp drop from the 2017 close of 6.85% y/y. Core inflation is forecast to turn positive at 0.21% m/m and 4.67% y/y.
• GDP and Activity: The GDP proxy (IGAE) for November is expected to decelerate to 0.9% y/y, while retail sales are forecast to contract by 1.5% y/y, reflecting a weak base and declining domestic consumption.
• Unemployment Rate: The December unemployment rate is expected at 3.7%, up from 3.4% in November.

Colombia

• Economic Activity: The activity number is forecast at 1.4% y/y for November, with a recovery in mining activity offsetting service sector slowdown.
• Monetary Policy: The Bank of Colombia (BanRep) is expected to maintain a dovish stance due to subdued economic activity.
• Political Developments: Political coalitions are forming ahead of the March Congressional elections, with the right-wing coalition led by Álvaro Uribe still deciding its presidential candidate between Ivan Duque and Marta Lucía Ramírez.

Chile

• Inflation Expectations: Inflation expectations will be in the spotlight, with the central bank releasing a bi-monthly survey of traders on Wednesday.
• Cabinet Announcements: President-elect Piñera is expected to announce his cabinet composition early next week.

Argentina

• BCRA Policy: The central bank is likely to pause its policy next week, with easing expected in February. The rate cut in early January was seen as a sign of independence, but the team believes it was a policy mistake.
• Trade Balance: The December merchandise trade balance is expected to show a sharp widening deficit, likely at USD -9bn, a significant deterioration from the previous year's USD 2.1bn surplus.
• GDP Growth: Monthly GDP proxy is expected to show a bounce, but activity-linked tax data suggests a moderation in early Q1 2018 growth.

Key Trends and Risks

• Inflationary Pressures: Inflation in Brazil and Mexico is expected to rise due to base effects and sticky non-tradable prices. Mexico's CPI is forecast to be 5.74% y/y in January, while Brazil's IPCA-15 is expected at 3.05%.
• Political Uncertainty: Lula's trial in Brazil and the upcoming elections in Mexico and Colombia are likely to influence market sentiment and policy directions.
• Economic Slowdown: Activity numbers in Mexico and Brazil are expected to reflect a slowdown in Q4, with Mexico's GDP proxy (IGAE) and Brazil's economic activity index both showing deceleration.
• Trade Deficits: Argentina is expected to see a widening trade deficit in 2017, with further deterioration forecast for 2018.

Economic Calendar Highlights

Conclusion

The week ahead is marked by significant political and economic developments across Latin America. Brazil's Lula trial, Mexico's NAFTA negotiations, Colombia's economic activity and political coalitions, Chile's inflation expectations, and Argentina's trade deficit and monetary policy decisions will all shape market sentiment. Inflation trends, economic slowdowns, and political uncertainties are key factors to watch, with potential impacts on monetary policy and investment decisions.