LATAM CHARTBOOK Summary
Core Content Overview
This report provides a macroeconomic outlook for Latin America, focusing on key countries such as Brazil, Mexico, Colombia, Argentina, and Chile, with an emphasis on growth, inflation, monetary policy, and fiscal dynamics. It also outlines the impact of global factors, including commodity prices, USD trends, and the upcoming election cycles.
Main Points and Key Insights
Global Context
- Global Upturn: Latin America is in a phase of economic recovery, influenced by global trends.
- Monetary Policy: Gradual removal of accommodative policies is expected, with the US dollar showing signs of peaking.
- Emerging Markets (EM): A weakening USD tends to improve sovereign ratings in EMs.
Brazil: Summer is Coming
- Growth Recovery: Brazil is showing signs of growth recovery in 2018, with confidence playing a key role.
- Inflation Trends: Inflation has fallen below the target for the first time in many years, with underlying services inflation plummeting.
- Interest Rates: Market consensus forecasts indicate a downward trend in interest rates, and the Taylor rule suggests room for rate cuts.
- Public Sector Credit: Credit from public sector banks is shrinking after years of expansion.
- Debt Dynamics: Debt servicing is becoming a smaller share of households’ disposable income.
- Fiscal Rule: Compliance with fiscal rules requires reforms and budget cuts.
- Retirement System: Brazil's retirement system is very generous, with high pension expenditures.
- Election Impact: The 2018 presidential and legislative elections are expected to be competitive and relevant for economic outcomes.
Mexico: Changing Gears
- Resilient Growth: Mexico's growth remains resilient, with a moderation in 2018.
- Monetary Policy: Rate hikes are expected to have a lagged and cumulative impact on the economy.
- Inflation: Inflation peaks are expected, with core inflation moderating.
- Fiscal Balance: Fiscal balances are improving, with progress in both revenues and spending.
- Oil Revenues: Oil revenues are falling, but non-oil revenues have increased following 2013 reforms.
- Elections: The 2018 presidential election is competitive, and the results may influence investment and policy.
Colombia: Growth Drivers a Precious Commodity
- Growth: Economic growth has slowed, and there are concerns about the sustainability of growth drivers.
- Inflation: Core inflation is above target but moderating.
- FDI Trends: FDI has remained relatively resilient, supported by dynamism in non-oil sectors.
- Election Impact: The 2018 elections may influence the political environment and economic policy.
Argentina: In Recovery Mode
- Growth: Argentina is in recovery, with real GDP growth expected to continue into 2018.
- Inflation: Annual inflation has been stable, with a downtrend likely in 2018.
- Election Impact: Mid-term election results are expected to support investment in 2018.
- Fiscal Policy: Fiscal policy needs to be reformed, and inflation targets have been revised to align with expectations.
Chile: Growth Acceleration in the Horizon
- Growth: Chile is expected to experience growth acceleration in 2018.
- Confidence: Consumer confidence has slightly increased, while business confidence lags.
- Inflation: Non-tradable inflation is at the official target, while tradable inflation is trending upward.
- Monetary Policy: The central bank is likely to maintain a cautious stance on interest rates.
Key Tables and Forecasts
Growth Forecasts (2016–2019)
| Country |
2016 |
2017 |
2018 |
2019 |
| Latin America |
-0.8 |
1.6 |
2.6 |
2.6 |
| Argentina |
-2.3 |
2.8 |
4.0 |
3.5 |
| Brazil |
-3.6 |
1.0 |
3.0 |
2.5 |
| Chile |
1.6 |
1.7 |
3.0 |
2.5 |
| Colombia |
2.0 |
1.5 |
2.5 |
2.5 |
| Mexico |
2.3 |
2.0 |
1.5 |
2.5 |
Inflation Forecasts (2016–2019)
| Country |
2016 |
2017 |
2018 |
2019 |
| Latin America |
9.0 |
6.5 |
4.7 |
4.2 |
| Argentina |
39.0 |
22.5 |
14.0 |
9.0 |
| Brazil |
6.3 |
3.0 |
3.5 |
4.0 |
| Chile |
2.7 |
2.3 |
2.6 |
3.0 |
| Colombia |
5.7 |
4.0 |
3.5 |
3.7 |
| Mexico |
3.4 |
6.8 |
3.5 |
3.0 |
Exchange Rate (Domestic Currency/USD, Year End)
| Country |
2016 |
2017 |
2018 |
2019 |
| Argentina |
15.88 |
18.62 |
18.50 |
20.30 |
| Brazil |
3.25 |
3.31 |
3.20 |
3.30 |
| Chile |
671 |
615 |
630 |
635 |
| Colombia |
3001 |
2987 |
2925 |
2980 |
| Mexico |
20.73 |
19.66 |
18.00 |
18.20 |
Current Account (% of GDP)
| Country |
2016 |
2017 |
2018 |
2019 |
| Latin America |
-2.1 |
-1.6 |
-2.2 |
-2.6 |
| Argentina |
-2.8 |
-4.4 |
-4.6 |
-4.9 |
| Brazil |
-1.3 |
-0.8 |
-2.1 |
-2.7 |
| Chile |
-1.4 |
-1.3 |
-1.6 |
-2.3 |
| Colombia |
-4.3 |
-3.5 |
-3.7 |
-2.9 |
| Mexico |
-2.5 |
-1.0 |
-1.0 |
-1.7 |
Fiscal Balance (% of GDP)
| Country |
2016 |
2017 |
2018 |
2019 |
| Latin America |
-5.9 |
-5.2 |
-5.0 |
-4.7 |
| Argentina |
-4.5 |
-5.1 |
-4.1 |
-3.7 |
| Brazil |
-8.9 |
-8.1 |
-8.1 |
-8.0 |
| Chile |
-2.8 |
-2.6 |
-2.3 |
-2.0 |
| Colombia |
-3.8 |
-3.6 |
-3.5 |
-3.0 |
| Mexico |
-3.6 |
-2.2 |
-2.0 |
-1.5 |
Conclusion
The report highlights that Latin America is experiencing a mixed economic landscape, with some countries showing signs of recovery and others facing challenges. Brazil, Mexico, and Chile are expected to see growth acceleration, while Argentina and Colombia remain more cautious. Inflation trends are generally declining, with monetary policy adjustments playing a key role. The upcoming elections in 2018 are expected to have a significant impact on the region's economic trajectory, particularly in Brazil and Mexico. The report also emphasizes the importance of fiscal reforms and structural changes in improving long-term economic prospects.
