- Argentina – The Argentine economy will likely slow considerably after years of robust growth, as exports stall coincident with sharply lower commodity prices and a loss in confidence in present policies. The Ecuadorian debt default will likely influence Argentina, as both nations share a dependence on commodities and state heavily intervening in the domestic economy. The central bank will likely reduce intervention in currency markets and the ARS should depreciate more sharply.
- Brazil – Growth will likely fade more dramatically as 2009 begins due to weaker domestic demand, tighter credit conditions, and lower export prices. Inflation also appears to have peaked at slightly below the authorities upper end of the Copom comfort zone of 6.5%. A slide in the economy and lower inflation will likely trigger more rapid interest rate reductions into early in 2009. USD/BRL will likely be a beneficiary of a modest renew in risk appetite early in the year volatility and a potential to close 2009 above lows registered during the course of the year.
- Chile –The fiscal surplus will allow the government to implement counter-cyclical policy to boost a slowing economy. Falling food and gasoline prices and a favorable base effect are likely to bring down unusually high inflation. The CLP will likely perform reasonably well on a regional basis, due to the boost to metals prices in response to more lax G3 central bank monetary policies.
- Colombia – The economy is deteriorating sharply, leaving the central bank in a difficult position as inflation remains high. However, as domestic demand slows and brings down inflation, a rate cut cycle is likely to begin.
- Mexico – The US slowdown is likely to lead to a contraction of Mexican economic activity. Despite rising inflation in the beginning on 2009, Banxico is expected to act sooner rather than later and cut at least 125bp throughout the year.
- Venezuela – President Chavez will try to extend presidential term limits in 1Q09 via referendum. Politics may postpone a VEF devaluation. Although government spending cutbacks are also likely amid much lower oil prices, implementation will likely lag reduced revenues from lower tax collections. A weaker external and public sector accounts backdrop will likely catalyze a sharp depreciation of the VEF.
Latin America: US slowdown and Weaker Commodity Pricesto Weigh on Growth
December 25th, 2008 · No Comments
Tags: Latin America
0 responses so far ↓
There are no comments yet...Kick things off by filling out the form below.
You must log in to post a comment.