LatAm Outlook: Navigating the Uncertainty

March 26, 2025 9:56 PM UTC

·       Brazil and Mexico economy are likely to decelerate in terms of growth in 2025, although we see this being stronger in Mexico. Mexico institutional reforms and its close ties with U.S. increases uncertainty for 2025, especially after Trump victory, and the menaces of Trump imposing tar

EMFX Outlook: Divergence versus the USD

March 26, 2025 9:16 AM UTC

EM currencies will be helped by the ongoing USD downtrend against DM currencies, but prospects also depend on relative inflation differentials versus the USD and starting point in terms of valuations.  The Brazilian Real (BRL), Mexican Peso (MXN) and Indonesian Rupiah (IDR) should all make modest s

Mexico: Uncertainty Mounts as Tariffs Are Imposed

March 5, 2025 2:43 PM UTC

Trump's administration has moved forward with 25% tariffs on Mexican imports, citing drug trafficking and migration issues. Mexico’s President Sheinbaum has stated retaliatory measures will be announced on March 9. The tariffs could push Mexico into recession in 2025, although we forecast growth a

Mexico: Labour Market Decelerating as Expected

February 28, 2025 5:53 PM UTC

Mexico's labor market remains strong with an unemployment rate of 2.7%, but signs of deceleration are emerging. Worker affiliation to the pension system and wage growth are slowing, and some job creation stagnation is expected, potentially pushing the unemployment rate above 3%. A technical recessio

Banxico Minutes: More Cuts on the Way

February 21, 2025 9:57 PM UTC

Banxico cut the policy rate by 50 bps to 9.5%, signaling a more dovish stance as inflation trends downward. The board cited weak domestic demand and improved inflation prospects but highlighted risks from U.S. policy uncertainty, tariffs, and immigration effects. While most members supported a 50 bp

Mexico: Tariffs and Growth Issues Could Impose Fiscal Difficulties

February 19, 2025 10:20 PM UTC

Mexico aims for fiscal consolidation in 2025, relying on revenue growth while freezing most expenditures. However, weak growth could undermine this strategy. Authorities expect 2–3% GDP growth, but our forecast is 1.6%, with a recession risk. A less integrated U.S.-Mexico trade relationship, parti

Mexico CPI Review: Inflation Falls as Demand Eases

February 10, 2025 7:14 PM UTC

Mexico’s CPI rose 0.3% in January, below its 0.6% historical average but in line with expectations. Y/Y inflation fell to 3.6%, the lowest since Jan/2021. Core CPI rose 0.4%, with core goods up 0.7% and services up 0.2%. Non-core CPI fell 0.13%, led by a 1.5% drop in agricultural goods. The econom

Banxico Review: 50 bps Cut as Expected

February 8, 2025 9:39 PM UTC

Banxico cut the policy rate by 50bps to 10.5%, with a cautious stance and a split vote. Inflation has fallen but remains above target, expected to converge to 3.0% by Q3 2026. Global risks, including Trump’s tariff threats, add uncertainty. Despite economic weakness, some monetary tightening may s

Mexico GDP Review: 0.6% Contraction in Q4 and Recession Risks

January 31, 2025 6:34 PM UTC

Mexico’s GDP shrank by 0.6% in Q4 2024, bringing annual growth to 1.5%, well below previous years. The industrial sector led the decline, driven by uncertainty over Trump’s election and weaker investment, while agriculture also contracted sharply. Monetary tightening, lower U.S. demand, and poli

Mexico’s Plan: An Eye on Nearshoring and Displacing China in U.S.

January 15, 2025 1:17 PM UTC

President Claudia Sheinbaum’s “Mexico Plan” targets USD 270 billion in investments, aiming to reduce poverty, boost sustainability, and expand Mexico’s economy. Key goals include nearshoring, increasing domestic production, and fostering U.S. trade relations. However, private investment stag

Mexico CPI Review: Downtrend Continues

January 10, 2025 2:11 PM UTC

December’s CPI grew 0.4%, with Y/Y inflation dropping to 4.2%, above Banxico’s 2%-4% target. Core CPI rose 0.5%, driven by services, while non-core inflation was stable. MXN depreciation’s pass-through impact remains limited. Tight monetary policy supports convergence, but Banxico faces a deci

Mexico CPI Preview: Christmas Acceleration

January 6, 2025 2:19 PM UTC

Mexico's December CPI is forecasted to grow by 0.5% in December, bringing 2024 inflation to 4.3%, above Banxico's target. Core CPI aligns better at 3.5%. Weak demand aids inflation convergence, expected by Q3 2026. Risks include a 22% MXN depreciation and U.S. tariffs. Banxico is likely to continue

EM Government Debt: BRICS Divergence

January 2, 2025 8:05 AM UTC

   Brazil and South Africa suffer from debt servicing costs outstripping nominal GDP, which will remain a concern unless a consistent primary budget surplus is seen – though S Africa enjoys a much longer than average term to maturity than Brazil.  India and Indonesia, in contrast, enjoy nominal

EMFX Outlook: Hit From Tariffs, Before Divergence

December 20, 2024 10:00 AM UTC

·        EM currencies on a spot basis will remain on the defensive in H1 2025, as we see the U.S. threatening and then introducing tariffs on China imports – 30% against the current average of 20%. China’s response will likely include a Yuan (CNY) depreciation to the 7.65 area on USD/CN

LatAm Outlook: Economic Shifts

December 18, 2024 5:21 PM UTC

·       Brazil and Mexico economy are likely to decelerate in terms of growth in 2025, although we see this being stronger in Mexico. Mexico legal reforms and its close ties with U.S. increases uncertainty for 2025, especially after Trump elections, although we see tariffs in 2025 as unlikely

Mexico CPI Review: Signs of Disinflation

December 10, 2024 11:04 AM UTC

Mexico’s November CPI rose 0.4%, lowering the Y/Y rate to 4.6% from 4.8% in October. Non-core inflation increased 1.7%, driven by energy costs and seasonal electricity tariff adjustments, while core inflation remained flat, with core goods contracting 0.3%. Key declines occurred in Domestic Goods

Banxico Minutes: Evaluating Further Cuts

November 29, 2024 7:31 PM UTC

Banxico’s latest minutes reveal a 25 bps rate cut to 10.25%, with most board members supporting continued easing. They view recent non-core inflation spikes as transitory, expecting headline CPI to decline as shocks dissipate. Core CPI has dropped to 3.8%, reinforcing the case for further cuts, wh

Mexico: Budget Aims at Resuming Fiscal Discipline

November 22, 2024 11:21 PM UTC

Claudia Sheinbaum’s administration has introduced the 2025 budget, reaffirming Mexico's commitment to fiscal discipline with a projected fiscal consolidation of 2.0% of GDP, reducing the fiscal deficit from 5.9% in 2024 to 3.9% in 2025. Although there is likely an overestimation on GDP growth we b

Mexico CPI Review: Agricultural Goods Drive Inflation Up

November 8, 2024 2:58 PM UTC

Mexico's CPI rose 0.54% month-over-month in October, with a year-over-year increase to 4.8%, slightly above expectations. Agricultural goods and energy prices were key contributors. Core CPI, showing positive recent trends, rose 0.3% month-over-month and dropped to 3.8% year-over-year. Banxico is ex

Banxico Preview: Continuing to Cut at 25bps Pace

November 5, 2024 7:45 PM UTC

Mexico's Central Bank (Banxico) is expected to proceed with a 25 basis-point rate cut on Oct. 10, bringing the policy rate to 10.0%. Banxico remains focused on core CPI, which is gradually decreasing toward its 3.0% target. While some previously anticipated a 50 basis-point cut, consensus now favors

Mexico GDP: Demand Sustains Q3 Rebound, but Growth Expected to Slow

October 30, 2024 6:01 PM UTC

Mexico's Q3 GDP grew by 1.0% quarter-over-quarter, beating market expectations, though annual growth slowed to 1.5%. High employment and stronger-than-expected U.S. demand sustained growth, but the outlook remains cautious. Slower growth is expected ahead, with limited structural shifts such as near

Banxico Review: 25bps Cut as Expected, But Not Unanimous

September 27, 2024 12:58 PM UTC

Banxico cut the policy rate by 25 bps to 10.5%, but the decision was not unanimous, with one dissenter favoring a higher rate. Weak domestic growth and softening core CPI suggest further cuts are likely, though caution is needed due to market volatility. Banxico’s minutes will provide more clarity

EM FX Outlook: Fed Easing Helps but Divergent Trends

September 26, 2024 8:00 AM UTC

  USD strength is ebbing across the board, which provides a positive force for most EM currencies on a spot basis.  However, where inflation differentials are large, the downward pressure will remain in 2025 e.g. Turkish Lira (TRY).  Where inflation differentials are modest against the U.S., but

LatAm Outlook: Diverging Patterns

September 24, 2024 12:54 PM UTC

·       Brazil and Mexico started to diverge in terms of growth. While we see Brazil GDP growing above 3.0% in 2024 (pushed by the internal demand), we see Mexico’s growth decelerating to 1.3%, due to weaker demand from U.S. and contractionary monetary policy. In 2025, we see Brazil growing

Mexico CPI Review: 0% Inflation in August as Expected

September 10, 2024 1:53 PM UTC

Mexico's CPI remained flat in August, causing year-over-year CPI to drop from 5.6% to 5.0%. This stability was driven by a 0.7% decline in non-core CPI, while core CPI rose 0.2%. The Food and Beverages CPI fell 0.6%, reflecting easing pressure on agricultural goods. With the economy cooling, inflati

Mexico CPI Preview: Stabilization on August

September 5, 2024 4:39 PM UTC

Mexico’s August CPI is expected to remain flat at 0%, with year-on-year inflation dropping to 5.0% from 5.5% in July, driven by a contraction in non-core CPI. Core CPI is projected to rise by 0.2%, bringing its year-on-year figure to 3.9%. This trend may give Banxico more confidence to resume inte

Mexico: Inflation Report Shows Confidence in Cuts

August 29, 2024 2:08 PM UTC

Banxico's latest report reveals a weaker growth outlook, with a 2024 forecast cut to 1.4% and further weakening expected in 2025. Despite rising non-core CPI, inflation remains controlled. Banxico is likely to continue rate cuts, aiming for a year-end policy rate of 10.25%, amid moderate inflation c

Banxico Minutes: Cuts on the Table, Divided Board

August 23, 2024 1:02 PM UTC

Banxico has resumed its rate-cutting cycle, reducing the policy rate from 11% to 10.75%, with a split board decision. Most members noted weakening domestic activity and external volatility impacting the exchange rate. While some view the rise in non-core inflation as transitory, others see it, along

Mexico: FDI Increases but No Sign of Nearshoring

August 21, 2024 2:50 PM UTC

Mexico's FDI reached USD 31 billion in the first half of 2024, a 7% increase from 2023. However, this figure may be inflated by not accounting for USD inflation, potentially reducing real growth. While nearshoring discussions continue, current FDI largely reflects reinvestment by existing foreign fi

Mexico: Moving Towards Deficit as Expected

August 16, 2024 8:10 PM UTC

Mexico's fiscal situation is becoming challenging, with a primary deficit emerging due to increased support for PEMEX and overestimated growth projections. The Debt/GDP ratio is expected to rise to around 50.8% by 2024, possibly stabilizing around 49-54% depending on fiscal consolidation efforts. Wh

EM Markets Divergence with China Harder Landing Concerns

August 14, 2024 3:35 PM UTC

Global market turbulence has had a spillover impact into EM, but also some EM assets have benefitted from rotation away from the U.S.  What are the prospects in the coming months?
We see scope for a 2nd wave of U.S. equity and Japanese Yen (JPY) correction, which are a mixed influence for EM assets

Banxico Review: 25bps Cut Amid the Risk

August 9, 2024 1:08 PM UTC

Banxico narrowly voted (3-2) to cut the policy rate by 25bps, despite rising headline inflation and peso depreciation. Core inflation is declining, standing at 4% year-over-year, with expectations of further decreases. Inflation is projected to hit the 3% target by Q4 2025. Future rate decisions wil

Mexico CPI Review: Food Prices Lead the 1% Rise

August 8, 2024 1:56 PM UTC

Mexico's CPI rose by 1.0% in July, pushing the year-over-year rate to 5.6%, the highest since November 2021. The increase was driven by a 1.9% rise in food and beverages due to drought and exchange rate impacts. Non-core inflation surged by 3.3%, widening the gap with core inflation. Given these ris

Banxico Preview: Inclined to Cut but There Are Risks

August 2, 2024 1:00 PM UTC

The Mexican Central Bank will meet on Aug. 8 to consider a 25 bps rate cut, though risks remain. At 11%, the rate is highly contractionary, impacting job creation and growth. The MXN’s volatility and 10% depreciation since June pose short-term inflation risks, complicating rate cuts. Adverse clima

Mexico GDP Review: Slow Growth in Continues

July 30, 2024 4:22 PM UTC

Mexico's GDP grew by just 0.2% in Q2 2024, with Industry and Services up 0.3% but Agriculture down 1.7%. The economy shows signs of deceleration, especially in agriculture due to extreme climate conditions, despite rising wages. The detailed data is pending, but a slowdown in investment and consumpt

Mexico: Mixed Signs for Banxico

July 25, 2024 1:52 PM UTC

The Mexican economy shows mixed signals for Banxico. Economic activity indicates a slowdown, with weaker industrial activity and decelerating formal employment. However, inflation is rising, particularly in non-core components like energy and agricultural goods, influenced by climate conditions. The

Banxico Minutes: More Slack Could Give Room for Rate Cuts

July 12, 2024 2:43 PM UTC

Banxico kept the policy rate unchanged at 11.0% but showed a slightly dovish tone, hinting at possible cuts in August. June's CPI figures revealed a widening gap between core and non-core inflation. Despite recent economic slowdowns and the MXN Peso's depreciation, Banxico expects economic slack to

Mexico CPI Review: 0.38% Inflation in June

July 9, 2024 7:46 PM UTC

INEGI reports Mexico's CPI rose 0.38% in June, above expectations. Year-over-year CPI increased to 5.0%, with core CPI at 4.1% and non-core CPI at 7.7%. Non-agricultural goods drove the rise, raising concerns about inflation due to climate-related agricultural shocks. Food and beverages saw the high

EM After the Elections: Fiscal Focus and Inflation Questions

July 1, 2024 8:05 AM UTC

Enhancing fiscal credibility is key post-election in India and S Africa, but also for Brazil.  India, will do this in the 3 week of July, but S Africa needs to move from ANC/DA led coalition optimism to reality quickly. Brazil needs to stop the vicious circle of sentiment building up on fiscal slip

Banxico Review: Continuing the Pause

June 28, 2024 1:59 PM UTC

The Mexico Central Bank (Banxico) kept the policy rate unchanged at 11.0%, despite one member advocating a 25 basis points cut. Banxico hinted at potential rate cuts in 2024 due to a slowing economy and inflation outlook. An August cut remains possible but seems premature. Market and Banxico inflati

EMFX Outlook: USD Strength to Ebb with Different EM Impact

June 25, 2024 8:05 AM UTC

 We see Fed rate cuts from September starting to soften USD strength into year end and 2025.  Beneficiaries will include currencies with inflation moving towards target and high real rates or, alternatively, undervalued currencies. This should benefit the Brazilian Real (BRL) and Indonesian Rupiah

LatAm Outlook: Pausing the Cuts

June 24, 2024 6:00 PM UTC

·       Brazil and Mexico growth will decelerate from the growth rates in 2023. The stronger basis of comparisons in 2023 and the tight monetary policy will diminish growth during 2024. Brazil robust Agricultural growth will not repeat in 2023 while Mexico is on the limit of growing due to a

Mexico CPI Review: Some Pressure in Services

June 7, 2024 5:10 PM UTC

INEGI reported a 0.2% CPI decrease in May, with annual CPI stable at 4.7%. Electricity prices dropped, contributing to the decline. Core CPI rose 0.2%, while Non-Core fell 1.3%. Persistent Services CPI and food price shocks may sustain inflation. Peso volatility could also pressure inflation, likely

Banxico Minutes: Unanimous Pause, Diverging Cuts

May 24, 2024 9:24 PM UTC

Banxico maintained the policy rate at 11%, reflecting a cautious stance amid persistent inflation and economic uncertainty. The board was unanimous in this decision but divided on the timing of future cuts. Despite expectations for a rebound in economic activity, concerns about inflationary pressure

Mexico: Exports Loosing Traction

May 20, 2024 2:38 PM UTC

At the beginning of the year, Mexico's exports are losing traction, stagnating as imports surpass exports. This could be due to adjustments to U.S. demand and inflation effects. With internal demand cooling and the U.S. economy decelerating, growth may shift to Mexico’s internal economy, bolstered

Banxico Review: Hold Rates

May 10, 2024 12:44 PM UTC

Banxico's decision to maintain the policy rate at 11% reflects a cautious stance amidst rising inflation and a slowing economy. Despite external volatility, the MXN remains resilient. The main concern is services inflation being stickier. With a revised inflation forecast indicating a longer period

Mexico CPI Review: 0.2% Growth in April

May 9, 2024 6:11 PM UTC

April's CPI data, despite a 0.2% m/m growth, reveals a significant y/y uptick to 4.6% from March's 4.4%, challenging norms due to electricity tariff adjustments. Core CPI maintained stability with a 0.2% increase, while Core Goods CPI rose by 0.3% and Services CPI by 0.1%, accumulating a 5.2% y/y gr

Banxico Preview: Continuing at 25bps

May 7, 2024 12:43 PM UTC

Banxico will convene on May 9 to decide on the policy rate, having initiated a possible cutting cycle. Despite concerns, the MXN remains stable. The 25bps adjustment aims to maintain tight monetary policy while mitigating inflation. The board may split over this decision, but Banxico is likely to co

EMFX: Diverging On Domestic Forces Not Less Fed Easing Hopes

May 3, 2024 10:45 AM UTC

While U.S. economic developments, plus Fed policy prospects, will be important in terms of EM currency developments, domestic politics and fundamentals will also be decisive. These can keep the South Africa Rand volatile in the remainder of 2024, given the risk of a coalition government and African