Latin American economies faced challenges last week. In Mexico, inflation rose above the central bank's target to its highest level in 18 months, which may lead to higher interest rates. Brazil reported weaker-than-expected economic growth and economists lowered forecasts for the next year as the country struggles to emerge from recession. Venezuela is facing a deepening political crisis as protests increased against President Maduro and most Venezuelans want him removed, despite the country having large oil reserves.

1. Latin America
The Latin American region had a similarly turbulent week to the last. the latest Mexican CPI figures
were released early in the week,as well as Brazilian economic growth statistics and GDP forecasts.
On Tuesday Mexico released monthly CPI figures, which showed that in the previous 12 month’s
prices rose by 3.09%, topping the Mexican Centralbank target of 3%. The general consensus on the
rate change was highly accurate,with a Reuters poll estimating a rise from 2.88% in early September
to 3.08% The latest figures represent an 18 month high (see graph below), sparking speculation that
policy-makers may push interest rates higher after a fall in the value of the peso. Inflation is predicted
to maintain above target in the medium term, with estimates around the 3.2% mark for Q3 2017. The
markets responded to the announcement as expected. The Mexican IPC Index (.MMX) tumbled from
a weekly high 48423 to 47726 points on Tuesday, but found resistance around this mark and rallied to
finish Thursday in a relatively healthy state.
Michel Temer did not receive the news he would have wanted this week. Brazil announced its
Economic activity figures late last week for August, the damage was to the tune of 91 basis points
(bp) compared with July, overshooting market expectations. In line with the new figures, Economists
announced reduced growth forecasts for Brazil on Monday for the next year,to their lowest level in
two months. A central bank survey of economists predicts an expansion of 1.23% in GDP, down from
1.3% previously. It’s evident to see that Latin America’s largest economy is struggling to emerge
from deep recession.
Taking a break from the markets, Venezuela is facing a deepening political crisis as the opposition
party organised mass street protests on Wednesday and called for a general strike on Friday. The
opposition is demanding a referendum (which is constitutionally allowed) because current President
Nicolas Maduro is rapidly decreasing in popularity. A recent survey of Venezuelans indicated that
three-quarters of the population want rid of President Maduro. Despite holding the world’s largest
energy reserves,Venezuela is now flirting with the prospect of default, although a $3.4 billion bond
swap this week has stemmed the tide – for now.
Next week there will be continued coverage of macro-indicators, but also some focus on the long term
trends and issues faced by Latin-American nations on an economic and political level.
Alistair Grant