Mexico’s Tax Reform in the Works: Preview and Initial Considerations
After early speculation that President Peña Nieto would unveil his much anticipated tax reform during the 2013 spring congressional session (February 1st – April 30th), Finance Minister Luis Videgaray recently confirmed that the comprehensive tax and expenditure package would not be unveiled until the second half of this year. According to Videgaray and other PRI ... Read more
Three Perspectives on Brazilian Growth Pessimism
It has become increasingly evident over the last two years that the growth engine of the Brazilian economy has run out of steam. Despite relative resilience during the global financial crisis and following a quick recovery, economic growth registered just 1 percent in 2012 and a meager 2.5 percent in 2013. More recently, the economy ... Read more
Current Account Surplus in Latin America: Recipe Against Capital Market Crises?
Volatility has sharply declined in Emerging Markets (EM) since the nerve-wracking heights of August 1998, when it reached a staggering 300 basis points (measured by EMBI’s intra-month standard deviation). Recent market volatility in the US sub-prime mortgage market and the April-May 2006 shakeup brought memories of 1998, when the Russian default sent the risk premium ... Read more
Reduced Speed, Rising Challenges: IMF Outlook for Latin America and the Caribbean
By Alejandro Werner The prospects for global growth have brightened in recent months, led by a stronger recovery in the advanced economies. Yet in Latin America and the Caribbean, growth will probably continue to slow, although some countries will do better than others. We analyze the challenges facing the region in our latest Regional Economic Outlook and discuss ... Read more
Why Is Bolivia Doing (Relatively) Well?
Juan Antonio Morales* and Thomas Trebat Many observers of the Latin American economies are wondering why these vulnerable commodity exporters, including the smaller South American economies, are showing more resilience to the current crisis than economies in other parts of the world. Is it because the crisis just has not hit them hard yet, but ... Read more
Inflation Expectations in Brazil
In order to reanchor expectations, the elected president will have to prioritize inflation’s return to its target. In its latest poll among economic analysts, the Brazilian Central Bank (BCB) computed the median of inflation expectations for 2014 above 6.5%, the ceiling of the band around the inflation target (4.5%). This has heated the debate about ... Read more
Chicken or Turtle? Brazil’s Disappointing Growth
In my recent seminars at US universities, Brazil’s disappointing growth in the last three years (2.7% in 2011, 1.0% in 2012 and 2.3% in 2013) have often been a surprise to many. Apparently, the good years of 2003-2010, in which Brazil grew an average of 4% per year, created the idea that Brazil was not ... Read more
Argentina: The Myth of a Century of Decline
On February 15 The Economist printed an interesting article about Argentina: “The tragedy of Argentina. A century of decline” with the subtitle, “One hundred years ago Argentina was the future. What went wrong?” As usual in that magazine, it is a nicely written article. But it is not, in my view, an accurate interpretation of ... Read more
Brazil: Reacting to Adverse External Scenario
In a scenario of capital flight, the BCB must intervene also via FX reserves sales. When, in late May, the FED announced the tapering, market reaction was dramatic. Yet, when it announced, in late December, the actual plan it intends to put into effect starting this month, reactions were not as intense. The chart shows ... Read more
Ecuador’s Performance Challenges Perceptions About Leftist LatAm Governments
The Wall Street Journal has written it’s latest “just so” article about how leftist Latin American leaders (Argentina, Brazil, and Venezuela) are bad and rightist Latin American leaders (Chile, Colombia, Mexico, and Peru) are wonderful. It quotes favorably this dismissal of progressive leaders. “’We set out to create the Pacific Alliance because we wanted to set ourselves apart from ... Read more