Itaú BBA - Global growth buoys LatAm assets

Latam FI Strategy Monthly

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Global growth buoys LatAm assets

April 25, 2017

MXN outperformed on the positive global landscape; BRL showed resiliency to the negative domestic news

For the full report, see enclosed file

Highligths

  • Global growth positive momentum continues, with a synchronized pick-up in activity indicators. Barring a negative surprise in French elections, LatAm asset prices stand to benefit from the positive momentum.
  • The recent MXN’s outperformance reflects this still positive landscape and the constructive approach taken by U.S. policymakers regarding Nafta.
  • Financial markets have priced-in a moderation of trade protectionism in North America…
  • … while the intervention set up by the Mexican authorities in February managed to ease concerns of a hefty depreciation of the Peso…
  • … and reduced upside risks for inflation this year. In this context, Banxico is finding room to reduce the pace of tightening, amid a moderation of Mexico’s internal demand and the dissipation of one-off inflationary shocks.
  • Meanwhile, the Brazilian assets showed some resiliency to the negative domestic news flow.
  • Despite the political noise, the fiscal reform effort in Brazil remains on track. Our calculations show the diluted Social Security reform bill could still be seen as an important step in avoiding an ever-growing trajectory of pension expenditures.


 

 



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