Itaú BBA - Evening Edition – President Bolsonaro’s speech keeps signaling a reform agenda

Latam Talking Points

< Back

Evening Edition – President Bolsonaro’s speech keeps signaling a reform agenda

January 22, 2019

The president said that the government has the credibility required to carry out the reforms that “the country needs and the world expects”

Talk of the day

Brazil

President Jair Bolsonaro made his speech at the World Economic Forum annual meeting in Davos this afternoon. The president said that the government has the credibility required to carry out the reforms that “the country needs and the world expects”. He also stressed that he will work to include Brazil on the list of the 50 best countries for doing business, and that Brazil still a “relatively closed economy in terms of international trade” and the new government is committed to change that.

The Serasa Experian Index for Retail Activity advanced 0.5% in December (our seasonal adjustment). In yoy terms, the index accelerated to 2.6% (from 0.9% in the previous month). The breakdown  shows monthly increases in 4 out of 6 categories, led by construction material (4.3%). Combining with other indicators, our preliminary forecasts for December’s retail sales are 0.2% mom/sa for the core segment, and 0.4% for the broad segment.

Tomorrow’s agenda: December’s CAGED formal job creation will be released at 9:30 AM. We forecast a net destruction of 314k jobs. It’s worth noticing this apparent weak headline is due to a strong seasonality in December. Adjusting for seasonality, our forecast implies a 71k formal jobs creation, leaving the 3-month s.a. moving average virtually stable at 73k. Also, FGV’s confidence survey for January on industry (preview) will be released at 8:00 AM. Finally, January’s IPCA-15 inflation will be released at 9:00 AM (SP Time). We forecast a 0.35% monthly increase, leaving the 12-month reading virtually stable at 3.8%. 

Colombia

Import growth remains solid as the activity recovery unfolds, resulting in another large trade deficit in November. Meanwhile, export data is yet to fully reflect the recent oil price moderation, another indication that the outlook for external accounts is not favorable. The trade deficit was USD 920 million in November, similar to the USD 1.0 billion deficit for both the market consensus and our forecast. As a result, the 12-month rolling trade deficit reached USD 6.0 billion, in line with 2017, but with some widening registered from the USD 5.0 billion as of June 2018. The widening in the 2H18 was due to the increase in the non-energy trade deficit, more than offsetting the improving energy surplus. At the margin, the annualized trade deficit (using our seasonal adjustment) increased from the USD 5.3 billion deficit in 3Q18 to USD 7.3 billion in the quarter ending in November, as imports of consumer and capital goods accelerated.

Low oil prices and some slowdown of the global economy have hampered the outlook for an external account correction. We see the 2018 and 2019 current account deficit coming in at 3.3% of GDP, stable from the 2017 level.
** Full story here

Mexico

December’s unemployment rate stood at 3.35%, above market expectations of 3.20%. With seasonally adjusted figures, unemployment increased to 3.57% (from 3.30% in November 2018), while participation rate remained at 59.7%. The statistics institute (INEGI) also published the informality rate which stood at 56.75% and 56.8% in non-seasonally  adjusted and seasonally adjusted terms, respectively.

Argentina

Tomorrow’s agenda: The central bank will publish its quarterly monetary policy report. The purpose of the report is to illustrate how the monetary authority anticipates the evolution of prices, and to explain the rationality of its monetary policy decisions.



< Back