Weekly Highlights

Brazil and Peru released GDP data for 3Q09. In Brazil, the positive performance from investments and private consumption did not preclude the final data to fall behind expectations. Thus, there were significant downward revisions for previous quarters. Inflation data for November led to positive changes, and grossly in line with consensus, in Brazil, Mexico and Venezuela. Colombia and Peru, on the other hand, showed negative m/m changes. The latest meeting of the Central Bank of Brazil leaves the Selic without changes, as expected..

1. Argentina

    • The inflow of capital into Argentina has provoked an increase in the level of international reserves, excluding IMF SDRs, up from USD 2500 million over its lowest level in August. The Central Bank has maintain the nominal exchange rate above 3.8 Ar$ / USD with its daily intervention policy in the foreign exchange market.
    • The effects on the monetary market are reflected in the increase in private sector deposits and lower interest rate by increasing liquidity. In the medium term, we expect this positive trend will continue.


    2. Brazil

    • The Brazilian GDP expanded 1.3% q/q (-1.2% y/y) in the third quarter of year. The main drivers of this expansion were investments and private consumption (which expanded 6.5% q/q and 2.0% q/q respectively). The performance was worse than expected by both
      BBVA (1.8% q-o-q; -0.7% y/y) and by the market (2.0% q/q; -0.2% y/y). In addition, the GDP for the first two quarters of the year were revised downwards (-0.9% q/q 1.2% q/q for the first and second quarters respectively instead of -0.8% and 1.9%). Overall GDP growth in 2009 is expected now to be negative and not slightly higher than 0.0% as
      previously expected.
    • The Central Bank decided this week to keep interest rates unchanged at 8.75%, exactly as expected.
    • The government announced tax reductions to the purchase of some capital and durable goods. The measure will imply a revenues loss of around 0.1% of the GDP in 2010.
    • November inflation came up in line with expectations at 4.22% y/y (0.41% m/m)..


    3. Chile

      • In October, the Imacec (Monthly Index of Economic Activity) dropped 0.9% yoy, affected by a still depressed manufacturing sector, in addition to having one working day less than 2008, effects that were partially offset by increases in mining, retail and electricity, gas and water. However, the seasonally-adjusted series rose 0.4% with respect to September. Although the activity is still expanding in the margin, the recovery is lower than previous estimations.
      • The Central Bank released its Economic Expectations Survey,according to which the GDP growth would reach -1.8% in 2009, while CPI inflation would close at -1.2%. During 2010 the expectations are 4.5% in the case of economic growth and 2.5% for inflation.



      4. Colombia

        • The inflation rate surprised the market, with its monthly rate falling 0.07% in November, while the annual inflation rate came in at 2.37%. This favorable movement in inflation was mainly explained by a drop in food prices.
        • Exports in October fell 5.5% yoy, contributing to the 17.3% contraction year to date. This result is due to the 15.4% yoy drop in traditional exports.
        • Consumer confidence rose during November to its highest level since September of 2008.



        5. Mexico

        • INPC grew 0.52% m/m in November (0.58% consensus) while core inflation rose 0.2% m/m (vs. 0.22 consensus). Marked downward evolution in annual basis (4.5% October vs. 3.9% November) relies on: base effect, good performance of core component due to lack of seasonal pressures, and, non-core basket evolution pushed by freeze policy in administered prices and non transmission of pressures from agricultural wholesale prices. This outcome matches our expectation of inflation under 4% at the end of 2009. Even though the data is positive we expect the opposite evolution during 2010 as consequence of fiscal pressures essentially. Next week October’s industrial production will be published, we expect it will keep its recovery trend.


        6. Peru

          • The Central Bank (CB) kept its monetary policy rate at 1.25% (historical low maintained since last August). According to the CB press release, this decision was based on the sustained decline in annual inflation (from 6.7% in December 2008 to 0.3% in November 2009) and on lower inflation expectations.
          • The trade balance in October recorded a surplus of USD 556 million. It is worth mentioning that exports grew 2.4% y/y, the first positive outcome since September 2008.



          7. Venezuela

            • National inflation increased 1.9% in November, with this figure the year to date inflation climbs 23.0% while the y/y change reached 26.2%. In Caracas the monthly inflation was 1.8%, 0.8pp lower than our expectations, the forecast error was driven by the decision to delay electricity service rate increase, previously announced to apply in November. In addition, the stable exchange gap in the period also contributes to disinflate import goods prices.
            • Government will create a new public bank. The state-owned bank Banfoandes will merge with three intervened banks, Confederado, Central and Real, to form Banco Bicentenario. With this movement the public banks will concentrate 24.0% of the total deposits.