Weekly Highlights

Activity data shows conflicting messages about the strength of the recovery in the region: while in Brazil the industrial production index fell slightly, confidence data remain expansive in Chile and Mexico. In Peru, the confidence indicator returns to the pessimistic area by an upturn in inflation. In Argentina, an upturn in tax collection was observed and, in another front, the President appointed a new Central Bank President.

1. Argentina
    • Mercedes Marcó del Pont was appointed as chairman of the Central Bank. In addition, the authorities set up an Economic Council with the aim of coordinating economic and monetary policies. One of its members will be the Minister of Economy.
    • Tax collection of January was $ 29,025 million, up 20% over January 2009. The figure was slightly higher than expected by analysts. Significant improvement is observed in VAT and Income taxes, while export duties continued showing a negative variation.
    2. Brazil
    • The minutes of the last Central Bank meeting released this week signal more clearly that the monetary authority should adjust interest rate upwards in the next months (in April according to our call).
    • Industrial production dropped -0.33% m/m in December. In November, industrial activity had declined -0.84% m/m following ten months of consecutive expansions. Car sales fall -27% y/y in January (+8% m/m). These indicators suggest that economic activity could have been moderating in the last months.
    • Food prices added to seasonal factors and helped to drive inflation up in January. The headline figure came up at 4.6% y/y (0.75%m/m), higher than expected by the markets and higher than December’s figures (4.3% y/y; 0.4% m/m).


    3. Chile

      • The peso kept depreciating, with a weekly loss of 2.9%, and 8.1% in two weeks. This variation can be explained by the change in regulation of the investment regime of AFPs.
      • The Consumer Confidence index (by the private consulting firm Adimark) showed an increase in January, scoring 56.4 points.
      • The Index of Economic Activity (IMACEC) rose 3.9% yoy in December (0.6% m-om), resulting in a 1.7% drop in GDP during 2009.


      4. Colombia

        • In December, urban unemployment rate was 12.3% compared to the 10.9% registered last year. This is mainly explained by a rise in labor participation which is not compensated by the growth in payrolls; furthermore there has been an increase in informality.
        • In November 2009 building permits rose 4.7% yoy and completed seven months of positive monthly variations. Permits for new homes (especially for low income families) boosted the growth rate.


        5. Mexico

        • January’s Consumer Confidence grew 3.1% m/m, reaching 81.5 pts. (SA), this improvement was common to its five components, this anticipates that consumers began 2010 with better perspectives about their situation and the country’s, which will contribute jointly with employment evolution to the recovery of consumption. In January the IMEF manufacturing index reached 52.5 pts. the average of the past four months. Index higher than 50 is consistent with an expansion in manufacturing, however its lateral trend shows a mild recovery path from last year’s recession. Since industrial inventories are almost rebuilt, the lateral trend might continue for a few more months. Next week January’s inflation will be released, it will reflect the pressure from tax changes and public prices.


        6. Peru

          • The consumer price index rose 0.3% in January, due to an increase in some food prices and the adjustment of fuel prices. Thus the y-o-y inflation stood at 0.4%, reversing the downward trend that had been following since December 2008.
          • The consumer confidence index published by Apoyo Consultoria in January fell by 4 points (48 points), turning back to the pessimistic zone (below 50 points), which is related to concern about a price increase in the coming months.


          7. Venezuela

            • The government cut banks’ contributions to Fogade. According to a presidential decree the private banking system contribution to the public deposit insurance was reduced from 1.5% to 0.5% in the first half of 2010 and to 0.75% from then on. The recent reform of Banking Law (applied in last December) had increased the half-yearly contribution from 0.25% to 1.5% of total deposits.
            • The National Security Commission (NSC) intervened 4 stock trading houses. Thus, there has been 11 such companies intervened in the last two months. The main reasons behind the resolution were the connections with intervened banks and operative losses that compromised their solvency. Additionally, the NSC banned stock trading houses from raising deposits by offering mutual liability instruments and increased capital requirements from 11.1% to 33.3%.