Latam | Monetary orthodoxy keeps greater evils at bay

Summary

Economic activity in Latam will grow 1.4% in 2024, below 2023 growth (2.0%) and the 2007-2019 average (2.2%). These figures conceal a mixed trend among the region’s main economies.

Key points

• Key points:
• Brazil, Mexico and Argentina will slow down next year, while Chile, Colombia, Peru and Uruguay will experience a recovery, albeit modest.
• This low growth stems from a combination of factors: less dynamism in global activity and in the purchase of raw materials; restrictive monetary policy in most economies and damage to purchasing power as a result of high inflation; and high political and social uncertainty.
• Latam is emerging from a severe inflationary shock unlike any seen in the last several decades, with controlled effects on deteriorating activity, rising inflation and inflationary expectations.
• Brazil and Chile are noteworthy, as they implemented their monetary policy response earlier and more vigorously, enabling inflation expectations to curb sooner.
• In contrast, Colombia, despite having one of the highest policy rates, has experienced a more persistent inflation cycle, with levels of around 10.0%. Argentina is the exception, with a surge in prices that is already over 140% per year.

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