2013 Retrospective: Rebalancing The Dominant Theme
BMI View: The six key themes we highlighted for Latin America in 2013 have played out relatively well. In particular, our expectation that slowing growth in China and lower commodity prices would hit regional metals exporting economies hard has been a major theme in macroeconomic analysis this year with consensus growth expectations converging with our own in several cases, as well as being an important driver of financial market performance this year.
The key themes we identified for Latin America in 2013 have broadly played out (see 'Our Key Themes For 2013', December 12 2012). In particular, our views that industrial metals exporters would be hit hard by slowing growth in China and lower commodity prices, policy rates would remain low throughout much of the region, reform efforts would make Mexico an investor favourite, and new leadership in Venezuela would not see political risk abate have all withstood the test of time. Our expectation that Argentina would face a perfect storm of economic conditions requires slightly more nuance, as despite avoiding a one-off devaluation of the currency, the rate of depreciation has exceeded our initial expectations, while legal wrangling has forestalled a technical default for now.
One area where we were caught out is the Brazilian economy. Throughout this year it became increasingly clear that structural constraints in the infrastructure sector, as well as continual changes to the government's concessions policies, were still delaying tendering processes and causing projects be waylaid in the implementation phase, meaning that the backlog of construction projects failed to feed through to the boom in fixed investment we expected for a second year in a row.
|Consensus Clearly Moving In Our Direction|
|2013 Real GDP Growth Forecasts For Chile (LHS) & Peru (RHS), %|