Latam Daily: Mexico CPI Overshoot; Peru Mining Overview

• Mexico: Inflation in the first half of May accelerated more than expected, with a notable increase in agricultural products; 1Q25 GDP details show large drop in mining

• Peru: Mining Sector Overview (Q1 2025)

MEXICO: INFLATION IN THE FIRST HALF OF MAY ACCELERATED MORE THAN EXPECTED, WITH A NOTABLE INCREASE IN AGRICULTURAL PRICES

Inflation in the first half of May accelerated more than expected, reaching 4.22% y/y (chart 1 and 2), up from 3.90% (vs. 3.99% consensus from Citi Survey). However, core inflation remained relatively stable at 3.97%, compared to 3.96% previously (vs. 3.96% consensus). Within the core index, goods inflation rose to 3.51% (from 3.48%), while services inflation stood at 4.49% (down slightly from 4.51%). On the other hand, non-core inflation saw a significant increase to 4.78% (from 3.57%), driven by a sharp acceleration in agricultural products to 5.79% (from 3.86%), while energy and government tariffs stood at 3.71%. On a biweekly sequential basis, headline inflation rose by 0.09% (0.20% previously, -0.13% consensus), core inflation increased by 0.16% (0.13% previously, 0.15% consensus), and non-core inflation declined by -0.15% (0.42% previously). Looking ahead, we believe inflationary risks remain tilted to the upside. We highlight the potential pass-through effect from the depreciation of the exchange rate, as well as the possibility of a significant rebound in the non-core component due to weather-related events in the coming months.

1Q25 GDP DETAILS SHOW LARGE DROP IN MINING

In Mexico, GDP growth for 1Q25 remained unchanged from the flash estimate, with a year-over-year increase of 0.8% y/y (chart 3), higher than the 0.4% recorded in 4Q24. Across the three main sectors, the industrial sector declined by -0.7% y/y, services grew by 1.3%, and the primary sector rose by 7.2% (agriculture jumped 11.5% y/y).

Within the industrial sector, there was a sharp drop in mining (-9.3% y/y), followed by utilities (-0.8%) and construction (-0.2%), while manufacturing showed a 0.7% increase. In the services sector, the largest declines were in wholesale trade (-4.6%), accommodation and food services (-1.9%), and corporate services (-0.5%). On the other hand, the best-performing sectors were professional services (15.0%), business support (14.4%), entertainment (11.3%), and healthcare (4.0%).

On a quarterly basis, GDP rose 0.2% q/q, up from -0.7% previously, in line with consensus expectations. The industrial sector fell -0.1% q/q (vs. -1.5% previously), services slightly declined -0.1% (vs. 0.0% previous), and the primary sector grew 7.8% (vs. -6.5% previous).

In March alone, the IGAE (Global Indicator of Economic Activity) rose 2.5% y/y after a -0.6% decline in February, owing to growing agricultural activities (9.6%), as well as increases in services (2.6%) and industry (1.9%). Manufactures edged up to 3.1% after four negative prints, while construction also increased, to 5.4%. In services, retail surged accelerated to 6.2%, while wholesale increased 0.1% after seven months of setbacks. 

On a monthly s.a. basis, the GDP proxy showed a decline of -0.4%. Primary activities rebounded 4.3% m/m; industry fell -0.9%, with a -1.1% drop in manufacturing and a more pronounced -2.7% decline in mining, which were not offset by a 0.8% rise in construction. Services decreased -0.4%, with the steepest drops in professional services (-5.2%), entertainment (-2.7%), and accommodation services (-1.3%).

In the coming months, economic activity is expected to remain sluggish due to slower consumption and ongoing uncertainty that could offset investment.

—Rodolfo Mitchell, Brian Pérez & Miguel Saldaña

PERU: MINING SECTOR OVERVIEW (Q1 2025)

Mining GDP grew by 3.1% in Q1 2025 (table 1), driven by higher output of copper, silver, molybdenum, zinc, and lead. By contrast, gold, iron, and tin production declined. We expect sector growth to decelerate starting in May due to ore producer Shougang’s temporary suspension and a 30-day mining ban in Pataz province which excludes formal mining companies.

Shougang halted operations for five months after the collapse of its only shiploader at the San Nicolas port, paralyzing exports. Shougang accounts for 98.4% of Peru’s iron ore production, so its operational halt will be significant on national output.

Copper production rose 3.9% y/y, driven by higher contributions from Las Bambas, Chinalco, Quellaveco, and Marcobre, offsetting declines at Cerro Verde, Antamina, and Antapaccay. Las Bambas benefited from higher ore grades and recovery rates, while Chinalco ramped up output following the completion of its Toromocho Phase II expansion in mid-2024. This is also the first full year of production at Chalcobamba Phase I.

Silver production increased 10.8%, boosted by Buenaventura’s new Yumpag mine, better-than-expected ore grades, and a low base effect at Antamina. Molybdenum output jumped 13.0%, supported by higher grades at Southern Copper, a rebound at Cerro Verde after 2024 maintenance downtime, and the startup of Toromocho Phase II at Chinalco. Lead production rose 2.6%.

Gold production fell 10.5%, dragged down by lower grades at Poderosa and declining output from Consorcio Minero Horizonte and Aurifera Retamas, all operating in Pataz—an area increasingly affected by illegal mining and rising security threats. Boroo stabilized production following record output in 2024. Zinc, iron, and tin production declined slightly (-0.8% each).

Mining investment (table 2) totaled US$1.06 billion in Q1 2025 (+4.6% y/y), led by greenfield projects like San Gabriel (Buenaventura) and Romina (Chungar), as well as brownfield expansions such as Inmaculada (Ares) and Antamina. We maintain our 2025 mining investment forecast at US$5.3 billion, supported by favourable metal prices that continue to encourage project development.

—Katherine Salazar