Latam Weekly: Regional GDP and Banxico Minutes

HIGHLIGHTS

• Next week should be a quieter one across Latam and the G10, with global trading thinned by U.S. and Canadian holidays on Monday (and Chinese New Year celebrations).

• Key releases and events are backloaded to the second half of the week, including Brazilian GDP and Banxico’s minutes, as well as U.S. PCE and GDP, a possible decision by the U.S. Supreme Court on Trump’s tariffs, and global PMIs.

• Latam kicks off the week with Peruvian and Colombian Dec/4Q GDP, on Sunday and Monday, to close out activity figures for 2025 showing Peru and Colombia grew by ~3.3% and ~2.8%, respectively, last year. Meanwhile, Brazil should clock in at a ~2.5% expansion, in spite of highly restrictive policy rates.

Chart of the Week

REGIONAL GDP AND BANXICO MINUTES

Juan Manuel Herrera, Senior Economist
+52.55.2299.6675 
juanmanuel.herrera@scotiabank.com

• Next week should be a quieter one across Latam and the G10, with global trading thinned by U.S. and Canadian holidays on Monday (and Chinese New Year celebrations).

• Key releases and events are backloaded to the second half of the week, including Brazilian GDP and Banxico’s minutes, as well as U.S. PCE and GDP, a possible decision by the U.S. Supreme Court on Trump’s tariffs, and global PMIs.

• Latam kicks off the week with Peruvian and Colombian Dec/4Q GDP, on Sunday and Monday, to close out activity figures for 2025 showing Peru and Colombia grew by ~3.3% and ~2.8%, respectively, last year. Meanwhile, Brazil should clock in at a ~2.5% expansion, in spite of highly restrictive policy rates. 

Next week will generally be a quieter one across Latam and the G10, with global trading thinned by U.S. and Canadian holidays on Monday (and Chinese New Year celebrations). The majority of key events are scheduled for the latter half of the week, which will close on Friday with global PMIs, U.S. PCE and 4Q GDP data, and a possible decision by the U.S. Supreme Court on the White House’s emergency powers tariffs. Canadian and U.K. CPI on Tuesday and Wednesday, and Tuesday’s U.K. employment report will influence local markets though the global mood will likely remain driven by AI disruption fears that have shaken trading sentiment in recent weeks. U.S.-Iran tensions should also continue to shape global energy markets.

In Latam, we kick off the week to Sunday releases of January unemployment rate and December GDP data from Peru, with Colombian 4Q GDP scheduled for Monday morning before a two-day break until Thursday’s Brazilian December economic activity and Banxico’s February meeting minutes, followed by Friday’s Mexican December retail sales and the Citi survey of economists. Chile’s calendar is bare of major economic releases with markets counting down the days to the start of Kast’s presidency on March 11^th.

Peru is estimated to have rebounded in December to around a 3% expansion, doubling November’s rise of 1.5% that was its weakest since April in an otherwise strong year for GDP growth in the country. A large 6.5% y/y contraction in mining sector output due to a fall in tin production owing to maintenance by Minsur (the country’s sole tin miner) should somewhat correct in December data, as should a 17.9% y/y drop in fishing production due to a delayed catch season and reduced quotas. Economic indicators for construction, investment, and personal spending were solid for the month.

With the 2.8% y/y GDP rise projected by our economists, Peru’s economy would have grown by 3.3% over the whole of 2025 closing with a 2.8% y/y gain in 4Q. Supportive inflation and monetary policy levels as well as the boost from another round of pension withdrawals and strong investment trends should see the country grow by about the same pace in 2026, with some drag from the election period and the start of a new administration. With about two months until the first-round vote for the presidency, the field remains wide open, although conservative candidate Rafael López Aliaga has steadily lead polls since last August, albeit with only a 12% voting intention in the latest Ipsos survey, with Keiko Fujimori (also from the right) following with an 8% share.

Like Peru, Brazil’s economy is expected to have picked up in December, to somewhere around 2% after its 1.3% November gain. Industrial production bounced back from a 1.4% contraction to a 0.4% rise in December as mining strength offset a decline in manufacturing output (its eighth y/y drop in the past nine months). Meanwhile, real retail sales growth of 2.8% y/y marked a recovery from a 0.2% drop in November. With a 2% expansion in December, Brazil’s economy activity would have grown by 2.4% over 2025, roughly in line with our GDP growth forecast of 2.3%.

Unlike Peru, there’s really only two candidates to follow in polls for Brazil’s October election, the incumbent Lula and his top challenger Flavio Bolsonaro. The recent narrowing of Lula’s lead in polls against Flavio (from about 10ppts to about half in the space of two months) has built market confidence in the latter’s chance at beating the current president, and with that bring more pro-market/business policies. However, business leaders were seemingly unimpressed with Flavio’s economic plans or the lack of clarity for these and who will make up his cabinet. An underwhelming challenge to Lula may begin to reverberate as a fear in Brazilian markets, denting the Ibovespa’s strong 15%+ gain so far this year.

Banxico’s meeting minutes out on Thursday will shed some light on why the bank decided to lift its inflation forecasts substantially over the near term, but still saw a convergence to the 3% target in 1H27, and simultaneously left the door open to more rate cuts in spite of these near-term inflationary risks. We may have to pay particularly close attention to the views of hawkish board member Heath in the minutes (comments are anonymous, but one can tell) as he recently floated the possibility of a cut at one of the upcoming meetings despite his generally hawkish stance. Mexican retail sales due on Friday should not move the needle too much, nor should the results to the Citi survey of economists which are nevertheless worth following for possible shifts in Banxico rate cut expectations. We continue to forecast that Banxico will cut twice to 6.50% by around mid-year.

Finally, Colombia releases 4Q/2025 GDP data on Monday which is expected to show a ~3% y/y expansion in the final quarter of the year to wrap up a full-year GDP rise in the high-2s. Strong economic growth and pronounced inflationary pressures continue to advocate for BanRep policy rate increases. However, BanRep rate expectations were thrown a curveball today with Council of State suspending the government’s 23% minimum wage hike decree, giving them eight days to come up with a well-justified alternative. How the government intends to play this, or even how firms will walk back this increase, will be in focus over the next few days but the high court’s ruling was a strong reminder to markets of institutional strength in the country, supporting the currency and Colombian borrowing rates (on top of revised BanRep expectations).