Current Latin America reserve, growth and rate agenda
A reserve programme and renewed activity growth entered the regional agenda, while a Reuters poll shows expectations for a limited rate cut in a third country on August 5.
Economics & Markets··Morning
Colombia ties purchase timing to an exchange-rate condition
Banco de la República held the first auction on August 3 in a programme intended to raise international reserves gradually by as much as 4 billion dollars. The first auction had a ceiling of 400 million dollars. Instead of buying foreign currency outright on a fixed day, the bank is using monthly auctions of accumulation put options. The first awarded options may be exercised between August 4 and August 31, but only when the market representative exchange rate is below its moving average over the previous 20 business days. That condition separates the programme's announced total size from the dates on which purchases actually occur. The bank says reserves support the country's ability to meet external obligations, improve its capacity to respond to shocks from international financial markets and help preserve confidence in access to external finance. It described the programme as preventive and compatible with its monetary-policy stance. The same option method was used in 2024, when a reserve-accumulation objective of about 1.5 billion dollars was achieved. The new ceiling of 4 billion dollars is larger than that earlier operation, while the amount bought in any month will still depend on when the option's exchange-rate condition is met.[1]
Chile ended five months of contraction
Chile's central-bank monthly economic-activity index rose 2.4 per cent in June from a year earlier, ending five consecutive months of annual contraction. The seasonally adjusted series increased 0.6 per cent from May. Non-mining activity rose 1.4 per cent annually and 0.1 per cent monthly, indicating that the total increase did not depend only on copper output even though mining led the monthly gain. Services grew 1.7 per cent with contributions from health, education and business services. Commerce expanded 5.4 per cent as retail, wholesale and online channels all increased. Goods production was supported by mining, especially higher copper output, while industry declined 0.7 per cent. The 2.4 per cent result was above most market forecasts. The June figure pointed to limited second-quarter growth of about 0.1 per cent and helped the economy avoid the two consecutive quarterly contractions commonly described as a technical recession. Even so, gross domestic product may have fallen 0.2 per cent over the first half of the year, with the definitive result still to be confirmed in the national accounts.[2]
Brazil's expected cut remains cautious
In a Reuters poll conducted from July 27 to July 31, 38 of 42 economists expected Brazil's monetary-policy committee to cut its benchmark rate by a quarter point to 14.00 per cent on August 5; four expected no change from 14.25 per cent. Three quarter-point cuts since the start of the year reduced the rate from a near-two-decade high of 15 per cent to 14.25 per cent. Another quarter-point move would continue easing while leaving the rate clearly restrictive. The median quarterly forecast keeps the rate at 14.00 per cent through year-end, with gradual reductions potentially resuming after January 2027. Of 32 economists who answered an additional question about September, 15 expected a fifth consecutive quarter-point cut. Recent lower-than-expected inflation readings were cited as supporting room for a reduction, while inflation remaining above the 3 per cent target and expectations for 2027 and 2028 becoming unanchored were listed among the constraints on a faster move. Taken together, Colombia's exchange-rate-conditioned reserve programme, Chile's renewed annual activity growth and Brazil's expected limited cut do not describe one uniform regional cycle. Each development involves a different policy instrument and a different immediate constraint.[3], [1], [2]
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