USD/Latin American currencies poised to rebound

4 Eki 2016

We have in Red (USDBRL) and Orange (USDCLP) the two strongest currency in latin american recovering from recent devaluation in a pronounced way in comparison with Dolar Index (Green). But fiscal situation in Brazil is getting worse, the political problem after impeachment of last president is to approve a series of bills to cut social expenditure like Health and Education, while continuing rolling over debt. Debt-to-GDP ratio is getting to 70% this year, in 2014 it was 55% showing significant deterioration.

While Business Confident Index (BCI-OCDE) improved this year, I have no reasons to believe it will last, in my vision is more related to a psychological vision that impeachment will bring structural changes, but the new goverment don't discard raise taxes.
In Chile (USDCLP) on the other hand, without impeachment, has the worst BCI in the world right now. showing the profound crises Latin American is facing. With all the majors countries in crises Mercosur business is stagnated.


Time to LONG Latin American Pairs.

Sources:
Debt-to-GDB Brazil: BCB 2016
BCI-OCDE: data.oecd.org/leadind/business-confidence-index-bci.htm

15 Kas 2016

Not

Latam currencies starting to correlate more with dollar index (DXY)

25 Kas 2016

Not

So far so good.