Monetary Policy

The central bank of Chile reports that economic growth in August was greater than expected:  2.5 percent compared to August 2015 and 0.4 percent compared to the July.

However, as Antonio de la Jara reports for Reuters, analysts are bracing themselves for lower numbers from September and a generally sluggish year. Given the “low economic dynamism,” the Central Bank chose to leave the benchmark interest rate at 3.5 percent and indicated that it may “ease monetary policy to stimulate depressed activity.”

Meanwhile, as Anahi Rama reports for Reuters, the head of the Central Bank of Mexico, Agustin Carstens, has tentatively suggested that a future benchmark interest rate hike may be influenced by the outcome of the United States presidential election. Mr. Carstens said, “If the result comes out well [that is, if Hillary Clinton is elected] … it may not be necessary to raise them [interest rates.”

His comments come on the heels of a hike in the benchmark interest rate on Thursday of 50 basis points to 4.75 percent. Mr. Carstens also conditioned a future adjustment in monetary policy on changes in the inflation rate away from the Central Bank’s 3 percent target.

Debt

Argentina issued €2.5 billion ($2.8 billion) in bonds today, with €1.25 billion maturing in 5 years and €1.25 billion maturing in 10 years, as reported by Javier Blanco for La Nacion. It was originally estimated that the interest rates for the 5- and 10-year bonds would be 4.375 and 5.5 percent, respectively. However, unofficial data suggest that an “avalanche of offers” lowered interest rates on the debt “to about 3.875% for the 2022 bonds and 5% for

It was originally estimated that the interest rates for the 5- and 10-year bonds would be 4.375 and 5.5 percent, respectively. However, unofficial data suggest that an “avalanche of offers” lowered interest rates on the debt “to about 3.875% for the 2022 bonds and 5% for the 2027 [bonds].”

Economic Growth

The World Bank released a new report  on the future of economic growth in Latin American and the Caribbean titled “The Big Switch: Restoring Growth through Trade.”

The authors examine the differences in past economic growth between regions, in particular between South America and Mexico, Central America, and the Caribbean, and offer policy prescriptions to encourage future growth.

The authors offer short-, medium-, and long-term prescriptions for the mainly South American countries, including fiscal reform to control public debt, real exchange rate adjustment, and “a major supply reorientation (a “big switch”), from non-tradeable to tradeable goods.” However, the authors note that “the nature and extent of adjustment needs vary.”

Trade

The free trade agreement between Central America and South Korea is one step closer to being concluded as the countries end the sixth round of negotiations, reports La Prensa Libre. The chapters approved in this round relate to government purchases, labor disputes, and other issues.

South Korea trades extensively with many countries throughout Latin America. Currently, South Korea has free trade agreements with Chile, Colombia, and Peru, as well as with Canada and the United States.

The final round of negotiations will be held between October 24 and 31 in Seoul.