latam macroeconomic outlook: between a rock and a hard place · see appendix a-1 for analyst...

LatAm Macroeconomic Outlook:

Between a Rock and a Hard place

See Appendix A-1 for Analyst Certification, Important Disclosures and non-US research analyst disclosures

Citi Research is a division of Citigroup Global Markets Inc. (the "Firm"), which does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm

may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

July 2015

Munir Jalil

Chief Economist

North Andean Region

[email protected]

+57 1 639 41 95

2

Global Overview: Forecasts and Forecast Changes

Economic Forecast Overview

We reduced our global growth forecasts (at current FX rates) this month, 2.6% for 2015 from 2.7% in the

last month and 3.4% for 2016 from 3.5%.

Economic Forecast Changes (Percentage Points)

2014F 2015F 2016F 2014F 2015F 2016F 2014F 2015F 2016F 2014F 2015F 2016F

Global 2.7 2.6 3.4 2.6 2.1 2.6 0.5 0.2 0.2 -3.4 -3.5 -3.2

United States 2.4 2.2 2.9 1.3 0.5 1.8 -2.4 -2.4 -2.7 -5.3 -4.4 -4.9

Japan -0.1 1.0 1.9 2.7 0.7 0.9 0.5 2.8 3.2 -7.3 -6.6 -6.2

Euro Area 0.9 1.5 2.1 0.4 0.3 1.6 2.4 2.7 2.1 -2.6 -2.1 -1.7

UK 2.6 2.6 3.0 1.5 0.4 1.4 -5.5 -4.5 -4.2 -5.6 -3.9 -1.8

China 7.4 6.9 6.7 2.0 1.5 1.9 2.1 2.7 2.5 -1.8 -2.7 -2.5

Emerging Markets 4.3 3.7 4.7 4.3 4.6 4.0 1.5 0.9 1.1 -2.5 -3.7 -3.0

Soruce: Citi Research

Fiscal BalanceForecasts

GDP Growth CPI Inflation Current Balance (% of GDP)

2014F 2015F 2016F 2014F 2015F 2016F 2014F 2015F 2016F 2014F 2015F 2016F

Global -0.1 -0.1 -0.1 - 0.1 - 0.1 - -0.1 - - -

United States - -0.3 - - 0.1 - - 0.2 0.6 - - -

Japan - 0.3 -0.1 - - - - 0.3 0.3 - - -

Euro Area - - - - 0.1 - 0.3 0.4 0.2 - - -

UK -0.2 - - - 0.1 -0.1 - -0.4 -0.3 - - 0.1

China - - - - - - - - - - - -

Emerging Markets - -0.1 -0.1 - - 0.1 - - -0.1 - -0.1 - 0.1

Soruce: Citi Research

GDP Growth CPI Inflation Current Balance (% of GDP) Fiscal Balance

3

United States

GDP grew 0.2% QoQ SAAR in Q1, after a growth rate of 2.2% in Q4. However, we expect the economy to grow at a big pace

during the second quarter of 2015 and throughout the year.

United States Economic Forecasts

Source: Citi Research

4

United States

We think September may be the most likely time to raise interest rates this year if the recent strong data flow continues.

We have changed our December call to September because of compelling evidence that moderate growth may be sufficient to

close the output gap in the medium term because potential growth has slowed significantly since 2008.

June FOMC and Market Rate Projections Initially Lower But Market Rates

Rise Faster After 2017


Monetary Policy Fed vs. Some Latin American Countries

5 Source: Bloomberg

0

1

2

3

4

5

6

7

8

9

May

-00

May

-01

May

-02

May

-03

May

-04

May

-05

May

-06

May

-07

May

-08

May

-09

May

-10

May

-11

May

-12

May

-13

May

-14

May

-15

US Chile

%

0

1

2

3

4

5

6

7

8

9

May-08 May-09 May-10 May-11 May-12 May-13 May-14 May-15

US

Mexico

0

5

10

15

20

25

30

May

-00

May

-01

May

-02

May

-03

May

-04

May

-05

May

-06

May

-07

May

-08

May

-09

May

-10

May

-11

May

-12

May

-13

May

-14

May

-15

US Brazil

%

0

1

2

3

4

5

6

7

8

9

10

May

-00

May

-01

May

-02

May

-03

May

-04

May

-05

May

-06

May

-07

May

-08

May

-09

May

-10

May

-11

May

-12

May

-13

May

-14

May

-15

US Peru

%

0

2

4

6

8

10

12

14

May

-00

May

-01

May

-02

May

-03

May

-04

May

-05

May

-06

May

-07

May

-08

May

-09

May

-10

May

-11

May

-12

May

-13

May

-14

May

-15

US Colombia

%

6

United States

Source: Bloomberg & Citi Research

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5M

ay-0

2

May

-03

May

-04

May

-05

May

-06

May

-07

May

-08

May

-09

May

-10

May

-11

May

-12

May

-13

May

-14

May

-15

US Monetary Base

QE 1 QE 2 QE 3USD Trillion

7

Euro Area


8

Euro Area

Source: Citi Research and Bloomberg

Bund yields are at highest levels since November 2014

The selloff in Treasuries was once again triggered by bunds during this month.

The bund driven selloff in rates is likely making it even more difficult for domestic investors to have a strong view on duration and this could

force banks to stay on the sidelines in the short terms.

9

Greece

Source: IMF, Bloomberg and Citi Research

General Gov’t Debt Maturing in 2015 (€ Bn)

Level and Monthly Change Of Bank Deposits Held By The Private

Non-Financial Sector(€ Bn), 2003-May 2015

10

Greece

Source: Citi Research and Bloomberg

13-Jul €0.5bn. Debt repayment due to the IMF

16-Jul ECB Monetary policy meeting

17-Jul €1.0bn. Treasury bill matures

20-Jul €3.5bn. ECB/Eurosystem-held government bond matures

31-Jul Moody's due to review Greece's sovereign credit rating

1-Aug €0.2bn. Interest payment due to the IMF

5-Aug ECB Non-Monetary policy meeting

7-Aug €1.0bn. Treasury bill matures

14-Aug €1.4bn. Treasury bill matures

20-Aug €3.2bn. ECB/Eurosystem-held government bond matures

Greece- Next Key Dates

Scenario A Scenario B Scenario C

June IMF debt repayments Missed Missed Missed

ELA access Restricted Restricted Restricted

Capital Controls Imposed Imposed Imposed

Short-term deal Found (by end-June?), new funds Found (byend-June?), no new funds Not found before end-June

ECB & IMF debt repayments in Jul-Sep Met by disbursement of bailout extension Missed Missed

Third bailout programme Agreed by September Agreed by September Agreed not found

Grexit Avoided Avoided Grimbo, potentially leading to Grexit (although less likely)

Main Alternative Scenarios

11


China

China Economic Forecasts

Effects of Lower Oil Prices

12

13

Commodities: Oil Views

Citi’s new and old oil crude price forecasts for 2015-16 ($/bbl.).

New (Jul 8) 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 2014 2015 2016

Brent 55 64 58 57 60 62 64 66 100 58 63

WTI 49 58 53 50 53 55 57 57 93 53 56

Brent-WTI 6 6 5 7 7 7 7 9 7 5 7

Old (May 19) 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 2014 2015 2016

Brent 55 64 68 63 60 65 70 75 100 68 75

WTI 49 58 61 54 53 58 63 66 93 60 70

Brent-WTI 6 6 7 9 7 7 7 9 7 8 5


14


Citi Price Outlook for Benchmark Commodities

July Expectations

Copper and Oil

15

Oil prices

Copper prices

Source: Citi Research & Bloomberg

261.5

200

250

300

350

400

450

Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15

63.59

59.47

40

50

60

70

80

90

100

110

120

Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15

Brent WTI

USD/Barrel

Brazil Risks of Drifting Away with Looser Fiscal Anchor

Leonardo Porto de Almeida

Economist

[email protected]

+55-11-4009-2947

Economic Research | July 2015

Marcelo Kfoury Muinhos

Head of Brazilian Economic Research

[email protected]

+55-11-4009-3470

See Appendix A-1 for Analyst Certification, Important Disclosures and non-US research analyst disclosures – July 6, 2015



Certain products (not inconsistent with the author’s published research) are available only on Citi's portals.

This presentation was approved for distribution on July 6, 2015; the disclosures in Appendix A1 are current as of the same date.

Maurício Une

Economist

[email protected]

+55-11-4009-3412

mailto:[email protected]



17

5Y CDS and Ratings for Some Emerging Countries

Brazil risk premium, measured by 5Y CDS, decoupled from LatAm peers’ and is now above Turkey’s and South Africa’s.

Risk Premia (5Y CDS) for several Latam countries (Peru and

Colombia) are significantly lower than that for Brazil.

Brazil 5Y CDS is higher than Turkey’s and South Africa’s since the

beginning of this year.

Global factors cannot explain the worse performance of Brazil’s

CDS relative to the peers.

Political threats to fiscal adjustment are the main reason behind

increasing risk premiums.

Sources: Bloomberg and Citi Research

CDS and Ratings – International Comparison July/2015

S&P gave a waiver to Brazil, because they trust in Levy.

Eventually the two have to converge, so risk will decrease or

Brazil will be downgraded., in our view

Sources: Bloomberg and Citi Research

CDS 5 year – International Comparison

60

100

140

180

220

260

300

340

Oct-12

Nov-12

Dec-12

Jan-13Feb-13M

ar-13A

pr-13M

ay-13Jun-13Jul-13A

ug-13S

ep-13O

ct-13N

ov-13D

ec-13Jan-14Feb-14M

ar-14A

pr-14M

ay-14Jun-14Jul-14A

ug-14S

ep-14O

ct-14N

ov-14D

ec-14Jan-15Feb-15M

ar-15A

pr-15M

ay-15Jun-15Jul-15

South Africa Peru Brazil Turkey Colombia

18

Sources: BCB and Citi Research

Fiscal Accounts – Reversing the Deteriorating Trend

Rousseff’s second term adopts opposite fiscal policy stance. The appointment of a recognized austere MoF, Joaquim

Levy, was the first sign of this reversal, followed by several fiscal measures.

We expect a yearend 2015 primary surplus at 0.8% of GDP (from -0.6%

of GDP in 2014), which implies a 2015 nominal deficit forecast of around -

4.8% of GDP (from -6.2% of GDP).

Mr Levy is implementing the sharpest fiscal effort in the last decades.

Fiscal tightening will continue in 2016 (1.7% of GDP of primary fiscal

surplus) constraining GDP recovery.

Some recently-announced fiscal measures, like curbing some social

benefits and unwinding payroll tax breaks, will face strong social and

political opposition and might eventually get ditched.

Primary Surplus Gross Public Debt Dynamic

Source: Brazilian Central Bank and Citi Research

Positive scenario assumes primary surplus of 2.0% of GDP (0.5% in

negative). GDP growth was set at 2.0% for both scenarios.

Gross public debt/GDP rose to 58.9% in December/14; trough in Rousseff’s

administration: 51.5% in December 2010).

Will gross public debt reach the 70% threshold?

2015 Budget Proposal sets primary fiscal target at 1.2% of GDP, being

another drag in the already weak economy.

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

2000 2002 2004 2006 2008 2010 2012 2014 2016

% of GDP

Consolidated Central Government

72.1

54.051.3

58.9

65.7

62.0

50

55

60

65

70

75

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Gross Debt / GDP (%)

Pessimistic Optimistic Benchmark

19

Activity – Real GDP Growth, Private Consumption & Investment

Source: IBGE and Citi Research Source: IBGE and Citi Research

We expect GDP to contract -1.7% in 2015 and -0.2% in 2016. Risks are skewed downwards. Brazil will face the longest

recession ever (4 quarters of contraction). Potential growth around 2.0%.

There are several fundamentals constraining economic activity in 2015.

Due to monetary and fiscal tightening, labor and credit markets should

continue decelerating steadily amid depressed levels of confidence.

We estimate four quarters in a row of GDP contraction, meaning the longest

recession of historical series which encompasses 4 recession episodes.

Political negotiations may extend the recession period to 2016.

Private consumption grew 0.2% in Q1 2015. For 2015, we estimate private

consumption to decline 1.5%, reflecting weakening labor and credit markets

amid depressed confidence

Investments contracted 6.9% in Q1 2015. Higher real interest rate, depressing

industry outlook and lower confidence point to sharp contraction along 2015 (-

6.0%).

External demand will not fully offset the softer domestic demand, in our view.

GDP Growth Domestic Demand

0.2

-6.9-10

-5

0

5

10

15

20

25

2001.I

2001.IV

2002.III

2003.II

2004.I

2004.IV

2005.III

2006.II

2007.I

2007.IV

2008.III

2009.II

2010.I

2010.IV

2011.III

2012.II

2013.I

2013.IV

2014.III

QoQ

Private Consumption Investments

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

2012.I

2012.II

2012.III

2012.IV

2013.I

2013.II

2013.III

2013.IV

2014.I

2014.II

2014.III

2014.IV

2015.I

2015.II

2015.III

2015.IV

2016.I

2016.II

2016.III

2016.IV

%

GDP QoQ (LHA) GDP YoY (RHA)

%

20

Activity – Private Consumption & Investment and Confidence

Source: FGV and Citi Research

Confidence indicators continue to plummet in 2Q15 returning to 2009’s levels or even below. Credit growth slowdown will

keep in place in coming quarters.

Source: Brazilian Central Bank and Citi Research

Credit Growth Confidence Indicators

Confidence indicators plummeted in 1H15, reaching levels consistent with

recession.

Service consumer confidence indicators are still moving south. Service is

back to 2008 levels.

Lower confidence reduces the willingness to increase debts.

Credit market is decelerating steadily, especially in non-earmarked credit

which is expanding at around 5% (therefore, meaning real contraction).

Credit expansion tends to weaken further, given labor market deceleration

and higher loan interest rates.

0

5

10

15

20

25

30

35

40

45

Mar-08

Aug-08

Jan-09

Jun-09

Nov-09

Apr-10

Sep-10

Feb-11

Jul-11

Dec-11

May-12

Oct-12

Mar-13

Aug-13

Jan-14

Jun-14

Nov-14

Apr-15

% YoY

Total Earmarked Non-Earmarked

60

70

80

90

100

110

120

130

140

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

Sep-11

Jan-12

May-12

Sep-12

Jan-13

May-13

Sep-13

Jan-14

May-14

Sep-14

Jan-15

May-15

Industrial Sector Consumer Service Sector

21

Activity – Services and Industry Dynamics

Source: IBGE and Citi Research

Since 2011, industrial sector has been underperforming GDP. This trend will likely persist in 2015, reflecting high real unit

labor cost. Services sector will decelerate further this year.

Since 2012 industrial sector has been expanding less than GDP.

The higher level of real interest rates, together with the tight conditions in

labor market (labor intensive sector), will likely constrain the expansion of

the services sector this year.

Industrial sector tends to be favored by the weaker domestic currency,

given its higher tradability. However …

Source: FGV and Citi Research

… the higher level of real unit labor cost (RULC) in industry restricts our

more favorable outlook for this sector in 2015.

RULC (real wages relative to labor productivity) was more than 10% above

its historical average in March/14.

The underperformance of industrial sector relative to GDP started in 2012

when RULC stayed at around 5% above average.

Industrial sector has been laying off since 2011, but the stronger rises in

real wages have been postponing the adjustment of RULC.

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

2010 2011 2012 2013 2014

4-quarter avg %

Services Industry GDP

0.75

0.85

0.95

1.05

110

115

120

125

130

135

140

145

150

2002M01

2003M01

2004M01

2005M01

2006M01

2007M01

2008M01

2009M01

2010M01

2011M01

2012M01

2013M01

2014M01

2015M01

IndexIndex

Industrial Real Unit Labor Cost (LHA) Labor Productivity (RHA)

22

Activity – Unemployment & Working Population & Labor Force


In 2008, the Central Bank estimated natural unemployment rate at around

7.4%. Market consensus estimates NAIRU at 6.5%.

The unemployment rate is still below the NAIRU suggesting still tight labor

market conditions.

Unemployment rate rose to 6.5% s.a. in June, higher than the lowest level of 4.6% of April/14. Employment has been

declining since 4Q12, with rising unemployment rate being contained by lower participation ratio.

Employment decreased 1.3% YoY in June (-0.7% YoY), while labor force

grew 0.9% (1.2% YoY).

Besides demographics and labor force participation, the better performance

of the services sector (labor intensive) since 2012 compared to the

industrial sector (capital intensive) has contributed to understanding the

puzzle of a declining unemployment rate amid low GDP growth.

Labor Force and Employment

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

Jan-06

Jul-06

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

Jan-10

Jul-10

Jan-11

Jul-11

Jan-12

Jul-12

Jan-13

Jul-13

Jan-14

Jul-14

Jan-15

% YoY

Labor Force Employment Working Population

4

5

6

7

8

9

10

11

12

13

14

Mar-02

Mar-03

Mar-04

Mar-05

Mar-06

Mar-07

Mar-08

Mar-09

Mar-10

Mar-11

Mar-12

Mar-13

Mar-14

Mar-15

Unemployment Rate Unemployment Rate (s.a)

23

Activity – Labor Market, Unemployment & Wages


Declining labor productivity growth is one of the consequences of better

performance of the services sector relative to the industrial sector since

2011.

Real wages declined in June, falling 2.9% YoY (1.6% YoY in

December/14), returning to the negative terrain after 3 years.

Real Wages and Employment Formal Job Creation (CAGED Survey)

Real wages dropped in May by 2.9% YoY, meaning the sharpest contraction since January/04. CAGED confirms

weakening labor market showing ten months in a row of no job creation.

There has been roughly no job creation since February/14 confirming the

labor market slowdown.

Most of this slowdown intensification came from the industrial sector.

Only in the 2008/09 recession was there a worse performance of the

CAGED survey.

-2%-1%0%1%2%3%4%5%6%7%Jan-08 May-08 Sep-08Jan-09 May-09 Sep-09Jan-10 May-10 Sep-10Jan-11 May-11 Sep-11Jan-12 May-12 Sep-12Jan-13 May-13 Sep-13Jan-14 May-14 Sep-14Jan-15Real Wages (LHA; s.a.) Employment (RHA; s.a)

-250,000

-200,000

-150,000

-100,000

-50,000

0

50,000

100,000

150,000

200,000

250,000

300,000

Jan-

00

Oct

-00

Jul-0

1

Apr

-02

Jan-

03

Oct

-03

Jul-0

4

Apr

-05

Jan-

06

Oct

-06

Jul-0

7

Apr

-08

Jan-

09

Oct

-09

Jul-1

0

Apr

-11

Jan-

12

Oct

-12

Jul-1

3

Apr

-14

Jan-

15

Formal Job Creation Industry Job Creation

-6%

-4%

-2%

0%

2%

4%

6%

8%

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

Sep-11

Jan-12

May-12

Sep-12

Jan-13

May-13

Sep-13

Jan-14

May-14

Sep-14

Jan-15

May-15

Real Wages (LHA; s.a.) Employment (RHA; s.a)

24

Monetary Policy – We Are Not in Kansas Anymore

Sources: Bloomberg and Citi Research Source: BCB, Bloomberg and Citi Research

We foresee a further hike of the Selic rate in 3Q15 up to 14.25%.

Interest Rate Swap Pre-720 days versus US Treasury 5Y

Real interest rates have declined from 7.5% in 2011 to 1.5% in 2012, but

since April/13 the Central Bank has started a process of monetary policy

normalization.

The deteriorating inflation outlook has motivated Copom to hike the Selic

rate by 600bp so far, bringing real interest rates back to levels above 6%.

In 2015, we expect the Selic rate to hike further in 3Q15 putting it at

14.25%.

Domestic interest rates usually tracks the yields of US Treasury 5 year

bonds.

The arbitrage of US x Brazil long-term interest rate implies the BRL

needs to depreciate.

To put CPI inflation promptly on downward path, real interest rate needs

to be raised beyond its equilibrium level..

0

5

10

15

20

25

Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14

%

Real Interest rate Selic rate

0.5

0.7

0.9

1.1

1.3

1.5

1.7

1.9

2.1

2.3

2.5

7

8

9

10

11

12

13

14

Nov-10 Jun-11 Jan-12 Aug-12 Mar-13 Oct-13 May-14 Dec-14 Jul-15

Swap 720 (LHA) TR 5Y (RHA)

25

Inflation – Above Upper Limit of the Target in 2015

We forecast CPI inflation at 9.2% in 2015, above the target’s upper-band (6.5%). CPI inflation keeps above the mid-point

target despite the weak GDP growth, due to the process of realigning monitored to market-set prices.

Sources: IBGE and Citi Research Sources: IBGE, BCB and Citi Research

CPI Inflation and Targets (YoY) CPI Breakdown (YoY)

We forecast CPI inflation at 9.2% in 2015, above the upper band of the

target (6.5%).

For 2016, we expect CPI inflation to reach 5.7%.

In 2015, market-set prices inflation is expected to reach 6.6%,( the same

rate of 2014) but higher monitored prices inflation (14.3% from 5.7% in

2014) emerges as a general process of realigning monitored to market-set

prices.

Services inflation (amounts 35% of CPI basket) continues to surpass CPI

inflation markedly.

Sticky services inflation around 8.5% is likely linked to tight labor market

conditions.

Food inflation had reached its peak in April/13 (14%) and reversed

afterwards. Recent drought pressurized food prices again in 1H14.

0%

2%

4%

6%

8%

10%

12%

14%

16%

Jan-10

Apr-10

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

Oct-11

Jan-12

Apr-12

Jul-12

Oct-12

Jan-13

Apr-13

Jul-13

Oct-13

Jan-14

Apr-14

Jul-14

Oct-14

Jan-15

Apr-15

CPI Food Monitored Prices Services

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

Jan-01

Jan-02

Jan-03

Jan-04

Jan-05

Jan-06

Jan-07

Jan-08

Jan-09

Jan-10

Jan-11

Jan-12

Jan-13

Jan-14

Jan-15

Jan-16

in %

Headline CPI Inflation Average of Core Measures

26

External Sector – FX, Commodities & Trade Balance

Sources: BCB and Citi Research Sources: Bloomberg, BCB and Citi Research

The strong negative correlation between CRB&BRL lies in the relationship between Brazilian export prices and CRB. Trade

balance: first annual deficit in 2014 since 2000. Current account deficit running above 4% of GDP.

Current account deficit around 4.5% of GDP raises concerns about

financing through voluntary capital inflows. Risks of BoP financing are

rising.

Trade balance will not show a significant improvement in the medium term,

in our view.

According to our models, global factors (commodity prices and global risk

aversion) explain almost 60% of the movements in USD/BRL.

Another strong piece of evidence is the positive correlation between BRL

and risk aversion (measured by VIX), which remains significantly below its

historical average.

BRL and Commodity Price Real Exchange Rate and Terms of Trade

1.5

1.7

1.9

2.1

2.3

2.5

2.7

2.9

3.1

3.3

3.5 250

300

350

400

450

500

550

600

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

CRB Spot (LHA) USD/BRL (RHA)

65

75

85

95

105

115

125

135

60

80

100

120

140

160

180

Jan-91

Jan-93

Jan-95

Jan-97

Jan-99

Jan-01

Jan-03

Jan-05

Jan-07

Jan-09

Jan-11

Jan-13

Jan-15

Index

Effective Real Exchange Rate (LHA) Terms of Trade (RHA)

USD/BRL 3,04

27

Political Popularity and Energy Situation.

10% of people evaluate Rousseff’s government as good or excellent

(13% in March). Conversely, 65% of people consider her

government bad or terrible (60% in March). This means a

-55% of NET approval.

In October 2014, 42% of people evaluated Rousseff’s government

as good/excellent, while 20% disapproved of it.

Low popularity ratings increase the risks of government not

succeeding in adjusting fiscal accounts.

Alternative fiscal plan: Discretionary expenses represent around

BRL280bn in Budget Law, but it encompasses social

programs/investments.

Sources: Datafolha and Citi Research

Popularity of Different Presidents

SE/CO energy reservoir levels recovered in the iH15, but keeps

at low levels.

Thermal power plants have been in full steam for 2 years.

50% hike of electricity prices and recession will contribute to cut

energy consumption, consequently raising the reservoir levels.

Reservoir Levels SE/CO – 70%

Sources: ONS and Citi Research

Rousseff’s popularity plummeted to 10% in June, the lowest since 1999. Further deterioration in macro conditions

suggests additional decline to come. Rousseff’s NET approval is only better than Collor’s.

-60

-40

-20

0

20

40

60

80

100

0 12 24 36 48

months after inauguration

Collor FHC 1 FHC 2 Lula 1 Lula 2 Dilma I Dilma II

20.616.0

19.416.820.6

28.533.5 36.1 36.1

0

10

20

30

40

50

60

70

80

90

100

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

% o

f m

axi

mum

valu

e

2003-2012 2001 2013 2014 2015

28

Brazil – Summary of 2015-2016 Outlook

Macroeconomic Indicators

Keep an Eye

▲ Fiscal accounts improvement.

▲ Governability – Government support in Congress.

▲ Potential downgrade by Rating Agencies (Moodys/Fitch).

▲ Electricity price hikes in 2015.

Risks

▼ External: US monetary policy normalization, Monetary

stimuli worldwide; China slowdown.

▼ Domestic: Recession extension, current/expected inflation;

fiscal accounts reversion; current account deficit.


2010 2011 2012

7.6 3.9 1.8

5.9 6.5 5.8

Nominal Interest Rate Selic (end of period – % p.a) 10.8 11.0 7.3

1.67 1.88 2.04

2.7 3.1 2.4

-2.4 -2.5 -2.3

20.1 29.8 19.4

-47.3 -52.5 -54.2

-2.1 -2.0 -2.2

288.6 352.0 373.1

Inflation (IPCA) – end of period (%)

Exchange Rate (end of period R$/US$)

Public Sector – Primary Result (% GDP)

Nominal Result (% GDP)

Trade Balance (US$ billion)

Current Account (US$ billion)

Current Account (% GDP)

International Reserves (US$ billion)

Total External Debt (US$ billion) 256.8 298.2 312.9

2013

2.7 5.9

10.0

2.34

1.9

-3.1

2.6

-81.0

-3.4

375.8

308.6

2014

0.1

6.4

11.8 2.66

-0.6

-3.9

374.1 345.5

-6.2

-90.9

-3.9

2015 (f)

-1.7

9.2

14.3

3.40

0.0

9.9

374.1

349.8

-7.8

-78.3

-4.2

2016 (f)

-0.2

5.7

14.3

3.60

0.4

38.0 34.5 32.9 Net Public Sector Debt (% GDP) 31.5 34.1 36.8 39.0

12.7

374.1

355.8

-8.2

-79.7

-4.2

51.8 51.3 54.8 Gross Public Sector Debt (% GDP) 53.3 58.9

Real GDP Growth (% market prices) –

66.7 70.1

Mexico: Economic Outlook Estudios Económicos, Banamex-Citi

July 2015

Sergio Luna

Director, Economic Research

[email protected]

+52 55 2226-6799

Citi Research



may have a conflict of interest that could affect the objectivity of this report.. Investors should consider this report as only a single factor in making their investment decision. Certain products (not inconsistent

with the author's published research) are available only on Citi's portals.

This presentation was approved for distribution on 17June 2015; the disclosures in Appendix A1 are current as of the same date.


Citi Economic Surprise Index (Points)

Source: Bloomberg

Mexico & US - Economic Activity

• Supply shock in the US weighed

on Mexican activity

… however

• Competitiveness

• Domestic consumption -80

-60

-40

-20

0

20

40

Mexico US

Positive Surprise

Negative Surprise

Production & Capacity – Auto Sector (Millions of units / annualized)

Source: Banxico

Automotive Sector

Share of total US Imports of Manufacturing Goods (% of total)

6

10

14

18

22

26

98 00 02 04 06 08 10 12 14

Mexico

China

Canada

Source: Department of Trade, US

2

3

4

5

10 11 12 13 14 15 16 17 18 19 20

Producción autos Capacidad de producción

VW

Chrysler

GMFord

Ford

NissanChrysler

Mazda Honda

ToyotaMazda Audi

Kia

Nissan-infiniti

Nissan-Mercedes BenzBMW

Higher than average

Average

Lower than average

Economic size (GDP)

Automotive plants

Economic growth National: 2.9%

Negative

Toyota

Ford

Ford

Mazda

GM Chrysler

GM

Nissan

Honda

GM

VW

Ford

Chrysler

GM

Regional Economic Growth (2010-14) and Auto Industry

Source: INEGI, AMIA, Banamex

Formal Payroll (Annual change, nominal terms)

Source: IMSS

Mexico: Domestic Conditions

Quality of Consumption Index (Index base = 2010, January-February average for each year)

Source: INEGI, Banamex

80

90

100

110

120

2008 2009 2010 2011 2012 2013 2014 2015

6.0

7.0

8.0

9.0

J F M A M J J A S O N D

2015 2014

Inflation (% annual)

Source: INEGI, Banamex Source: INEGI, Bloomberg

Inflation: Banxico’s Target Achieved

FX and Inflation Episodes (Pesos per dollar, %)

2

5

8

11

9

11

13

15

E 08 A J O E 09 A

MXN Inflation

11.0

6.5%

3.7%

15.25

January 2008 - March 2009

2

3

4

5

J14

M M J S N J15

M M J S N

Headline Core

Forecast

2

4

6

8

12

13

14

15

16

J 14 J J 15

MXN Inflation

16.3

2.87%

13.4

4.5%

January 2014 - July 2015

MXN forecasts for 2015 year-end – Banamex Survey (Pesos per dollar)

Source: Banamex

Monetary Policy: Aspects to Consider

• Banxico remains vigilant to the

pass-through effect from FX

depreciation on inflation

• Coordination with the Fed.

Changes on Banxico’s calendar

• Strategies to face financial markets’

volatility

13.1

13.6

13.98

14.314.46

14.8

15.2 15.315.5

N D J 15 F M A M J J

Exchange rate at the end of 2015 (median)

Monetary Policy: The 13th Federal Reserve Bank?

Mexico-US: Economic Integration (GDP annual growth, %)*

Expectations: Banamex Survey as a Policy Gauge (Númber of participants)

Source: Banamex * Annual growth of the filtered data of US and Mexico´s GDP, using HP (Lambda=1600)

Source: INEGI, BEA, and Banamex

0

1

2

3

4

5

1Q81

84 87 90 93 96 99 02 05 08 11 1Q15

USA Mexico

NAFTA

-5

0

5

10

15

20

25

-50 -25 25 50

May-13 May-14 May-15 Jul-15

Cut on Government Spending (MXN$ bi)

Source: SHCP

Public Finances: Adjustment

Oil Production (MXN $bi, first quarter)

Source: SHCP and Banamex

62

10

18.2

34.1

Pemex CFE Investment Currentexpenditure

Total : MXN$124.3 bn

PublicCompanies

FederalGovernment

60

70

80

90

100

110

Budgetary Oil Revenues(PEMEX)

Observed Renevues (PEMEX)

- 29%91% change in

price

9% change in production

Energy Reform I: Mexico as a Consumer of Energy

Electricity Generation: Fuels (Percentage)

Source: SENER and Banamex

39.5

57.8

22.4

3.46.2 9.7

2012 2027

Gas-fueled Conventional Other

Source: INEGI, SENER, Banamex

Import-Export Connections

Private

Pemex

New Projects

Gas pipelines

Energy Reform II: Mexico as a Producer of Energy

Investment Estimates for Round One (US$ billions)

Source: Banamex Source: CNH, SENER, Banamex

Round One: Breakeven Prices* (US$ per barrel)

Despite lower oil process, some of the Round One projects remain profitable

0

10

20

30

40

50

60

70

80

200 2,200 4,200 6,200 8,200 10,200 12,200 14,200 16,200 18,200

Volume (2P + Prospective Resources), million boe

On Shore,Shallow Waters

andExtra Heavy

Oil

UltraDeep

Waters (Perdido

area)

Deep Waters(South)Chicontepec and Non-Conventional

Long-term Forecast

Short-term Forecast

2.23.9

1.5

0.1

4.6

1st Bid 2nd Bid 3rd Bid Total

Total Round 1 estimated investment: 8.5bn

Round 1: Calendar of Auctions 1 to 3

Invitation Pre-qualified

participants List

Dec 11, 14 May 25, 15 Jul 15,15 Aug 21, 15

Contract Signature

1st Auction

Opening of bids and

Winners are

announced

Exploration Shallow

Waters (14 areas))

2nd Auction Opening of Bids

and Winners are

announced

Invitation

Prequalified

participants List

Feb 27, 15

Contract

Signature

31 Jul 15 Sep 30, 15 Nov 6, 15

Production Shallow

Waters (9 areas)

3rd Autcion Production Onshore (26

areas)

Dec 15,15

Opening of Bids

and Winners are

announced

May 12, 15

Invitation

Oct 31,15

Prequalified

participants List

Source: Banamex

Forecasts

Source: Citi, Banamex

2014 2015f 2016f

GDP (%) 2.1 2.5 3.5

USA Industrial Production, (%) 4.2 2.2 3.4

Fiscal Balance (% of GDP) -3.5 -3.5 -3.0

Current Account (% of GDP) -2.1 -2.5 -2.4

Inflation (%) 4.1 2.9 3.6

Interest rate (%)

End of period 3.00 3.25 4.00

Exchange rate (MXN per US$)

End of period 14.8 15.9 15.3

Andean Region Macroeconomic Outlook:




July 2015

Munir Jalil

Chief Economist

North Andean Region

[email protected]

+57 1 639 41 95

43

Terms of Trade

0

20

40

60

80

100

120

140

160

0

50

100

150

200

250

May

-96

May

-97

May

-98

May

-99

May

-00

May

-01

May

-02

May

-03

May

-04

May

-05

May

-06

May

-07

May

-08

May

-09

May

-10

May

-11

May

-12

May

-13

May

-14

May

-15

Colombia Ecuador WTI(RHA) Venezuela

Source: Central Banks & Citi Research

0

50

100

150

200

250

300

350

400

450

500

40

50

60

70

80

90

100

110

120

May

-96

May

-97

May

-98

May

-99

May

-00

May

-01

May

-02

May

-03

May

-04

May

-05

May

-06

May

-07

May

-08

May

-09

May

-10

May

-11

May

-12

May

-13

May

-14

May

-15

Peru Chile Copper (RHA)

Terms of Trade

44

Source: Central Banks

93.76

50

60

70

80

90

100

110

120

130

140

150

160

Apr-9

6

Apr-9

7

Apr-9

8

Apr-9

9

Apr-0

0

Apr-0

1

Apr-0

2

Apr-0

3

Apr-0

4

Apr-0

5

Apr-0

6

Apr-0

7

Apr-0

8

Apr-0

9

Apr-1

0

Apr-1

1

Apr-1

2

Apr-1

3

Apr-1

4

Apr-1

5

Colombia

94.11

50

60

70

80

90

100

110

120

Apr-9

6

Apr-9

7

Apr-9

8

Apr-9

9

Apr-0

0

Apr-0

1

Apr-0

2

Apr-0

3

Apr-0

4

Apr-0

5

Apr-0

6

Apr-0

7

Apr-0

8

Apr-0

9

Apr-1

0

Apr-1

1

Apr-1

2

Apr-1

3

Apr-1

4

Apr-1

5

Peru

Chile Ecuador

112.08

50

60

70

80

90

100

110

120

130

140

Mar

-96

Mar

-97

Mar

-98

Mar

-99

Mar

-00

Mar

-01

Mar

-02

Mar

-03

Mar

-04

Mar

-05

Mar

-06

Mar

-07

Mar

-08

Mar

-09

Mar

-10

Mar

-11

Mar

-12

Mar

-13

Mar

-14

Mar

-15

131.29

50

70

90

110

130

150

170

190

210

230

Apr

-96

Apr

-97

Apr

-98

Apr

-99

Apr

-00

Apr

-01

Apr

-02

Apr

-03

Apr

-04

Apr

-05

Apr

-06

Apr

-07

Apr

-08

Apr

-09

Apr

-10

Apr

-11

Apr

-12

Apr

-13

Apr

-14

Apr

-15

45

GDP by Sectors

Colombia (1Q15) Peru (1Q15)

Ecuador (1Q15) Chile (1Q15)

22.2%

17.1%

13.5%

12.0%

8.2%

8.2%

8.1%

6.9%

3.8% Financial and Real State Services

Social Service Activities

Retail, Restaurants and Hotels

Manufacturing

Oil & Mining

Construction

Transportation

Agriculture

Utilities

49.6%

14.1%

12.2%

11.2%

5.7%

5.0%1.9% 0.3%

Services

Manufacturing

Oil & Minning

Retail

Construction

Agriculture

Utilities (Waterand Electricity)

14.3%

14.1%

12.1%

10.4%10.1%

9.9%

8.5%

2.9%

2.4%

15.4%

Services

Manufacturing


Oil and Minning

Transportation andCommunicationsConstruction

Fishing and Agriculture

Financial Services

Utilities

Others

35.3%

11.2%10.0%

9.0%

7.2%

6.5%

5.0%

2.4%

0.3%

13.0%Services

Manufacturing

Mining


Construction

Transport and Communications

Agriculture

Utilities

Fishing

Others

46

Exports (Accumulated values)

Colombia (Apr) US12.63 Bn Peru (Apr) US10.44 Bn

Ecuador (Apr) US6.42 Bn Chile (May) US28.8 Bn

48.1%

35.7%

12.4%

3.5% 0.2% 0.0%

Copper Industrial Agriculture Other minning Fishing Forestry

22%

20%

14%

8%

2%

1%

33%

Copper Gold Other mining Oil and derivatives Fishing Agriculture Non traditional

36.62%

29.81%

15.61%

11.40%

0.78% 5.77%

Oil Non-Traditional Bananas and Plaints Shrimp Coffee Others

41.2%

13.9%

7.2%

1.4%

36.2%

Oil and Derivatives Coal Coffee Nickel Other Exports

FDI (USD Bn.)

47

Colombia

6.42

10.87

0

2

4

6

8

10

12

14

16

18

20

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Oil & Mining Others

0.49

0.27

-0.2

0

0.2

0.4

0.6

0.8

1

1.2

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Oil & Mining Others

Ecuador

Peru

2.69

7.27

0

2

4

6

8

10

12

14

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Oil & Mining Others

Chile

13.28

10.02

0

5

10

15

20

25

30

35

2008 2009 2010 2011 2012 2013 2014

Minning Other

48

National Government’s Income (%Oil and Mining)

Colombia Peru

Ecuador

7.2%

11.2%

16.9%

20.1%

15.6%

5%

7%

9%

11%

13%

15%

17%

19%

21%

2010 2011 2012 2013 2014

20.2%

23.6%

20.8%

15.1%

14.6%

10%

12%

14%

16%

18%

20%

22%

24%

26%

2010 2011 2012 2013 2014

Chile

27.0%

32.2%

40.7%

32.0%

29.1%

15.8%

5%

10%

15%

20%

25%

30%

35%

40%

45%

2009 2010 2011 2012 2013 2014

34%32%

26%

14%

21%19%

14%

10% 10%

0%

5%

10%

15%

20%

25%

30%

35%

40%

2006 2007 2008 2009 2010 2011 2012 2013 2014

FX

49

USDCOP

USDPEN

636.44

400

450

500

550

600

650

700

Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15

USDCLP

3.1765

2.4

2.5

2.6

2.7

2.8

2.9

3

3.1

3.2

3.3

3.4


2637.02

1,500

1,700

1,900

2,100

2,300

2,500

2,700


Imports (Accumulated Values)

50

Colombia (Apr) US18.57 Bn Peru (Apr) US12.19 Bn

Ecuador (Apr) US 8.03 Bn Chile (May) US 25.58 Bn

40%

18%

17%

14%

11%

Intermediate Goods

Consumption Goods

Capital goods

Electricity

Durables

45.0%

15.9%

17.2%

10.5%

11.4%

0.1%

Manufacturing

Vehicles and Transportation

Machinery and Equipment

Oil Refining

Agriculture, Food and Beverages

Others

30.6%

22.7%

22.1%

9.6%

6.2%

3.8%

3.4% 1.6%

Raw materials for the industry

Consumption Goods

Capital goods for the industry

Oil and derivatives

Transport equipment

Construction materials

Raw materials for agriculture

Others

33.10%

27.21%

20.19%

19.27%

0.22%

Raw materials

Capital goods

Consumption goods

Oil and derivatives

Others

51

Current Account Balance (% of GDP)

1.1

-1.2 -1.4-0.9 -0.7

-1.3-1.8

-2.9 -2.7-2.0

-3.0 -2.9 -3.1 -3.3

-5.3

-6.0-5.6

-7.0

-6.0

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Colombia

Ecuador

Peru

-1.1

2.6

1.5

4.64.1

-3.2

2.01.7

-1.2

-3.6 -3.7

-1.2

-0.4

-2.1

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Chile

-3.0-2.3 -2.0

-1.6

0.1

1.6

3.3

1.5

-4.4

-0.5

-2.4-1.9

-2.7

-4.2 -4.0 -4.3

-6.1

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

-4.3

-1.2 -1.3

1.1

3.7 3.7

2.9

0.5

-2.3

-0.3 -0.2

-1.0-0.6

-3.4

-2.0

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Reforms: Don’t stop me now

52

53 Source: ECLAC, World Bank & IDB

Infrastructure Investment in Latin America

In Latin America, low levels of banking have prevented

commercial bank to influence in a big magnitude

investment financing, specially infrastructure projects.

According to ECLAC, during the 2000s, investment in

infrastructure in the region amounted to 3.8% of

annual GDP; is a far below the needs of the region.

Foreign Financing

Foreign Direct Investment

Multilateral Development Institutions

Bilateral Investment Mechanisms

Sovereign and Pension Funds

Innovative Strategies for Financing

Infrastructure

Securization

Public-Private Association

54 * Perrotti, Daniel and Ricardo J Sánchez (2011) “La brecha de infraestructura en AL y el Caribe ”Recursos Naturales e Infraestructura Series No. 153, United

Nations publication, Santiago, Chile, July.

The Economic Infrastructure Gap and Investment in Latin America

The investments required to close the infrastructure

gap are enormous, amounting 6.2% of GDP (US$

320 billion in 2012) for the period 2012-2020*

BID Loans (US Billion) 2010 2011 2012 2013 2014

Loan Outlay 10.341 7.898 6.883 10.558 9.423

Approvals 12.705 10.911 11.424 13.899 13.543

Transport 1.60 2.29 1.71 2.78 2.30

Infrastructure and Environment

Approvals 42.2% 62% 49% 34% 38%

Disbursement 5.4 6.7 5.6 4.7 5.1

In Brazil, Chile and Mexico, comercial bank is one of the

main agents in financing infrastrusture. After the crisis,

the banking system in Latin America will deal with

regulatory restrictions and risk aversion, increasing the

cost to finance infrastructure.

Andean Indicators

55

Colombia

Ecuador

Peru

Venezuela

2008 2009 2010 2011 2012 2013 2014F 2015F 2016F

Summary Data

Nominal GDP, USD bn 723 700 761 883 1,012 1,044 866 767 755

GDP per capita, USD 5,586 5,339 6,391 7,314 8,279 8,433 6,907 6,036 -

Population, mn 129.4 131.2 119.1 120.7 122.2 123.8 125.4 127.0 -

Unemployment, % of labour force 8.7 9.5 9.1 8.5 8.0 7.5 7.5 7.7 -

Economic Activity

Real GDP, yoy avg 5.4 -0.5 3.0 5.9 5.1 3.8 2.1 0.6 1.5

Real investment growth % yoy 10.7 -13.7 11.8 15.7 12.6 0.2 0.7 -2.5 0.4

Real consumption growth % yoy 5.6 0.5 3.8 5.2 5.8 4.8 2.9 1.3 1.7

Private consumption growth % yoy 5.7 -0.6 3.7 5.2 5.5 4.4 2.5 0.8 1.4

Real export growth, % yoy 2.5 -7.0 -3.6 7.9 4.3 -0.5 -1.1 -2.3 -0.3

Real import growth, % yoy 9.3 -14.8 9.5 15.9 14.3 0.2 1.1 -4.2 -0.3

Prices, Money & Credit

CPI, % yoy eop 17.6 12.0 11.1 12.6 8.7 20.3 17.0 21.1 19.5

CPI, % yoy eop (Ex. Venezuela) 7.6 1.8 2.9 4.3 2.7 2.3 3.5 3.4 2.9

Balance of Payments, USD bn

Current account 27.4 3.6 -1.7 14.1 -5.7 -16.4 -16.8 -42.8 -34.5

% of GDP 3.8 0.5 -0.2 1.6 -0.6 -1.6 -1.9 -5.6 -4.6

Trade balance 50.7 27.9 35.0 61.6 49.3 39.2 27.3 -18.5 -6.0

Exports 184.1 133.1 160.4 220.4 230.9 217.8 199.9 135.6 151.8

Imports 97.5 76.6 86.2 112.3 132.6 126.2 119.3 111.1 110.7

FDI, net 14.5 6.3 8.1 19.7 28.9 23.5 19.9 15.9 15.9

International reserves 102.8 98.1 105.5 114.0 133.8 135.1 133.6 133.5 131.4

Public Finances, % of GDP

Consolidated government balance -0.9 -5.1 -4.9 -4.5 -5.0 -5.0 -4.5 -5.6 -5.1

Public debt 26.4 31.2 34.6 34.1 33.5 33.0 37.7 42.1 42.0

of which Domestic 11.5 13.7 15.6 15.6 16.4 16.5 17.4 16.7 16.2

Foreign Assets & Liabilities, USD bn

External debt 163.7 184.6 215.6 245.9 265.6 292.4 319.0 316.5 320.5

Public 109.7 132.6 152.8 171.0 181.7 190.2 207.1 215.0 218.8

External debt / GDP 13.4 14.6 14.1 11.9 9.8 10.1 17.5 23.2 25.3

Source: National sources, Citi Research

56


Some Macroeconomic Forecasts - Colombia

2008 2009 2010 2011 2012 2013 2014 2015F 2016F

Summary Data

Nominal GDP, USD bn 242 231 285 334 369 378 375 312 324

Nominal GDP, local currency bn 480 505 545 620 664 710 756 804 854

Economic Activity

Real GDP, yoy avg 3.5 1.7 4.0 6.6 4.0 4.9 4.6 3.2 3.0

Real Investment Growth % yoy 9.0 -3.9 7.7 18.5 4.7 5.1 11.7 2.9 3.0

Real Consumption Growth % yoy 3.5 1.6 5.1 5.5 4.8 4.9 4.8 4.0 3.2


CPI, % yoy (Citi estimates) 7.7 2.0 3.2 3.7 2.4 1.9 3.7 3.8 3.4

CPI, % avg 7.8 2.4 2.7 3.9 2.8 1.8 3.5 3.9 3.3


Current account -6.5 -4.6 -8.7 -9.7 -11.3 -12.3 -19.8 -18.8 -18.2

% of GDP -2.7 -2.0 -3.0 -2.9 -3.1 -3.3 -5.3 -6.0 -5.6

Trade balance 1.0 2.5 2.4 6.1 5.0 3.2 -4.7 -12.9 -11.3

Exports 38.5 34.0 40.8 58.3 61.6 60.3 57.0 42.5 44.9

Imports 37.5 31.4 38.4 52.1 56.6 57.1 61.7 55.4 56.2


Gross Public Debt 34.0 36.7 37.2 34.6 32.6 35.1 38.3 38.3 39.9

Central Government Deficit -1.8 -3.7 -3.4 -2.6 -1.9 -2.7 -2.4 -3.0 -3.6

57 Source: Citi Research

Some Macroeconomic Forecasts - Ecuador

2008 2009 2010 2011 2012 2013 2014 2015F 2016F

Summary Data



Economic Activity

Real GDP, yoy avg 6.4 0.6 3.5 7.9 5.2 4.6 3.8 -0.4 1.7

Real Investment Growth % yoy 22.5 -7.3 10.5 11.5 3.7 11.7 3.3 -4.0 3.0

Real Consumption Growth % yoy 6.2 0.9 7.2 5.7 4.1 4.0 3.8 -1.3 1.9



CPI, % avg 8.4 5.2 3.6 4.5 5.1 2.7 3.6 3.7 2.3


Current account 1.8 0.3 -1.6 -0.3 -0.2 -1.0 -0.6 -3.5 -4.2

% of GDP 2.9 0.5 -2.3 -0.3 -0.2 -1.0 -0.6 -3.4 -2.0

Trade balance 1.5 0.1 -1.5 -0.2 0.0 -0.5 -0.1 -2.7 -3.3

Exports 19.5 14.4 18.1 23.1 24.6 25.7 26.6 18.9 20.2

Imports 17.9 14.3 19.6 23.2 24.5 26.2 26.7 21.6 23.5


Public Debt 27.4 21.5 19.9 19.3 18.3 19.9 24.0 23.7 22.9

58


Some Macroeconomic Forecasts - Peru

2008 2009 2010 2011 2012 2013 2014F 2015F 2016F

Summary Data



Economic Activity

Real GDP, yoy avg 9.1 1.0 8.5 6.5 6.0 5.8 2.4 2.8 3.5

Real Investment Growth % yoy 29.4 -22.9 38.8 12.9 10.2 12.1 -3.9 0.9 2.5




CPI, % avg 5.8 2.9 1.5 3.4 3.7 2.8 3.2 3.1 2.7


Current account -5.3 -0.6 -3.5 -3.2 -5.2 -8.5 -8.0 -8.2 -11.5

% of GDP -4.4 -0.5 -2.4 -1.9 -2.7 -4.2 -4.0 -4.3 -6.1

Trade balance 2.6 6.1 7.0 9.2 6.3 0.6 -1.3 -0.5 -3.2

Exports 31.0 27.1 35.8 46.4 47.4 42.9 39.5 38.8 38.8

Imports 28.4 21.0 28.8 37.2 41.1 42.2 40.8 39.3 42.0


Public Debt 25.5 28.1 24.1 22.4 20.6 19.3 17.4 18.0 21.7

59


Some Macroeconomic Forecasts - Venezuela

2008 2009 2010 2011 2012 2013 2014F 2015F 2016F

Summary Data



Economic Activity

Real GDP, yoy avg 5.3 -3.2 -1.5 4.2 5.6 1.3 -4.0 -7.5 -5.6

Real Investment Growth % yoy 2.2 -19.1 1.0 15.2 24.1 -14.0 -17.5 -14.2 -11.4

Real Consumption Growth % yoy 6.0 -2.1 -1.1 4.4 6.9 4.4 -2.9 -6.0 -4.7



CPI, % avg 31.4 28.6 29.1 27.1 21.1 38.5 57.3 87.4 99.2


Current account 37.4 8.6 12.1 27.3 11.0 5.3 11.6 -12.3 -0.5

% of GDP 12.5 3.0 4.7 9.1 3.1 1.4 6.1 -8.5 -0.4

Trade balance 45.7 19.2 27.1 46.4 38.0 35.9 33.3 -2.5 11.8

Exports 95.1 57.6 65.7 92.7 97.3 89.0 76.8 35.4 47.9

Imports 49.5 38.4 38.6 46.2 59.3 53.0 43.5 37.9 36.0


Public Debt 22.2 28.9 37.7 37.1 33.0 34.3 71.3 97.2 111.3

60


Some Macroeconomic Forecasts - Chile

2008 2009 2010 2011 2012 2013 2014 2015F 2016F

Summary Data



Economic Activity

Real GDP, yoy avg 3.3 -1.0 5.8 5.8 5.5 4.2 1.9 2.5 3.5

Real Investment Growth % yoy 20.8 -23.5 32.8 11.2 10.8 -1.8 -10.6 0.8 2.7



CPI, % yoy (Citi estimates) 7.1 -1.5 3.0 4.4 1.5 2.8 4.6 3.7 3.0


Current account -5.8 3.5 3.8 -3.1 -9.6 -10.1 -3.0 -0.9 -5.4

% of GDP -3.2 2.0 1.7 -1.2 -3.6 -3.7 -1.2 -0.4 -2.1

Trade balance 6.1 15.4 15.9 11.0 2.3 1.8 7.8 10.0 7.6

Exports 64.5 55.5 71.1 81.4 77.8 76.5 75.7 72.8 76.6

Imports 58.4 40.1 55.2 70.4 75.5 74.7 67.9 62.8 69.1


Public Debt 4.2 7.3 10.0 11.1 12.9 13.0 13.5 14.5 15.8

Central America Macroeconomic Outlook:




July 2015

Jorge Pastrana

Economist

[email protected]

+1-212-816-5728

Expected tax collection from the new VAT

63

The economy is slowing down

64

The tightening cycle is over

65

69

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