Economists doubt labor market gains in Brazil and Mexico will be cut short, even as their key interest rates stand at lofty levels of 12.75% and 11.25%, respectively. 

Brazil’s central bank has reiterated plans to relax monetary policy through half-point rate reductions. On the other hand, Mexican policymakers led by Victoria Rodriguez are expected to start cutting only in 2024 as a resilient economy keeps them on watch for inflation.

Elsewhere across the region, Colombia’s services sector is still creating jobs, with higher consumption defying odds of an economic slowdown. Chile’s unemployment rose more than expected in August, but is forecast to fall in coming months.

Eoin Treacy's view

Brazil and Mexico are enjoying the benefits of doing what was necessary to get inflationary pressures under control as soon as they became apparent. That has put them in a stronger position to recover and their central banks now have ample room to lend assistance should the need arise.

The Brazilian Real has held an incremental succession of higher reaction lows since 2020. It now firming again from the region of the 200-day MA.

The Mexican Peso has been on an historic rally and bounced emphatically from the region of the 200-day MA this week.

The Colombian Peso is the best performing currency this year. Most of that move unwound the oversold condition relative to the 1000-day MA where it is now pausing. A sustained move through it will be required to break the nine trend of underperformance.

The Blackrock Latin American Investment Trust trades at a wider than normal discount of 12.94%. It is currently firming within its range and retains a mild upward bias.

The holdings of the trust are dominated by banks and commodities producers. However, the best performers in both markets this year are more consumer focused. For Brazil the best performer is an education company and in Mexico it is restaurants.