A slow recovery

GDP growth in Latin America should strengthen in the coming quarters, but the pace of the recovery will be weaker than most expect. Fiscal and monetary policy are likely to be tightened and external headwinds are brewing. We think some of the optimism about the prospects for Brazil will ultimately fade as political realities bite, leading to a reversal of the recent market rally and hampering the recovery. We are, however, somewhat more upbeat than most on the outlook for Mexico’s economy.