High inflation rates and higher interest rate forecasts will temper the robust recovery in consumption after the coronavirus pandemic lockdowns in Brazil, Mexico and Chile, credit rating agency Moody’s said on Tuesday.
The strength of private consumption, which contributes almost two thirds of the GDP of the three countries, will depend largely on the solidity of consumer confidence in Brazil, the improvement in job creation in Chile and the situation of wages reais in Mexico, the firm said in a research note.
Mexico, the second Latin American economy, suffers from the high level of labor informality that affects the recovery of wages, in the context of an inflation that could have reached in the first half of August almost triple the permanent goal of the central bank, according to analysts consulted in a Reuters poll.
“Wages after inflation (in Mexico) will probably remain low, especially in informal work. In Brazil, workers are going back to work, and wages in formal work are increasing with inflation,” the agency said.
Moody’s highlighted that consumption recovered in the region as a result of the lifting of restrictions due to COVID-19, especially in Chile, where the Government authorized a series of incentive measures to encourage retail demand.
But now the South American nation faces the pessimism of consumers as a result of internal and external shocks, such as the social unrest of 2019, the impact of the war in Ukraine and the uncertainty derived from the process to draft and carry out a new Constitution, Moody’s said.
Meanwhile, Brazil and Mexico have seen an improvement in domestic consumption thanks to the reactivation of their service sectors, although tighter conditions for retail loans could alter the trend after their central banks applied strong increases in interest rates. interest.
With information from Reuters
