Latam Weekly: Solid Growth in Peru Despite Headwinds Against a Sluggish Brazilian EconomyGLOBAL ECONOMICS

Key arguments

• Peru's economy remains solid with 3.3% y/y growth expected in August, driven by domestic demand but tempered by El Niño.
• Brazil's growth is sluggish, with activity expected to remain in the low-1s y/y, as services sector deceleration continues.
• Brazilian assets rallied sharply on Bolsonaro's rising election odds, with BRL up 5% and Bovespa up 8%+ since last Friday.
• The BCB is expected to keep rates unchanged through 2026, but the last minutes showed a more dovish stance.

Corresponding source evidence

1. • August economic activity figures will likely continue to show sluggish growth in Brazil in the low- 1s, while Peru’s economy is estimated to have expanded by 3.3% y/y, in line with our full year forecast of 3.2%.
2. Chart of the Week 160 170 180 190 200 210 220 0 10 20 30 40 50 60 70 80 90 Mar Apr May Jun Jul Aug Sep Oct Flavio Bolsonaro (LHS) Luiz Inacio Lula da Silva (LHS) Sao Paulo Stock Exchange Index (RHS) Sources: Scotiabank Economics, Bloomberg, Polymarket.
3. Brazil’s yield curve also shifted well lower (e.g. -150bps+ in 10s) with traders taking higher odds of a Bolsonaro presidency as one that reduces the risk premium embedded in Brazilian debt and one that curbs fiscal support (and therefore inflation).