México and Brazil maintain the best currency performance among LATAM markets.
México and Brazil maintain the highest performance among Latin American emerging markets
México and Brazil maintain the highest premium above Treasury bonds, the so-called carry trade, among Latin American emerging markets.
Mexico continues to offer a positive and attractive yield after maintaining the nominal rate unchanged at 11.25 percent for eleven months.
In fact, at the moment, Mexico’s real interest rate stands at 7.5%, according to Chief Economists of Finamex, one of the largest brokerage firms in Mexico. This rate compares favorably against those of its counterparts in Colombia, Peru, or Chile, but remains in line with that managed by Brazil.
The inflation rate of both countries is very close. Mexico’s inflation at the end of 2023 was 4.6%, while Brazil’s reached a variation of 4.51%.
What lies ahead is what the Federal Reserve will do and the timing and magnitude of adjustments made by each central bank. The interest rate differential between Brazil and Mexico with the United States will surely make a difference.
The interest rate differential between Mexico and the United States remains very attractive, standing at 5% approximately. Currently, as a result of the extraordinary tightening of monetary policy in both countries, the spread with the United States is between 575 and 600 basis points, exceeding the historical average of 450 points.
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