Chile, Peru FX up on China data cheer; Brazil’s real falls

Currencies of copper miners Chile

and Peru rose on Tuesday after better-than-expected data from

top consumer China lifted demand hopes, while Brazil’s real fell

after the government submitted its long-awaited fiscal framework

proposal to Congress.

Chile’s peso firmed 0.6%, rising for the first time

in three days, while the Peruvian sol gained 0.5% against

the dollar. The two countries are the world’s largest exporters

of copper, and rely heavily on China’s consumption of the red

metal.

Prices of copper rose as data from China showed its economy

grew at a faster-than-expected pace in the first quarter,

benefiting from an end of strict COVID-19 curbs, although

headwinds from a global slowdown point to a bumpy ride ahead.

The U.S. dollar softened after Beijing’s upbeat

economic showing, although it did little to lift other Latam

currencies, which were bogged down by factors specific to their

regions.

Brazil’s real shed 0.7%. Investors digested

President Luiz Inacio Lula da Silva’s government’s fiscal rules

which established that expenses can grow up to 70% of the

increase observed in recurring revenues, aiming to provide

sustainability to the trajectory of the public debt.

The framework has been closely watched by foreign investors

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to gauge confidence in deciding on investing in Brazil.

“The new fiscal framework sets the stage for equity

outperformance, while high interest rates support the currency

and falling inflation drives debt,” Jon Harrison, managing

director of EM macro strategy at TS Lombard, wrote in a note.

Brazil’s Bovespa index reversed earlier declines

to rise 0.1% by afternoon trading.

Mexico’s peso fell 0.1% and Colombia’s dropped

1%, as the oil exporters’ currencies tracked a fall in crude

prices.

A preliminary reading showed Mexico’s economy likely grew

3.8% in March compared with the same month a year earlier.

Latin American currencies have still outperformed other

emerging markets, with the MSCI’s index tracking Latam

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currencies jumping 10% for the year versus the

broader emerging market foreign exchange index

which has risen about 2%.

Central and South American economies have benefited from

higher commodity prices and their exposure to China, while

political uncertainties in certain regions have also calmed

since the beginning of the year.

Brazil’s Finance Minister Fernando Haddad announced that

the government has backtracked and will maintain the exemption

for international orders of up to US$50 between individuals.

Local retailers including Lojas Renner and

Magazine Luiza, which could have benefited from the

tax exemption’s end, fell 4.1% and 2.2%, respectively.

Key Latin American stock indexes and currencies at 1941 GMT:

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Stock indexes Latest Daily

%

change

MSCI Emerging Markets 1000.41 -0.34

MSCI LatAm 2285.97 -0.21

Brazil Bovespa 106094.6 0.07

9

Mexico IPC 54422.63 -0.65

Chile IPSA 5470.05 0

Argentina MerVal 285130.5 1.363

8

Colombia COLCAP 1247.04 -0.81

Currencies Latest Daily

%

change

Brazil real 4.9767 -0.80

Mexico peso 18.0400 -0.16

Chile peso 794.5 0.54

Colombia peso 4488.19 -1.13

Peru sol 3.7664 0.17

Argentina peso (interbank) 216.9300 -0.25

Argentina peso (parallel) 414 -1.45

(Reporting by Shreyashi Sanyal and Shashwat Chauhan in

Bengaluru; Editing by Emelia Sithole-Matarise and Jonathan

Oatis)