Page 10 - Special Issue Asutil Conference 2025

INSIDER

Macroeconomic improvements support LATAM’s biggest economies

John Gallagher reports from Buenos Aires

When Avolta reported an 11% increase The Peso now floats within a managed are projected to rise by 5.0% in 2025,
in sales from Latin America in its Q1 2025 band from 1,000 to 1,400 Pesos per moderating in the second half of the year as
financial results, it hinted that the region dollar, replacing the previous crawling tighter policies take effect. The forecast for
may have turned the corner and could see peg system. Critics predicted a run on the 2026 is 3.5 -3.6%.
more growth during the rest of the year. Peso prior to the government’s action, Brazil’s growth is expected to
Avolta’s biggest operations in Latin but the reverse has been the case with the decelerate in the second half of 2025 as the
America are in Brazil and Argentina, both Peso strengthening to 1150-1170 = $USD; effects of high interest rates and weaker
of which have faced economic problems in surprisingly the gap between the official global demand become more pronounced.
the last few years, but are now seeing some dollar and the grey market dollar has Domestic and international travel is
positive macroeconomic improvements. practically disappeared. up at the leading Brazilian airports but
Prior to the removal of the foreign with Brazilian airlines Gol and Azul still
Argentina – economy rebounds exchange controls, the US Dollar has suffering from financial problems and with
Argentina’s economy rebounded been very stable, and this has encouraged no progress on their planned merger, short
strongly in the first months of 2025, Argentines to travel abroad. Regional term travel patterns and trends are difficult
continuing the recovery that began in the travel to Chile, Uruguay and Brazil has to predict.
second half of 2024 after a severe recession been extremely popular as well as travel
in the first half of 2024. After a fall of to Europe and the USA, good news for the Expansion in Peru continues
1.7% in 2024, Argentina’s GDP rose in travel retail business. After a solid 2024, Peru’s economy
early 2025 reaching levels close to those Although big challenges remain for continued its expansion in the first few
of March 2023. Both the government and the government, the outlook is broadly months of 2025, marking over a year of
independent analysts agree on a GDP positive compared to the contraction and consecutive growth periods.
forecast of 5.5% for the full year. instability of previous years. Peru’s economy started 2025 with
Improving domestic demand, rising sustained growth across multiple sectors,
private investment, a modest recovery Brazil - GDP growth revised upwards led by transport, mining, construction,
in consumption and a strong agricultural Brazil is delivering a more resilient and manufacturing, supported by strong
sector have been the principal drivers of performance than expected in the first investment and consumption trends. EXPLORE
growth. months of 2025. Brazil’s GDP grew by Twelve consecutive months of economic
Inflation has slowed significantly 1.6% in the Q1 of 2025 compared to the expansion along with increasing public and
from extremely high levels, with monthly previous quarter, reversing the negative private investment indicate that Peru will
inflation dropping from 25.5% in December trend observed in the latter part of 2024. have a good full year of growth in 2025. NEW HORIZONS
2023 to about 2.4% in February 2025. The Growth for the last 12 months rose to 3.5%, In general, economic activity remains
March figure of 3.7% is considered an thanks to a strong performance from the robust, with growth driven by diversified
anomaly and monthly inflation is expected agriculture sector, particularly due to record sectors including mining, transport,
to fall to 2.0-2.4% over the next few harvests of soybeans and cotton. Industrial construction, and primary industries.
months. The annual inflation rate for 2025 output was lagging, blamed on credit Imports of capital goods increased by 20%
is now expected to be around 30%, as the constraints and subdued external demand. in January followed by solid increases
government continues with its program In the face of an uncertain global in February and March, reflecting rising
of tight monetary policies and fiscal panorama and a difficult domestic investment and private consumption grew
discipline. environment with persistent inflation, high strongly in Q1.
interest rates, and external uncertainties, the The Peruvian government and
Foreign exchange controls lifted future is unclear but so far, the government analysts remain optimistic on Peru’s 2025
On April 14, 2025, the Argentine remains optimistic. GDP growth forecast, around 3% to 4%,
government lifted most of its foreign The government revised its 2025 reflecting continued expansion in the
exchange restrictions. Individuals and GDP growth forecast upward to 2.4% for productive sector.
businesses are now able to purchase U.S. the full year, citing improved agricultural Projections in the medium term are
dollars without limits or waiting periods, prospects and a strong Q1 performance. positive but moderate, with expected GDP
enabling companies to access foreign Other forecasts are more conservative, growth rates around 2.9% in 2025 and
currency for imports and repatriate profits with BBVA Research expecting 1.6% and 2.5% in 2026, close to Peru’s potential
abroad. The government’s actions have financial markets around 2% for 2025. growth rate. The economy is expected
been supported by a $20 billion IMF Brazil’s Central Bank raised interest to continue benefiting from strong
Extended Fund Facility agreement, which rates to 14.75% in early 2025, the highest macroeconomic policies, though political
has enabled the Argentine Central Bank to in nearly two decades; further increases instability may constrain investment.
ensure stability in the economy and Foreign are likely, reaching around 15% by mid-
Exchange market. year to reduce inflation. Consumer prices

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