BofA: LatAm Current Accounts As The Dust Settles

Bank of America note that “following the pandemic, large current account deficits sparked concerns about external sustainability in LatAm.”

• “Since then, deficits have shrunk, sometimes materially. And while Chile and Colombia continue to run deficits that are larger than justified by long-term fundamentals, there is a silver lining in FDI in the region.”
• “Except for Chile, FDI in LatAm is generally almost as large, and sometimes larger than enough to compensate for the level of the current account deficit, providing some comfort.”
• “Even in Chile, FDI has been picking up after a depressed period. In FX, we like buying ZAR/CLP as we expect continued CLP weakness absent positive domestic drivers, and we like to buy USD/PEN ahead of BCRP's upcoming easing cycle amid lower inflation and growth.”