Financial Local weather in Latin America drops 12.6 factors within the third quarter, says FGV

The two components of the ICE registered a decline in relation to the immediately previous quarter.

The Economic Climate Indicator (ICE) in Latin America dropped 12.6 points from the second quarter to the third quarter of 2022, to the level of 54.7 points, thus remaining in the unfavorable zone (below 100 points), according to a survey. made by the Brazilian Institute of Economics of Fundação Getulio Vargas (Ibre/FGV).

The two components of the ICE registered a decline in relation to the immediately previous quarter. The Expectations Indicator (IE) retreated 21.7 points, to 65.5 points. The Current Situation Indicator (ISA) dropped 4.5 points to 44.3 points.

“The worsening in expectations sparks a warning signal, as it indicates that experts expect an economic slowdown for the coming months. All indicators are in the unfavorable zone of the economic cycle”, evaluated the FGV, in a note.

The Economic Climate in Brazil dropped 8.2 points from the second quarter to the third quarter of 2022, to the level of 54.5 points. The Country’s Current Situation Indicator rose 12.9 points, to 42.9 points, while the Expectations Indicator dropped 33.3 points, to 66.7 points.

Only two countries recorded an improvement in the ECI between the second quarter and the third quarter of 2022: Paraguay, with an increase of 9.9 points, to the level of 101.1 points, and Bolivia, with an increase of 1.7 points, to 67.6 points.

The biggest drop occurred in Uruguay, down 27.0 points to 122.6 points. Uruguay and Paraguay are the only countries with ECI in the favorable zone, above 100 points.

FGV included in the survey a question about bottlenecks in access to inputs, as production and logistics chains that were reorganizing during 2021 were impacted by the lockdown in China and the war in Ukraine.

“Only in Argentina predominate responses that consider the supply problems to be serious. In this case, domestic issues of access to foreign exchange to carry out international transactions must be influencing the answers. All countries responded with percentages equal to or above 50% – yes, moderately/lightly – except Argentina and Uruguay. This last country, experts assessed that ‘it would never have faced this problem’. The case of Brazil stands out, where 13.3% responded saying they were seriously affected, which would be directly related to bottlenecks in the supply of chips and semiconductors. The ‘light/moderate’ responses also identify problems in the supply of chips/semiconductors”, pointed out the FGV note.

The survey showed the supply of agro-industry inputs (35%), followed by energy (14%), chips and semiconductors (13%), other manufacturing industry inputs (11%) and miscellaneous (11%). The other items mentioned had less than 10% of mentions.

“It is interesting to note that agribusiness inputs are the main bottleneck. For Brazil, as mentioned before, the issue does not seem to be a priority, despite the importance of the sector in Brazilian exports”, pointed out the FGV, noting that Brazil recorded an increase in the volume of imports of fertilizers this year. “Some sectors of the agroindustry may be having difficulties, however, in the aggregate of imports, the increase in volume indicates that the supply of fertilizers and fertilizers is growing”, concluded the FGV.

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