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Fears that the global recovery is faltering is unlikely to prevent Chile's central bank from hiking rates tomorrow. It had hiked rates last month and the data since has been strong and economists have generally revised higher growth forecasts and Chile's finance minister recognized this last week. The market expects a 50 bp rate hike to 2.0% Optimism over the Chilean economy helped strengthen the peso a bit more than 5% since July 1, which makes it the strongest currency in Latam in this time. However, with risk-off coming back into vogue and concerns about the world's growth outlook becoming more acute, the peso is losing ground today. There is scope for a 1% dollar near-term dollar advance toward CLP5.19.

Brazil reported stronger than expected June retail sales figures, but here too the systemic concerns around paramount today. Retail sales rose 1% in June twice what the consensus expected. The dollar is trading at its best level against BRL since late July. A close today above BRL1.7650 may signal a move toward BRL1.80.

Argentina's economy is booming and this is increasingly being recognized. Recall Q1 GDP was 6.8% and May's economic activity index rose 12.4% year-over-year. This year's growth could be among the fastest in the world. Many institutional investors are taking another look at Argentina's GDP-linked bonds, which according to industry indices, are up by more than 25% in the past month. Recall these bonds have greater payout the stronger the growth. There is no payout this year because growth in 2009 was so poor (less than 1%). Q2 GDP will be reported on Sept 17. The higher wheat prices and a record soy crop is beneficial to Argentina as well. While Argentina has been a bit of a pariah since its crisis, the strength of the economy and the performance of its asset markets is seeing investors re-evaluate.

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Source: Latin America Update: Chile, Brazil and Argentina