Latam 8 October 11

Economic activity grew 1.0% in the second quarter, above expectations, but it stagnated in July (-0.04% in July m/m, seasonally adjusted). Year-on-year the economy grew 5.6%, below the 6.9% in June and the 7.9% in May. We expect the decelerate during Q3 and contract in Q4 due to import controls that affect production and the impact of inflation on household incomes. In July, the most dynamic sectors were Hotels & Restaurants (45.7% y/y) and Mining (13.6%). On the other hand, fishing (-4.1%) and Agriculture & Livestock (-2.7) had the worst performances. Mostly explained by the statistical carryover, we forecast that the GDP will grow at least 4% this year.