LATAM Today August 3, 2026

Economics Research 3 August 2026 | 9:55AM EDT

ARGENTINA Alberto Ramos | Goldman Sachs & Co. LLC Data This Week: Friday: Industrial Production (June); we forecast a 0.5% year-on-year decline of Sergio Armella | manufacturing activity in June. In Argentina, June had 21 working days this year Goldman Sachs & Co. LLC versus 19 in 2025, which should provide a positive tail wind to the year-over-year Santiago Tellez growth reading. Manufacturing and construction activity improved in May, but | high-frequency indicators have been volatile in recent months. In May, Goldman Sachs & Co. LLC

manufacturing activity increased by 0.4% sa (-5.7% yoy) from the previous month, only partially offsetting the 1.8% mom sa decline in April. Construction activity, in turn, rose by a notable 6.4% mom sa (+4.1% yoy) following a 3.6% mom sa decline in April.

BRAZIL Copom: 25bp Selic Rate Cut to 14.00% with Open-Ended Guidance The Monetary Policy Committee (MPC; Copom) meets on August 5. We expect another 25bp Selic rate cut to 14.00%, likely with uncommitted, open-ended (data-dependent) guidance which would leave the door open for a follow-up cut at the late Sept meeting; with the possibility of language signaling limited scope for further easing. Given recent softer-than-expected inflation prints, a well-anchored BRL, and signs of gradual moderation in real activity, we brought forward to the August meeting, the rate cut previously penciled in for Q4.

Although the real ex-ante policy rate remains very high, scope for rate cuts is limited by several factors: (1) inflation remains challenging, with broad and elevated services pressures; (2) 2027/28 inflation expectations have deteriorated further and moved farther from target; (3) oil prices have risen since the last meeting, while conditions in the Middle East remain unsettled; (4) the labor market remains tight, with the 3-month moving average of the real wage bill up a solid 5.0% yoy and real household disposable income up 5.7% yoy; (5) the output gap remains positive; (6) a strong El Niño could add inflation pressure toward year-end; and (7) the Copom’s conditional inflation forecasts are expected to remain above target across the full policy-relevant horizon.

In the policy statement we will be looking for the Copom inflation forecasts over the foresting horizon, the balance of risks for inflation, and whether the forward guidance turns more explicit and hawkish.

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The central bank’s model-based conditional inflation forecasts are expected to have benefited from a higher Selic path and lower realized inflation (lows inertia) and negatively impacted by higher inflation expectations. The Reference Scenario underlying assumptions entail a BRL/USD PPP path probably starting at 5.10 (vs. 5.10 at the June Copom meeting), the 2026/27/28 Selic path extracted from the Focus survey of market participants (13.75%12.00%/10.50% (+25bp), for end-2026/27/28), and oil prices that follow approximately the futures curve for the next six-months and that rise 2% per year thereafter. At this meeting the relevant horizon for monetary policy shifts to 1Q28. We expect the conditional inflation forecast under the analysts’ expected Selic path to decline by 20bp to 5.0% for 4Q26, and to remain at 3.7%/3.2% for 4Q27/1Q28 (tail end of the relevant horizon).

Since the June 17 Copom meeting, real activity indicators have been mixed to sluggish, and while the labor market remains resilient there are tentative signs that it is becoming less tight (softening job and real wage growth). The Jun manufacturing/services PMIs firmed, with the manufacturing PMI returning to expansionary territory. On net, consumer and business confidence softened in June and July. The Jun IPCA-15/IPCA and Jul IPCA-15 printed below consensus, but services inflation remains high and disseminated. The BRL/USD is trading at around 5.07 (vs ≈5.11 ahead of the June 17 Copom meeting), 5-yr CDS spreads were down slightly (-5bp to 123), 1-yr UST yields rose 4bp (to 4.01%) and…