Highlights
- Average summer temperatures in the US and Canada will limit annual growth in gas consumption
- Economic issues and mild weather in Argentina will dampen gas demand in the country in 2015
- The US and Canada are set to be in a healthy gas storage position this year
- LNG and pipeline gas suppliers in Latin America are struggling to maintain their export markets
Economic overview
Brazil’s weakening macroeconomics and worsening investment climate are expected to limit oil and gas production.
Brazil’s economy contracted by 0.2% in Q3 2014 on an annual basis – the second consecutive quarter of decline. The Central Bank’s tight monetary policy – designed to control rising inflation – is partly responsible. In March, the central bank increased the benchmark interest rate by 50 basis points to 12.75% – its highest level since January 2009. The rate hike was prompted by inflation, which hit 7.7% in February 2015, the highest level since May 2005.
Quarterly and annual year-on-year GDP growth rates
| Q2 2014 | Q3 2014 | Q4 2014 | 2014 | 2015 | 2016 | |
| US | 2.6% | 2.7% | 2.4% | *2.2% | *3.1% | *3.0% |
| Canada | 2.6% | 2.8% | 2.6% | *2.3% | *2.4% | *2.4% |
| Mexico | 1.6% | 2.2.% | 2.6% | *2.4% | *3.5% | *3.8% |
| Brazil | -0.9% | -0.2% | *0.3% | *0.3% | *1.4% | *2.2% |
| Argentina | 0.0% | -0.8% | *-1.7% | *-1.7% | *-1.5% | *-1.5% |
Meanwhile, Brazil’s Senate is resisting austerity measures promoted by the government to get the economy on track. In March, the Senate rejected a presidential decree aimed at reducing tax breaks for businesses. The government’s austerity policies will further weigh on Brazil’s economic growth prospects in the short-to-medium term.
Argentina is grappling with its own economic woes, which are already affecting upstream investment and LNG imports. The country’s debt battle with investors is far from over. In March, the so-called ‘me too’ investors claimed $7-8 billion in compensation for alleged debt owed since 2002. These investors are in addition to the hedge funds – which the government calls ‘vulture funds’ – which are already seeking compensation. This is yet another setback to attracting investment in the country.