Credit Writedowns » Mexico

Intervention Risks Rise In Latin America

Win Thin — Tue, 07 Feb 2012 20:30:50 +0000

FX intervention is certainly in the air this week for Latin America. Brazil stands out as the most aggressive, of course, as the central bank intervened in the forward market Friday and in the spot market Monday

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Developments continue to be bullish for Mexico

Win Thin — Wed, 25 Jan 2012 17:30:12 +0000

Given what we see as a basically hands off policy with regards to the exchange rate when MXN is appreciating, we see more potential upside for MXN compared to, say, BRL, where Brazilian authorities are clearly going to work against further currency strength. Others in Latin America are concerned with currency strength, including Colombia. As such, going long MXN vs. BRL or COP would be a good alternative too. On the other side, Banxico has installed circuit-breakers to help boost peso liquidity during times of stresses as part of an effort to prevent disorderly downside movement in the peso

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Seven Observations about Commitment of Traders in FX

Marc Chandler — Mon, 23 Jan 2012 14:00:00 +0000

The Commodity Futures Trading Commission requires futures traders to identify whether they have an underlying business interest (commercials) or if they don't (non-commercials). Here are seven take-aways from the most recent report that covered the week through January 17th

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Nervous Calm over Currency Market

Marc Chandler — Tue, 13 Dec 2011 12:30:00 +0000

A good reception to a Spanish bill auction and a some what better than expected German ZEW investor survey helped stabilize the risk sentiment which had been battered yesterday. The major foreign currencies are mostly firmer on the day, but the modest gains have left the short-term momentum indicators a bit over-extended. This would seem to favor early North American participants selling into the currency bounce

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News Links: Down with the Eurozone, It’s not about Berlusconi

Edward Harrison — Sun, 13 Nov 2011 14:30:48 +0000

Down with the Eurozone – Nouriel Roubini – Project Syndicate For the last decade, the PIIGS (Portugal, Ireland, Italy, Greece, and Spain) were the eurozone’s consumers of first and last resort, spending more than their income and running ever-larger current-account deficits. Meanwhile, the eurozone core (Germany, the Netherlands, Austria, and France) comprised the producers of

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Expect a lot more trade intervention

Michael Pettis — Wed, 02 Nov 2011 12:30:49 +0000

The currency may well be undervalued, but a significant rise in the RMB, especially if it is countered domestically by an increase in credit at lower real rates, might actually make the global imbalances worse and, more worryingly, cause China’s debt burden and capital misallocation to rise. This would make China’s eventual adjustment far more difficult. The focus should be on shifting China’s economy towards the more labor-intensive and efficient sectors, and an appreciating RMB might actually make things worse, especially if it encourages hot money inflow. It is much better, I think, for China to raise interest rates than to raise the value of the

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The United States of Eurasia?

Marc Chandler — Tue, 13 Sep 2011 11:36:46 +0000

The dollar remains supported in choppy markets; French banks under pressure amid funding concerns. Euro zone risk premium continues to widen; Greece dances with default, tepid Italian bond auction. Banco de Mexico is likely to cut by at least 25bps in October; macroeconomic asymmetries in EMs

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China losing competitiveness

Edward Harrison — Fri, 13 May 2011 12:00:22 +0000

As labour costs in China rise, economists are beginning to think about replacing labour with capital, something we have already seen as a major factor in suppressing wage gains in developed economies. This is also in line with what economists say developing nations need to do to counteract the problem. More importantly, developing economies that reach this juncture must move up the industrial ladder to production of higher value-added goods or they will see their export competitiveness severely eroded

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A Credible Solution to Europe’s Debt Crisis

Guest Author — Sat, 30 Apr 2011 16:00:46 +0000

In April 1989, Mexico's external debt negotiator, Angel Gurria, asked his country's commercial bank creditors for a 55 percent haircut. This was the opening pitch of the newly created Brady Plan, which finally addressed both the debt overhang of developing countries and the weak balance sheets of their commercial bank creditors, ultimately resolving the LDC Debt Crisis. More than twenty years later, Europe is in the midst of a similar sovereign debt and banking crisis. The EU is in a destabilizing feedback loop that it cannot control. Sovereign credit is deteriorating and this is reducing confidence in national banking systems, causing or increasing the likelihood that sovereigns will have to assume bank liabilities. This further impairs the sovereign credit and increases the lack of confidence in the banks. We review the basic tenets of the Brady Plan in the context of our personal experience working on many of these sovereign restructurings and how they could apply in a comprehensive solution for the European debt crisis. The markets and the Eurozone desperately need a positive confidence shock in the form a comprehensive plan that simultaneously addresses the sovereign debt overhang and the balance sheets of European commercial banks

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Diverging Inflation Paths In Brazil And Mexico

Win Thin — Wed, 20 Apr 2011 20:30:00 +0000

We are seeing divergent inflation paths in Brazil and Mexico, and today’s mid-April data underscored this point

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Dovish Banco de Mexico Does Not Derail Bullish MXN Call

Win Thin — Fri, 08 Apr 2011 22:54:01 +0000

Mexico central bank Governor Carstens is sounding very dovish, noting that the economic recovery is not leading to price pressures. He believes there is enough slack in the economy still to keep inflation near the 3% target. Comments came after CPI inflation was reported at 3% y/y in March Thursday, down from 3.6% y/y in

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Faber: For Sure There Will Be QE3 But Not Right Away

Edward Harrison — Fri, 01 Apr 2011 22:27:12 +0000

Here is a good 17-minute Bloomberg video with Marc Faber. He talks a lot about Mexico and he is bullish on that economy. As for the US, his view, like mine, is that printing money does give a temporary boost to economic activity. However, in the long run, it doesn’t lead to sustained economic growth

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Mexico Central Bank Turns A Bit Hawkish

Win Thin — Fri, 04 Mar 2011 19:30:00 +0000

Mexico central bank kept rates steady at 4.5% today, as expected. However, it tilted a little more to the hawkish side and supports our view that tightening is likely to start in Q4 11 and not Q1 12 as market is pricing in. Central bank noted that the balance of risks for inflation is deteriorating, and noted that higher commodity prices resulting from Mideast turmoil and bad weather may spur inflation this year. The change in tone comes despite CPI inflation easing to 3.6% y/y in mid-February from a peak of 4.4% in December, and back within the 2-4% target range. Core CPI has eased steadily to 3.3% y/y in mid-February from over 4% in early 2010. Instead, the bank appears to be focusing on the output gap, which it said is likely to close by mid-

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U.S. Trade Deficits Worth 26 Million Jobs

John Lounsbury — Thu, 10 Feb 2011 05:41:53 +0000

In January Steven Hansen observed that, through November, the trade deficit for manufactured goods in 2010 was the equivalent of 1.3 million workers earning the median manufacturing wage in the U.S. Well, the trade deficit has been with us in a major way for nearly two decades. I am reminded of the 1992 presidential campaign

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Will trade action bring back American jobs?

Michael Pettis — Thu, 04 Nov 2010 13:30:52 +0000

by Michael Pettis In the debate about global trade imbalances, we often hear it said that because Americans produce nothing that China exports to the US, any move to restrict Chinese imports to the US would have no employment effect on Americans. A forced contraction in Chinese exports would simply result in an equivalent increase

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Mexico Update: Century Bond and More

Marc Chandler — Wed, 06 Oct 2010 13:13:32 +0000

Mexico is taking advantage of the investment climate and the near insatiable demand for emerging market credits. The peso may also benefit from actions by other countries, from Brazil to South Korea taking actions to deter hot money inflows. Yesterday. Mexico brought a 100-year bond to market, an unprecedented duration for Latam and a rare

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Permanent Zero and Unbelievably Low Yields in Mexico

Edward Harrison — Tue, 05 Oct 2010 18:45:08 +0000

When faced with a balance sheet recession and anaemic demand growth, Japan pushed short-term interest rates to zero and preceded to print money. This created the infamous Japanese carry trade in which Japanese investors would buy high-yielding assets abroad in order to escape the permanent zero (PZ) interest rate policy of the Bank of Japan.

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India, Brazil, Mexico Update

Marc Chandler — Fri, 24 Sep 2010 16:00:40 +0000

India: Earlier today India lifted the cap on foreign ownership of government and corporate bonds. This had been anticipated, but it runs counter to the rash of media reports suggesting that rise of beggar-thy-neighbor policies after last week’s BOJ intervention. Foreign investors can now hold as much as $10 bln worth of Indian government bonds,

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Mexican Repatriation: The Great Depression and Immigration Policy

Edward Harrison — Tue, 29 Jun 2010 13:45:46 +0000

When the United States last experienced an economic downturn greater than the present day depression, immigrants were often seen as a problem more than a solution because of high unemployment. As a result, Herbert Hoover authorised the Mexican Repatriation Program, which was the removal – by force if necessary – of both American Citizens of

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Morgan Stanley: Yuan Peg Move Bullish for Latam Commodity Producers Like Mexico

Edward Harrison — Wed, 23 Jun 2010 13:17:44 +0000

Gray Newman of Morgan Stanley is the third analyst this week who has been making Mexico-bullish noises due to the Chinese peg move. In his recent research piece called "Latin America: The Renminbi Impact" he says we have to be cautious regarding the overall impact of the Yuan move. At a minimum, any appreciation is

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More on Why Mexico Poised To Benefit From Yuan Move

Edward Harrison — Tue, 22 Jun 2010 19:53:01 +0000

Echoing the Marc Chandler’s comments yesterday, Andy Lees of UBS had some constructive things to say about the potential effect of a Chinese revaluation on Mexico. Mexican Finance Minister welcomes the move because it will help Mexico’s export driven manufacturing industry. Mexico is out-competing China for export share to the US. Its share of the

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Latam Currencies Poised To Benefit From Yuan Move

Marc Chandler — Mon, 21 Jun 2010 13:05:59 +0000

Ideas that China will allow greater flexibility in the yuan, which for many means appreciation, will have positive impact on Latam currencies. The Mexican peso and Brazilian real are leading the advance with about 0.66% gain today. Chile is next with about a 0.33% rise. The risk is that market’s euphoric reaction in Asia and

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Still Want to Buy the Loonie on this Pullback

Marc Chandler — Fri, 26 Feb 2010 20:58:07 +0000

The following is a post by Marc Chandler, head of Brown Brother Harriman’s Currency Strategy Team. For more of BBH’s currency views, visit the website here. Canada reported a somewhat disappointing Q4 09 current account data today, but this is not sufficient to change our preference to buy Canadian dollars on weakness. The current account

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Nationalized Citi Mexicana Redux

Edward Harrison — Tue, 20 Oct 2009 22:17:08 +0000

Back in March when the US Government felt compelled to bail out out Citigroup, Tracy Alloway over at FT Alphaville noticed a curious thing – Citigroup had effectively been nationalized. No, they were not seized by government, but Citi was controlled by government. The Feds had 36% of shares outstanding, which in many cases is

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Swine Flu Tempature Rises, Dollar and Yen Remain Firm

Edward Harrison — Tue, 28 Apr 2009 12:41:29 +0000

The following is the currency outlook released today by the Brown Brothers Harriman Currency Strategy team: Swine flu and concerns about US banks may be hitting the headlines but, the European banking sector remains a threat for the euro zone. Indeed, ECB President Trichet, speaking in NY yesterday, highlighted the fact that the European banking

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Swine Flu has Mexican peso bears feeding at the trough

Edward Harrison — Mon, 27 Apr 2009 12:01:38 +0000

After a good run-up in the last month, the Mexican Peso is getting crushed in the currency markets today. How much of the pullback is a result of the news regarding Swine Flu and how much is technical, due to the prior run up, is hard to identify. Nevertheless, the outbreak will have a negative

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Mexico goes hat in hand to the IMF

Edward Harrison — Tue, 31 Mar 2009 16:55:49 +0000

This comes from Win Thin, a senior currency strategist at Brown Brothers Harriman: Mexico President Calderon is now saying that Mexico stands ready to take a $30-40 bln IMF credit line. This was a surprise to us, and we view this as a negative for Mexico since no country until now has gone to the

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1995

Edward Harrison — Thu, 26 Mar 2009 21:05:59 +0000

The political realities of solving a financial crisis have often meant circumventing legislative approval to meet the exigencies of a particular situation. This was certainly the case in 1995 during the so-called Tequila Crisis in Mexico. And I believe it is the case again today in 2009. Before I go into how this applies to what is presently happening in the Obama Administration, I thought an example from 1995 would be illustrative

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Mexico: Central bank to cut today

Edward Harrison — Fri, 20 Mar 2009 13:00:55 +0000

This analysis comes via Brown Brothers Harriman (I have bolded a few lines): Mexico’s central bank is widely expected to cut its overnight rate by 25 bp today. That would bring it to 7.25%. Last month it delivered a 25 bp rate cut too. The market had expected a 50 bp cut and punished the

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Is Mexico imploding?

Edward Harrison — Tue, 17 Mar 2009 17:49:21 +0000

I plan to visit Mexico early next month as I do at least one or twice every year. This year I question what awaits me as evidence that Mexico's economy and civil order is imploding mount. The latest strike against Mexico comes in its now escalating trade war with the United States

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Mexico’s economy is weakening

Edward Harrison — Fri, 13 Mar 2009 12:22:13 +0000

On Wednesday I posted an article that pointed out a largely positive review by Morgan Stanley of Mexico and their economy. Having noticed a negative bias in the article, I amended it to reflect the tone originally given in the Morgan Stanley piece. That said, I would like to point out a Bloomberg video clip and another from the Wall Street Journal, which illuminate some of the pitfalls of investment there. Below are some additional links that should shed more light as well

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Will Mexico suffer contagion?

Edward Harrison — Wed, 11 Mar 2009 18:58:19 +0000

While everyone seems to be shedding assets, Citigroup included, BBVA seems to be doing relatively well. If they are as strong financially as they indicate despite Spain's crashing economy, antitrust concerns aside, Banamex would be a good target for increasing their North American footprint

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Is this the way to fight inflation?

Edward Harrison — Thu, 19 Jun 2008 11:47:00 +0000

Tariffs and price controls? Apparently, Latin America thinks it can stop the growing tide of inflation and end the riots on their streets by just imposing tariffs and imposing price controls. They better get ready for a blind date with Econ 101. But, I guarantee you this date won’t end well either. The Financial Times

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Is this the way to fight inflation? originally appeared on Credit Writedowns

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