Conditions in Venezuela are reaching boiling point. Venezuelans – particularly students – are taking it to the streets, as protests sparked by worsening living conditions have turned violent (see story). Inadequate supplies of food and medicine are becoming a serious issue. Suppression of free speech by jailing students is adding to protesters’ fury. The Maduro administration of course is blaming all this on what they call the “rebirth of neo-Nazi movement” that is trying to orchestrate a coup d’é·tat.
Tag: Latin America
Below are seven recent developments in Venezuela’s economy
This is a quick note here on Latin American economies where currency issues are the main story. Argentina has been most often in the news, but the slowdown in Brazil should be top on the radar. I also note that some European banks are pulling the plug on their Latin American investments, ostensibly to raise capital. But this could be in reaction to recent nationalisations in Bolivia and Argentina and the threat that more could be coming.
That a couple of Latin American countries have recently announced the expropriation of foreign investors in the energy sector seems hardly like new news. After all, cycles of nationalization and privatization have unfolded for more than half a century. Moreover, the expropriation simply marked the latest illiberal measures by Argentina and Bolivia, the two protagonists here. There is significant risk that others will follow Argentina and Bolivia.
A look at the fundamentals shows why Fernandez is engaging in such visible theatrics, which also includes recent vitriol regarding the Falkland Islands. Simply put, we think economic stresses are intensifying. How deep the stresses will get is yet to be determined.
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.
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.
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.
This has been an extremely tumultuous week throughout the capital and commodity markets. August itself has been a cruel month. The German stock market has lost around a quarter of its value. A marked slow down in the US and Europe in Q2 has given rise double dip fears in the former and compounding difficulty achieving deficit targets. There are a number of take-aways for investors from this week’s developments.
This article was published in the NYT more than 20 years ago, forecasting precisely what has happened in Russia
Investors became comfortable with Lula’s economic team, his cabinet, and his general attitudes towards markets. The bottom line was that Lula inherited a strong, vibrant economy and was smart enough not to mess with success. Will Humala learn that lesson too?
With markets now contemplating some sort of debt “re-profiling” by Greece, we thought it would be helpful to summarize the two most recent major debt restructurings by an EM borrower for some guidance on what such a move could imply for ratings, debt trajectories, and triggering CDS events. To us, it is clear that “re-profiling” is a euro zone euphemism for a soft debt restructuring that extend maturities and lowers rates, while “restructuring” now refers to a hard one that involves principal haircuts as well as potentially adjusting maturities and coupons too.