Tuesday, 16 December 2008

Earlybird, Dec. 16, 2008

Headlines for Dec. 16, 2008: 

MARKETS -- Third of Hedge Funds May Disappear as Returns Sink: (Bloomberg) The hedge fund industry is facing a hemorrhage of redemptions and will need to reinvent itself if it's to stay in business. Returns are at a 18-year-low and the recent scandals involving some firms (such as Bernard Madoff's) are driving investors away. In Latin America, the same model that's unraveling in the U.S. and Europe will continue to work, for a little longer.  

BRAZIL -- Companies Begin to Negotiate Employee Perks to Weather Crisis: (Estado) The government may be ready to help mediate negotiations between industry groups and trade unions over the easing of some labour laws that make it harder for companies to fire staff or reduce high labour costs. The story says that 
Lula himself will help mediate such talks -- something that probably tells us that the president is rather worried with the impact of the crisis on the labour market. Although some easing in labour rules is necessary, we insist here that the scope must be long-term, not a palliative measure to fight the effects of the credit crisis.  

BRAZIL -- Vale Buys 50 Percent Stake in African Miner: (Valor) Vale took advantage of the cheap valuations in the industry and bought for C$81 million a 50 percent stake in African Rainbow Materials Ltd. of South Africa. Vale is expanding in copper mining and it may step up acquisitions of rivals as it still has spare cash to do so. 

BRAZIL -- Brazil Government, Companies Borrow Least in Six Years: (Valor) Nice story by Cristiane Perini. Companies and the government of Brazil only borrowed $2.5 billion in the third quarter, the smallest amount raised in international capital markets since the last quarter of 2002 (remember when Lula's victory roiled markets?) It's logical -- risk perception has been worsening and since the crisis started, access to funds is limited. Perhaps we will see a migration to financing such as multilateral lending, or syndicated loans backed by guarantees issued by supranational or multilateral agencies. Banks are trying to avoid getting too exposed to borrowers in emerging markets or specific industries -- such as consumer goods or manufacturing.  

LATIN AMERICA -- Summit Starts in Brazil as Rifts, Disputes Grow: (La Nacion) The presidents of South American countries started a summit today that will probably focus on the response to the credit crisis afflicting the global economy. Nonetheless, the summit takes place amid growing rifts between Brazil and Ecuador and Paraguay over the legality of credits the former gave to the latter countries, as well as formal opposition by Uruguay (and veiled by Peru and Colombia, I was told) to the nomination of former Argentina President Nestor Kirchner to assume the presidency of Unasur. The conclusion will surely be, 1) let's not talk about investments here, and; 2) let's keep spending in great fashion to avert a slowdown. Let's not forget that there will be a heavy election calendar in Latin America in 2010 -- and politicians don't want to see their economies slowing down significantly before election time. 

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