Headlines for Dec. 30:
- ECUADOR -- Ecuador Pays Off $28 Million of BNDES Debt to Brazil: (Reuters) Contrary to what many people had said for weeks, the Ecuadorean government decided to repay part of the loan extended by the Brazilian state development bank. In my view, which I was almost forced to change because of the recent remarks made by Ecuadorean President Rafael Correa (Didn´t I, Jim?,) the country will recognise this loan to a point that doesn´t mean a disbursement bigger than 40 percent of the total credit (which is about $245 million.) The loan still is under arbitration for Ecuador still considers it ''illegal´´ (illegal???, what Correa does mean by illegal!!!!)
- U.S. -- GMAC Gets $6 Billion Capital Injection by the Treasury: (WSJ) In a delayed move that signals the government´s decision to increase its role in the car industry, the Treasury Department will use the Troubled Asset Relief Program to help kick start auto loans. The TARF was initially designed for banks and financial companies. This may be an indication that the Obama administration won´t spare a single penny of aid until it sees clear signs of recovery.
- U.S. -- Housing Crisis Means Problems for Divorced Couples: (New York Times) Check this story. One-sixth of homes in America are now worth less than the money borrowed to buy them.
- MARKETS -- Oil Expected to Rebound to $60 a Barrel: (Bloomberg) OPEC output cuts may drive oil higher. This might mean that the dollar could fall further. Will Latin regional currencies rally again in the wake of this? Probably not.
- BRAZIL -- Government to Manipulate Job Data to Reduce Share of Informal Workers: (Globo) In another move with evident electoral bias, Labour Minister Carlos Lupi (himself a union leader) announced changes to the way the government measures unemployment. If the changes take place, informal workers who contribute to social security will no longer be counted as part of the informal economy. This comes as most economists are expecting an increase of about 1-2 percentage points in the unemployment rate by the end of next year.
- BRAZIL -- Unions Win Injunction in Courts Stopping Reduction of International Air Ticket Prices: (Valor) Citizens don´t trust the judiciary: in a recent survey, 38 percent of Brazilians rated the judiciary power as 'corrupt' and 'inefficient'. That is, as this case reflects, the result of well-organised trade unions and business associations with powerful lobby muscle suing the state and plans to modernise the country -- and obviously winning either significant regulatory or tax concessions.
- BRAZIL -- Business Confidence Plunges to 10-Year Low: (Valor) The indicator points to a recession, because it is one-third of those business executives interviewed who now expect output to decline, the worst reading since Jan. 1991. It is clear -- the export component of Brazilian supply plus an expected deterioration in labour numbers in the coming months will only propel declines in manufacturing. Stay fixed-income. Expect lower interest rates next month!
- PERU -- Crisis Will Slow Growth; Economy Growing Above Trend, Says Minister: (Comercio) Peru, the ''golden economy´´ of South America, is growing above trend (oh, really???) says its Economy Minister Valdivieso. He says his ''first task´´ was to cool down growth and prepare the country for the crisis. Valdivieso is hopeful that a $35 billion investment plan will stay on track, despite the dearth of financing (ha!!) And they still want to sell bonds, as Bloomberg reported last week, to ''reinforce market confidence (!!!!)´´
- COLOMBIA -- Government Freezes Fuel Prices for First Quarter of 2009: (Espectador) Well, that is healthier than cutting prices. At least they will wait until oil stabilises below $60 a barrel to do so. I wonder what will happen to Ecopetrol if something like this happens. The stock should rise on the news (market participants were expecting the government to trim gasoline prices.)