Tuesday, 17 February 2009

Earlybird, Feb. 17, 2009

These are the headlines:

ECUADOR -- Ecuador Ceases Interest Payments on 2030 Bond (click here for link to Comercio story): The Rafael Correa administration decided not to make a $135 million coupon payment on the bonds, alleging these are part of an ''illegal´´ issuance. The worst part of this is that one cabinet minister, Diego Borja, threatened to sue bondholders, God only knows why. The real reason, please read the story's last two graphs, is liquidity. The illegality is refusing to pay because you have no money, not because your clients have alleged counterfeit products of yours ...

ECUADOR -- Viteri Quits Finance Ministry; No Changes in Policy Expected (click here for link to Telegrafo story): Maria Elsa Viteri, the finance minister of the Correa government, tendered her resignation after assuming full responsibility for an accusation made by her office that a group of professors earned salaries close to $9,000 a month -- the teachers pointed at by Viteri aren't precisely the staunchest Correa supporters. The reason seems quite innocent, and it wouldn't be surprising that Viteri and her team are departing as a result of the very challenging policy moment. Viteri probably chickened out and wanted out before the scenario of shrinking fiscal revenues and economic downturn deteriorates even further. The need for a tough policy correction is growing, and it seems that the government's stance on things will remain unaltered. Policy options, thanks to Correa's recent radicalisation, are turning scarce. The stance towards bondholders and the default will stay the same (it seems to be something already decided between Correa, his Rasputin and Interior Minister Ricardo Patiño, and the Economic Affairs Councilor Borja.)

COLOMBIA -- Glencore to Exit Cartagena Refinery Expansion Plan, Problem for Colombia (click here for link to Portafolio story): Glencore might exit the refinery for something close to $200 million, according to Portafolio. President Alvaro Uribe threatened to cancel all Glencore contracts in the country unless the Swiss company made good on promises to pay its part for a $3 billion upgrading of the Cartagena refinery -- the most ambitious infrastructure project in Colombia's oil sector. Glencore alleged that access to new funds has been restricted in the light of the current financial crisis. Now Colombia will have to look for another partner. This event deals a setback for Uribe, who is seeking the execution of $20 billion in infrastructure projects to weather the financial crisis.

COLOMBIA -- Macquarie Bank, Ashmore, Inverlink Said to Be Chosen to Manage $500 Million Infrastructure Fund (click here for link to Portafolio story): The $500 million fund created by the CAF, the IADB and the Colombian government to help finance infrastructure will have these three managers. The formal announcement about the fund's structure and focus should come in a few days, ahead of the IADB meetings in Medellín, Colombia, scheduled for the end of March, government sources told this blog.

BRAZIL -- Government Offers Credit to Argentina, Seeks to Fend Off Attempt to Block Brazilian Exports (click here for link to Estado story): A story that never ends. The external policy of the Workers' Party administration is privileging political criteria over commercial sense. Using the same mechanism that failed in Ecuador (the excuse of providing Brazilian companies with loans for investments in a foreign nation) the Luiz Inácio Lula da Silva administration is seeking to trump Cristina Fernández's growing protectionism. The scheme includes the use of Treasury (Brazilian taxpayer money) to finance shipping of Argentine goods into Brazil. Or somewhere else. The problem is not the planned measures in the end, but the lack of transparency of the policy elements involved. Lula does whatever he wants with the money of taxpayers -- and no one says a word.

MARKETS -- U.S. Offers $4 Billion in Additional Aid to General Motors (click here for link to Reuters story): The news are unlikely to spark a recovery in global stock prices. Analysts continue to see the Barack Obama bailout/economic salvage plan incomplete, lacking of the sufficient tools to avert a deeper downturn.

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