EFG - The Blog

UPDATE 1-U.N. body ups 2010 Latam, Brazil GDP growth view

2010-07-26T18:46:00Z

Wed Jul 21, 2010 11:57am EDT

(Adds Eclac comments on Latam economies)

SANTIAGO July 21 (Reuters) - The economy of Latin America and the Caribbean will likely expand by 5.2 percent in 2010, up exponentially from a previous view of 4.1 percent, the United Nations economic body for Latin America said on Wednesday.

The Economic Commission for Latin America and the Caribbean, or Eclac, said the region's economy would likely grow a more moderate 3.8 percent in 2011, given lingering concerns over the health of the global economy.

The body sees the economy of Brazil, the region's biggest, soaring 7.6 percent in 2010 and 4.5 percent in 2011, while No. 2 economy Mexico is seen growing 4.1 percent this year and 3.0 percent in 2011.

Eclac lauded governments in the region for solid fiscal policy that allowed counter-cyclical spending during the global financial crisis. The United States and Europe are still struggling to recover from the downturn.

"The solid macroeconomics evident in a majority of Latin American and Caribbean countries in the years before the international crisis marked a significant change," Eclac said in a release.

"Countries took advantage of an exceptional period of economic bonanza and international finance to clean up their public accounts."

(Reporting by Felipe Iturrieta; Writing by Brad Haynes; Editing by Eric Walsh) (For a table click on [ID:nN21146139]

Colombia Becomes the New Star of the South

2010-07-19T19:29:00Z

In a time of emerging-market juggernauts, Colombia gets little notice. Its $244 billion economy is only the fifth-largest in Latin America, a trifle next to Brazil, the $2 trillion regional powerhouse. Yet against all odds Colombia has become the country to watch in the hemisphere. In the past eight years the nation of 45 million has gone from a crime- and drug-addled candidate for failed state to a prospering dynamo. The once sluggish economy is on a roll. Oil and gas production are surging, and Colombia’s MSCI index jumped 15 percent between January and June, more than any other stock market this year.

This is more than a bull run. Since 2002, foreign direct investment has jumped fivefold (from $2 billion to $10 billion), while GDP per capita has doubled, to $5,700. The society that once was plagued by car bombs, brain drain, and capital flight is now debating how to avoid “Dutch disease,” the syndrome of too much foreign cash rolling in. Stable, booming, and democratic, Colombia has increasingly become “a bright star in the Latin American constellation,” as emerging-market analyst Walter Molano of BCP Securities calls it. Michael Geoghegan, CEO of HSBC, recently picked Colombia as a leader of a nascent block of midsize powers, the CIVETS (after the smallish, tree-dwelling cat), which stands for Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa. “These are the new BRICs,” he said.

For more, click here.

Mexico's June Auto Production Doubles To 206,195 Units

2010-07-13T15:41:00Z

By Paul Kiernan

Dow Jones Newswires

MEXICO CITY -(Dow Jones)- Mexico's auto production more than doubled in June from a year earlier as exports continued to gain market share in the U.S., Canada and Latin America.

Production rose 102% at Mexican auto plants last month, to 206,195 cars and light trucks, the Mexican Auto Industry Association, or AMIA, said Monday. Exports soared 109% to 177,575 units, led by demand from the U.S., Canada and Latin America. Mexico also shipped thousands of cars to Africa and Asia, where its exports had little or no presence last year. Domestic sales remained fairly feeble, growing 7% in June from a year ago to 59,909 vehicles.

"The dynamism of Mexican exports explains the significant increase in production, with growth (even) from levels prior to the crisis," AMIA said.

The auto industry represents Mexico's biggest single manufacturing sector. The U.S. recession led to a plunge in output in 2009, and a number of local assembly plants closed temporarily as a result of curtailed demand.

The rebound in output has led Mexico's recovery in economic activity this year. The National Statistics Institute reported Monday that May industrial production rose 8.4% from a year ago, with manufacturing up 14.2%.

Divided Belgium to assume caretaker EU role

2010-06-28T13:11:00Z

(BRUSSELS) - Profoundly divided Belgium will take the European Union chair on July 1 in the midst of an unprecedented debt crisis, but leading EU figures maintain they are relaxed at the prospect.

When voting ends on Sunday in Belgium's general election, it could take months for the kingdom's political parties to fashion a new coalition government -- especially if, as polls predict, Flemish separatists seize the upper hand.

As a result, the current caretaker government would have to take the reins of the EU's presidency -- still an agenda-setting role in crucial economic and other policy areas despite the creation of a permanent EU president last year.

The day-to-day executive running affairs across the 27-nation bloc, the European Commission, has expressed its confidence that Belgium will run an efficient six-month programme during its six months at the helm.

Of course, the main thrust of Belgian EU priorities have already been worked out -- in conjunction with Spain, the current post-holder, and Hungary, which will take over on January 1 next year. For more click here.

How to Preserve Trust in Anti-trust

2010-06-22T13:08:00Z

08 October 2009, 18:16 CET

By Ben Van Rompuy

Let it be known: yesterday was European Competition Day. With a one-day conference in Stockholm, hosted by the Swedish EU Presidency, the European Commission wanted to enhance the visibility of EU competition policy (or anti-trust policy, in American terminology) and explain its achievements to the general public.

The idea for a European Competition Day grew out of the concern that European citizens are in general poorly informed about the benefits they can derive from EU competition policy. In light of the current economic crisis, consumer education and awareness-raising has never been more crucial. In order to preserve public confidence in competitive markets, and in the benefits derived from them for our everyday life, a better understanding of the importance of competition policy is invaluable.

In Europe, the U.S. and elsewhere, the crisis has generated much debate about the reliance on market forces to provide the best outcome for consumers and the economy as a whole. It has poked holes in the idea that financial markets will self-correct. Extending this concern to markets in general is not a big leap. Many industries in distress have already requested greater tolerance towards cartels, abuses of dominant positions and other anti-competitive practices and, as the social impact of the recession unfolds, political pressure to retrench competition enforcement is expected to intensify. As a response to these calls, the EU and U.S. competition authorities declare that they continue business as usual. However, the European Commission already showed flexibility in the application of the rules under which state aid is monitored (it approved over 2,900 billion Euro of state guarantees in favour of banks). Furthermore, if history can tell us anything, it is that no government has reacted to a crisis by calling for a more vigorous anti-trust enforcement. In the face of the Great Depression, the U.S. government suspended the anti-trust rules and put in its place a system of industry-sponsored codes. Similarly, albeit less radical, the European Commission relaxed its stance on competition issues in response to the oil crises in the mid-1970s.

For more, click here.

Mexico's economy grows 4.3 pct in 1st quarter

2010-06-01T19:27:00Z

(AP) – May 20, 2010

MEXICO CITY — Mexico's economy is surging out of the global economic crisis, recording growth of 4.3 percent in the first quarter of the year compared to the same period last year, the National Statistics Institute reported Thursday.

It was the first year-on-year growth in more than a year.

Mexico's gross domestic product had fallen 6.5 percent for 2009 as a whole — the worst figure for any country in Latin America.

Mexico can anticipate similar growth for the entire year, said Moody's Latin America analyst Alfredo Coutino. But he warned political leaders should still exercise political moderation.

"There are historical and structural reasons to believe that the Mexican economy will grow less in 2011 than in 2010," he said.

President Felipe Calderon, visiting Washington this week, underscored his country's rebound, urging the U.S. and Canada to join with Mexico in creating a stronger, economic region.

"Together, we should increase our exporting capacity in a contest of growing competitiveness among different regions of the world," Calderon said.

Server Boom: Latin America Grows Most Globally in Revenue Growth3 Percent in the First Quarter of 2010

2010-06-01T18:52:00Z

Gartner - STAMFORD, Conn., May 25, 2010 — Worldwide server shipments grew 23 percent year over year in the first quarter of 2010, while revenue increased 6 percent, according to Gartner, Inc.

"We've seen a return to growth on a worldwide level, but the market has not yet returned to the historical quarterly highs that were posted in 2008, and there were some interesting variations in that growth," said Jeffrey Hewitt, research vice president at Gartner. "Emerging regions that were expected to grow, such as Asia/Pacific, forged ahead, while some mature markets, such as the U.S., produced better-than-expected results, as other countries and regions had a 'mixed bag' of results."

"The server segments varied as well. x86-based servers grew 25.3 percent in units and 32.1 percent in revenue. RISC/Itanium Unix servers were not positive, with declines of 28.5 percent in units and 26.9 percent in vendor revenue, and the 'other' CPU category, which is primarily mainframes, fell 15.1 percent in revenue for the quarter," Mr. Hewitt said.

For more, click here.

The world turned upside down

2010-05-06T20:44:00Z

The emerging world, long a source of cheap labour, now rivals the rich countries for business innovation, says Adrian Wooldridge

Apr 15th 2010 | From The Economist print edition

IN 1980 American car executives were so shaken to find that Japan had replaced the United States as the world’s leading carmaker that they began to visit Japan to find out what was going on. How could the Japanese beat the Americans on both price and reliability? And how did they manage to produce new models so quickly? The visitors discovered that the answer was not industrial policy or state subsidies, as they had expected, but business innovation. The Japanese had invented a new system of making things that was quickly dubbed “lean manufacturing”.

This special report will argue that something comparable is now happening in the emerging world. Developing countries are becoming hotbeds of business innovation in much the same way as Japan did from the 1950s onwards. They are coming up with new products and services that are dramatically cheaper than their Western equivalents: $3,000 cars, $300 computers and $30 mobile phones that provide nationwide service for just 2 cents a minute. They are reinventing systems of production and distribution, and they are experimenting with entirely new business models. All the elements of modern business, from supply-chain management to recruitment and retention, are being rejigged or reinvented in one emerging market or another.

Fore more, click here.

Europe’s economy is the sick man of the world

2010-05-04T15:18:00Z

Kick Greece out of the euro to warn other reprobates that they face swallowing the same humiliating medicine

Bill Emmott

It wasn’t very nice to liken the Greek debt crisis to the Ebola virus but, as a former Mexican finance minister, Angel Gurria knows a thing or two about contagion and financial sickness. “When you realise you have it,” he said, “you have to cut your leg off to survive.” As the head of the Organisation for Economic Co-operation and Development was standing next to Angela Merkel, Germany’s tough-minded chancellor, at the time, his message will surely have got through.

The message is that yet more promises of emergency loans to Greece, from the International Monetary Fund and the European Union, are beside the point. Loans, whether the €45 billion already agreed or the rumoured €100 billion-plus soon to come, are just palliatives. They do not stop the virus from spreading. The only way to do that is to cut the euro’s Greek leg off: in other words, to expel it from the single currency.

This whole Greek tragedy must be galling to those Europeans who thought the post-Lehman recession was basically an American affair, one that showed the superiority of the continental way of doing things compared with those beastly Anglo-Saxons. Now America’s economy is rebounding strongly and it is Europe that looks like the world’s sickest continent. The European economy is weak, and a sovereign debt crisis that promises to spread from Greece to Spain, Portugal and, perhaps, Italy risks sending it back into another nasty recession.

Three painful truths lie behind the problems of Greece and the dangers of contagion. None is the issue most often cited by euro-fans — that Europe’s single currency faces these problems because monetary union was not combined with political union. No form of political union in Europe could have controlled Greek spending or accounting deceptions in the past decade, or prevented the economic troubles now being seen in Portugal and Spain; nor, now, would a European political union have been better at maintaining political stability than the Greek Government itself.

No, the first painful truth is that if Greece is to be able to service its debts and to revive its economy without suffering political collapse, it will need both financial aid and something extra to enable its economy to adjust. The financial aid will have to be huge, meaning subsidised loans or, better, a negotiated debt restructuring. The something extra, to offer some growth to compensate for all the fiscal austerity demanded by the IMF and eurozone lenders (especially Germany) and to make Greece capable of earning its way in the world, can only be a devaluation. There are no other tools at Greece’s disposal.

The second painful truth is that the more generous that the IMF and the EU are to Greece, the likelier it is that Portugal and Spain will want the same; and that if Greece’s debt is restructured (that is, if, like in Latin America in the 1980s, both the principal and the interest costs are cut), then markets will sell Spanish and Portuguese (and, perhaps, Italian) bonds in expectation that these countries too will soon renegotiate. Such a deal for the whole of Southern Europe would be far too costly, both for governments and creditors. So a way has to be found to impose a condition on Greece that the others would prefer to avoid. The best candidate for such a condition is exclusion from the euro.

For more, click here.

Real Bulls Rampage as Rate Rise Fuels Currency Bets

2010-04-30T15:02:00Z

By Ye Xie and Alexander Ragir

April 29 (Bloomberg) -- International investors are turning the most bullish on Brazil’s real in almost two years as the country becomes the first in Latin America to raise interest rates.

Foreign institutions made 113,994 more bets on the currency rising than falling as of April 26, the widest gap in 21 months, according to data compiled by the BM&FBovespa SA in Sao Paulo. As recently as March 31, traders speculated the currency, the world’s best-performer in 2009, would fall.

The real strengthened 1 percent today to a three-month high after central bank President Henrique Meirelles lifted the benchmark lending rate to 9.5 percent from a record-low 8.75 percent to rein in inflation. Interest-rate futures show policy makers will raise borrowing costs to 12.75 percent by year-end. The U.S. Federal Reserve pledged yesterday its intention to keep the benchmark rate near zero for an “extended period.”

“Interest rates are low in the most important economies and we don’t have many alternatives in the world right now,” said Solange Srour, chief economist in Rio De Janeiro at BNY Mellon ARX, which manages about 11.4 billion reais. “The trend for the real is to appreciate.”

The real touched 1.7234 per dollar today, the strongest level since Jan. 11, before trading at 1.7326 as of 3:26 p.m. New York time.

Economic Growth

The currency has gained 9.4 percent in the past three months, the best performer among major emerging-market currencies, as economists in a central bank survey predict gross domestic product will grow 6 percent this year, the second- fastest pace in two decades. The currency gained 33 percent last year as the economy shrank 0.2 percent amid the global recession.

Brazil’s Treasury may double dollar purchases in the foreign-exchange market after the country’s monetary council authorized it to buy foreign currency to make debt payments, Treasury Secretary Arno Augustin told reporters today in Brasilia.

Brazil’s real-denominated debt has returned 2.6 percent this year, beating the 1 percent average gain in emerging markets, according to JPMorgan Chase & Co’s ELMI+ index. The government’s dollar bonds have returned 3.2 percent this year, trailing the 4 percent average gain for developing countries in JPMorgan’s benchmark EMBI+ index. The country’s corporate dollar bonds have returned 3.8 percent.

For more, click here.