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COUNTRY INSIGHTS

The arrest of José Dirceu and its consequences
BRAZIL POLITICS · Report · 03 Aug 2015

The arrest of José Dirceu in the Lava Jato Operation will increase pressure on the PT even further.Especially taking in consideration that the incident occurred at the same time as Renato Duque, former Petrobras director, is negotiating a plea bargain deal. The combination of these two facts m...

Two Milestones Reached
VENEZUELA · In Brief · 03 Aug 2015

Last week Venezuela cashed-in $6.5 billion: $1.5 billion from the sale of accounts receivable from Jamaica and $5.0 billion from China. The sale of accounts receivable from Jamaica ($3.2 billion face value) took place last Tuesday 08/28 and brought in $1.5 billion (54% discount). Pdvsa sold $1.2 ...

Week of August 3
BRAZIL POLITICS · Report · 03 Aug 2015

Expectations with the return of Congressional activity.President Dilma Rousseff meets with party leaders of the governing coalition this Monday (3) to improve the climate between the Executive and Legislative.She will appear in the PT’s radio and TV program on Thursday.Leaders have until August 6...

Sharp Deceleration of Credit
BRAZIL ECONOMICS · Report · 03 Aug 2015

One of the (many) reasons the current recession will be longer than the one in 2008-2009 is the behavior of credit. Growth of the credit stock started to slow in early 2011, and has been stagnant in 2015, with lending by both private and public banks decelerating. The flow of new loans to both bu...

The Monetary Policy Dilemmas
BRAZIL ECONOMICS · Report · 03 Aug 2015

Last week the COPOM ended the tightening cycle with one more hike of 50 basis points, taking the SELIC rate to 14.25%, where according to the communiqué it will remain “for a sufficiently prolonged period.” But how long might that be? On the one hand, the Central Bank wants to bring inflation dow...

Inflation Eases, But Best Is Likely Over
TURKEY · Report · 03 Aug 2015

Consumer price inflation moved little in July (0.1%), m/m, broadly in line with the consensus. This led to another easing in the 12-month rate to 6.8%, from 7.2% in June. Food price inflation stayed broadly unchanged at some 9.3%, y/y, while underlying inflation dynamics finally showed some moder...

Desperate For A Coalition
TURKEY · Forecast · 31 Jul 2015

Executive Summary With coalition talks proceeding very slowly, the ISIS/PKK threats on the rise and emerging markets under pressure, macro visibility has never been this poor. Our political baseline is reelections now (60% probability), even though the political landscape is unlikely to change mu...

Perpetual Election Mode
VENEZUELA · Report · 31 Jul 2015

Executive Summary We’re all focused on the December 6 National Assembly elections, but voters will also choose governors in 2016, mayors in 2017, and a president in 2018. And there just might be a presidential recall referendum after April of next year. This means that the government will rema...

A Heavy Burden
ARGENTINA · Forecast · 31 Jul 2015

Executive Summary In Argentina nobody discusses the need for a correction in economic policy. The debate is only about the scale and the speed of the required adjustments. The old debate concerning “gradualism versus shock” has returned with the intensity it had in the literature of stabilization...

Costa Rica: The Central Bank revised its Macroeconomic Program
CENTRAL AMERICA · Report · 31 Jul 2015

As stated by law, the Central Bank of Costa Rica announced yesterday its revision of the Macroeconomic Program 2015-2016, which was originally published in late January. There are no major changes in the Bank´s policy orientation, but there is a revision in the forecast of the macro-variables for...

En route to hyperinflation
VENEZUELA · Report · 31 Jul 2015

We forecast the NCPI August MOM inflation rate at 18.3 percent. The YOY rate rises to 208.5 percent in August from 171.0 percent in July. Inflation accelerates reflecting the rapid rise of the price of the dollar in the parallel market in July (41.8 percent), steady monetary expansion, supply cha...

Costa Rica: Fiscal Challenges
CENTRAL AMERICA · Report · 31 Jul 2015

Executive Summary The outlook for Costa Rica for the next 17 months is for modest growth, and relative stability. But fiscal vulnerability will present challenges for controlling inflation, interest rates and the exchange rate. By yearend, we expect to see modest economic growth (2.3% y/y); low h...

Can this tell us about future price action?
CHINA FINANCIAL · In Brief · 30 Jul 2015

If this model is appropriate (i.e. if enough investors believe that there is a consensus around brokers selling substantially once the index breaks 4,500), there are two obvious implications. First, if Beijing wants the market to keep rising, it must either convince investors that brokers will no...

The consensus about the consensus
CHINA FINANCIAL · In Brief · 30 Jul 2015

I don’t know if this is indeed what triggered the selling, but on Thursday, July 23, following a string of uninterrupted up days, the market closed at a new recent high of 4,124, after which it dropped sharply every day for the next three days to close down by just over 11%, at 3,663. This is exa...

Long stocks = short synthetic put?
CHINA FINANCIAL · In Brief · 30 Jul 2015

My worry was that as the index approached 4,100 or higher, the threat of intense selling by capital-tight brokers at 4,500 meant that anyone buying shares was implicitly giving away a free call at 4,500, and the higher prices went, the less upside there was and the more downside. Remember that if...

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