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COUNTRY INSIGHTS

Uncertainty Persists
CHINA · Report · 25 May 2016

Fixed asset investment growth slowed significantly in April, rising by 10.1% y/y, down 0.6 pps from Q1. Value added for major industrial firms was likewise weak, at 6% y/y, down 0.6 pps from March -- and a break from the previous recovery. We expect private investment to pick up after industrial ...

An irrefutable victory for the Temer coalition
BRAZIL POLITICS · Report · 25 May 2016

The vote on the bill to change the 2016 fiscal target, establishing a R$ 170.5 billion deficit, was symbolic, without the registration of individual votes. However, before that vote, two other votes on the matter took place in the House of Representatives.

A Shot of Vodka Might Help
ECUADOR · Report · 25 May 2016

Businesses are complaining of tax bullying, on the heels of two new tax reforms over the past four months. The first initiative, called the Bill of Fiscal Equilibrium, levied new taxes on sugared drinks, telephone services and cigarettes, and drastically cut the limit (from $10,000 to $1089) o...

Simsek-mania won’t last
TURKEY · In Brief · 24 May 2016

With our monthly coming up in a few days, I want to defer my detailed remarks on the composition of the new administration and potential policy path to that publication to focus on market outlook with the help of the Cosmic Strategist. The gist of our message after yesterday’s CBRT O/N lending ra...

The MNB issued a new signal on the forint today
HUNGARY · In Brief · 24 May 2016

Just as expected, the MNB reduced its base rate and O/N credit rate at today's monthly rate setting meeting, to 0.9% and 1.15%, respectively. But contrary to market expectation, the Monetary Council indicated that the easing cycle of latest months has come to an end with this step. As a consequen...

The government announces measures to limit spending and stimulate the economy
BRAZIL POLITICS · Report · 24 May 2016

This morning the government announced a set of measures to limit the fiscal deficit and stimulate the economy. The two most complex measures (public spending ceilings and social security reform) will be adopted via constitutional amendments, which require 308 votes in the House and 49 in the Sena...

Economics: New Rules on Local Gov’t Finance
MEXICO · Report · 24 May 2016

President Enrique Peña Nieto signed the Law of Financial Discipline for States and Municipalities on April 27. The enactment and eventual application of this law constitute a major step forward by spelling out the very specific obligations that state and municipal governments must abide by in the...

Easing Cycle Continues, As Expected
TURKEY · Report · 24 May 2016

The Monetary Policy Committee (MPC) cut the O/N lending rate by another 50 bps to 9.5% (simple) today, in line with our and the majority of market players’ expectations. The other two rates – O/N borrowing and weekly-repo – were left unchanged (Graph 1).

Politics: Insecurity, Debt, Graft and Elections
MEXICO · Report · 24 May 2016

With two weeks left before the June 5 elections, campaigning has intensified and turned increasingly negative. Questions of economic growth, corruption, and security have consolidated as the top issues in the minds of potential voters and central themes of the campaigns. And security indicators h...

The Perfect Storm: The Panama Papers, The Waked Affair and The Economic Slowdown
PANAMA · Report · 23 May 2016

In our last report, we discussed the potential implications of the Panama Papers (part I of the Mossack & Fonseca documents leak). We argued that the expected slowdown of international legal services in Panama was equivalent to a “permanent demand shock to the service sector, that will affect the...

Congress votes on a new fiscal target
BRAZIL POLITICS · Report · 23 May 2016

Michel Temer gives a press conference to discuss the country’s fiscal situation. The new fiscal target, with the R$ 170.5 billion deficit, will be voted upon by Congress. Minister of Finance Henrique Meirelles will announce a series of measures to tackle the emergency and transmit a positive sign...

Recordings target a member of the economic team and increase pressure on Temer
BRAZIL POLITICS · Report · 23 May 2016

Today’s Folha de S. Paulo contains transcriptions of dialogue between Minister of Planning, Sen. Romero Jucá (PMDB-RR), and the former president of Transpetro, Sérgio Machado. The recordings suggest that a “change” in the government would result in a pact to “stop the bleeding” represented by the...

Forces Driving the Exchange Rate
BRAZIL ECONOMICS · Report · 23 May 2016

An increase in demand for Brazilian assets leads at the same time to a decline in the risk premiums (CDS quotations) and appreciation of the exchange rate. Both of these movements started occurring before the change of government, in light of the clear increase in the likelihood of impeachment, w...

The reign of Yildirim starts with great peril
TURKEY · In Brief · 23 May 2016

AKP’s unanimously elected chairman Mr. Binali Yildirim was appointed by 7 pm Sunday as PM-designate by president Erdogan. He is expected to unveil his Cabinet on Tuesday, the first task of which will be the introduction of a mini package of constitutional amendments to the Grand Assembly to allow...

Back to investment risk from Fitch Ratings - with a slightly odd timing
HUNGARY · In Brief · 21 May 2016

On Friday, May 20, Fitch Ratings upgraded the Hungarian sovereign's LT FX debt to BBB-/Stable from the previous BB+/Positive level. With this, a four-year period ended, during which Hungary had no investment risk category rating from any of the three leading agencies. Following this move, Moody's...

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