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Friday, October 21, 2016

FT LatAm Viva For October 21, 2016

7:37 AM (1 hour ago)
to me
On the other side of the commodity boom
By John Paul Rathbone 
October 21, 2016
What lies on the other side of the commodity boom for Latin America? Retrenchment, lower interest rates and a backlash against those who filched money during the halcyon days. Brazil showed all these in spades over the past week – but so did all the region.
In Brazil, prosecutors arrested Eduardo Cunha on corruption charges. Brazilians cheered the move: the powerful former speaker of the lower house, who led the impeachment of Dilma Rousseff, has been called the “Frank Underwood” of Brasilia. The Brazilian central bank cut interest rates for the first time in four years to help the country emerge from its deepest recession in history; Colombia, Chile and Mexico (especially if Trump’s election run continues to falter) are expected to follow with their own rate cuts soon.  And Michel Temer, the president, pressed on with reforms that aim to cut spending and shrink the bloated Brazilian state.
In Colombia, the government submitted a tax reform to patch up the country’s public accounts following the collapse in oil prices. The reform, although technically well-thought out, faces a tough ride in Congress where President Juan Manuel Santos’ political capital has been weakened by the county’s rejection on Oct 2 of a peace accord with Marxist rebels. You can almost hear the ratings agencies drumming their fingers: without a deal, South America’s third biggest economy will lose its investment grade credit rating.
Among other villains: Quito, which needs international support for its low oil price-battered economy, cut off the internet access of Julian Assange due to concerns that the Wikileaks’ founder, who is still holed up in the Ecuadorean embassy in London, is seeking to influence the US election by publishing Russian hacked emails from the US Democratic National Committee; Venezuela made it harder still for the political opposition to mount a referendum that could unseat President Nicolas Maduro next year even as a bond swap that state-oil company PdVSA is trying to engineer to stave off default floundered; and Javier Duarte, the outgoing governor of Mexico’s Veracruz state, went on the lamb as he tried to skip the country to escape corruption charges. Throughout the region, one cannot help but have a sense of accounts being settled.
Quote of the week
"The government of Ecuador respects the principles of non-intervention in the affairs of other nations, does not meddle in electoral campaigns nor support any candidate in particular ... Ecuadorean foreign policy is exclusively sovereign and does not respond to pressure from other states" - Ecuador’s foreign ministry.
Chart of the week
Brazilian interest rates
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The week in review
New default worries over $3.2bn Venezuela oil group bond payments
 
Supreme court asked to decide if US dollars must be used to repay debt, says report
 
 
Brazil cuts interest rates for first time in 4 years
 
Central bank acts as country struggles to emerge from its deepest recession on record
 
 
Brazil’s former House speaker arrested in Petrobras probe
 
Eduardo Cunha masterminded impeachment of former president Dilma Rousseff
 
 
Argentina’s Macri faces a rising bar as he woos investors back
 
President will require patience from his backers after initial honeymoon
 
 
Ecuador cuts off Assange’s internet access over US election worries
 
WikiLeaks founder had been releasing emails from Clinton campaign
 
 
Venezuela’s wealthy build their own oasis
 
For more than a few it seems there is no economic crisis