Brazil Sets 2008 Inflation Target at 4.5%

Brazil’s National Monetary Council set a generous inflation target of 4.5 percent for 2008, opening the way for lower interest rates and higher growth. It is the same as the target for 2007 and less than the 4.2 percent rate at which prices rose in the 12 months to May. The council, which is made up of the finance and planning ministers together with the governor of the central bank, said it wanted to avoid the mistake of setting the target too low. The council missed its target in 2001 and 2002 and raised the targets in 2003 and 2005 after realizing it could not hit them.


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Mexico May Issue 30-Year Bond After Elections

Mexico expects market conditions after Sunday’s presidential elections to be calm enough to allow it to sell 30-year government bonds, according to Finance Minister Francisco Gil Diaz.
At a press conference ahead of the weekend he said Mexico’s fiscal and economic conditions are stable and there is no danger of any market wobbles. Up until President Vicente Fox’s win in 2000, the previous three presidential elections were marked by economic crises.


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Peruvian Congress Ratifies U.S. Trade Pact

Peruvian legislators overwhelmingly approved a free trade agreement with the United States that would boost the economy through increased exports. The government now hopes the U.S. Congress will do the same before the summer recess, although even ministers admit this may not be easy.

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Mexican Economy Grew 1.8 Percent in April

Preliminary figures show the Mexican economy expanded 1.8 percent in April compared with a year earlier. Growth was weak because Holy Week, when many factories close down, fell in April this year, compared with March in 2005.


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Panama and Chile Sign Free Trade Agreement

Chile and Panama Tuesday signed a free trade accord, ending a decade of negotiations. The agreement will take at least 10 years to fully open trade between the countries with Panama insisting on protection for farmers.

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Argentina Industrial Output Rises 7.3 Percent in May

Industrial production in Argentina rose 7.3 percent in May compared with the same month a year earlier. In the first five months of the year industrial output is 7.1 percent higher. The growth was led by automobile production and construction materials.


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Brazil’s Lula Announces He Will Run Again

Brazilian President Lula Inacio da Silva announced at the weekend he will run for a second term in office this October, promising to maintain economic stability and intensify his battle against poverty. Most polls predict he will handily beat his opponent Geraldo Alckmin, a former governor of Sao Paolo state.


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Mexico’s Central Bank Holds Rates Steady

Mexico’s central bank held its benchmark interest rate steady at 7 percent Friday, just over a week before the presidential elections. The monetary authority indicated it saw no room for a cut in the foreseeable future as it looks to calm market jitters before the tight contest between Andres Manuel Lopez Obrador and Felipe Calderon on July 2. Concerns over rising U.S. interest rates as well as domestic inflation are preventing the bank from cutting domestic borrowing costs.


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More Millionaires For Latin America

The number of millionaires in Latin America grew 9.7% last year, above the world average rate of 6.5%, according to the 10th annual World Wealth Report, just published by Merrill Lynch and consultancy firm Cap Gemini. The increase of millionaires – defined as people with more than $1 million in assets – in the region is attributed to the high price of crude oil and other commodities. The 350,000 millionaires in the region control around $4.2 billion of assets.


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Argentine GDP Up 8.6% in Q1, Prices Rise 2.6%

The Argentine economy grew 8.6 percent in the first quarter of the year, driven by a continuing recovery in manufacturing and construction. The economy has grown 37.5 percent from the trough it fell into in 2002 when the government defaulted on its debt. Meanwhile prices rose 2.6 percent in the first quarter, signaling runaway inflation remains a threat.


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Venezuela Joins Mercosur

Venezuela signed an agreement to become the fifth member of the Mercosur trading block. Argentina, Brazil, Paraguay and Uruguay are the other countries that belong. Venezuela is attractive to the other members given its huge oil reserves but the current administration has not been in favor of free trade agreements and may see this as more of a political than an economic union.

Together the five countries represent about 75 percent of South American GDP.


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Mexico’s Lopez Obrador to Defy NAFTA

Andres Manuel Lopez Obrador, the left-wing contender in Mexico’s July presidential elections, said he will ignore parts of the North American Free Trade Agreement, which call for the abolition of agricultural tariffs by 2008. He said Mexican farmers could not compete on even terms against U.S. corn and beans and the effects on the countryside would be disastrous. He also proposed a set of price guarantees, subsidies and cheap credits. Lopez Obrador is running neck and neck in the polls with conservative candidate Felipe Calderon.


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Venezuela Government Eyeing Mines

Venezuelan President Hugo Chavez has sent a law to Congress aimed at taking control of unused gold and diamond mines in what would be a further blow to private investors. Companies with concessions they have not yet begun to exploit could lose them. Chavez has already increased state control over some oilfields at the expense of private companies. The proposed law would enable the government to take a majority stake in any non-operational mining concession in tandem with a private company.


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Peru Growth Slows

Peru’s GDP grew by only 3.63% in April, compared with the same period in 2005. This compares with year-on-year growth of 10.7% in March and 4.9% in February. Declining output of manufacturing, fishmeal and natural gas were behind the slowdown. Annual inflation for the four months to April was 5.94%. Growth for the year is forecast at over 5%.


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Chile Holds Benchmark Rate

Chile’s Central Bank held its benchmark interest rate at 5% at its monthly meeting yesterday, Thursday. Recent figures show that Chile’s economic growth has weakened, prompting a hold on rates rather than an increase. The Bank last raised interest rates in April, when it put up the rate by 25 basis points from 4.75% to 5%.


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IGAF Worldwide - Newsletter

Click AQUI para ver la newsletter de IGAF Worldwide, The Exchange (Mayo-Junio 2006)


Click HERE to view the IGAF Worldwide newsletter, The Exchange (May-June 2006).


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Colombian Stocks Lead Region’s Slide

It was another grim day of trading on the Colombian stock exchange Tuesday with several stocks suspended during the course of the day and some losing more than 17% of their value. Although the IGBC had fallen overall only 8.73% by close of play, trading was on the verge of being suspended throughout the day, as it neared the 10% fall which halted dealing on Monday. Across the region stocks continued to slide: Brazil’s Bovespa fell 2.1%, while Mexico’s BMV dropped 2%.


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Uruguay Economic Growth 7.2%

Uruguay’s GDP expanded by 7.2% in the first quarter of the year, compared with the same period of 2005, according to figures published by the Central Bank. The growth was driven by the manufacturing sector, which grew 18.1% and construction which rose 16.1%.


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Tenaris To Buy North American Rival Maverick

Tenaris, the world’s largest steel tube producer, controlled by Argentina’s Techint, is to buy North American rival Maverick Tube for $3.2 billion. The acquisition will allow Tenaris to expand into the North American market. The move by Techint’s Luxembourg-based unit pushed up the company’s share price and saw an improvement in Argentina’s Merval Tuesday – Technit has a 27.7% weighting in the index.


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Markets Take A Turn For the Worse

Latin American stock markets tumbled again yesterday, Monday, in another gloomy day of trading on renewed concerns of hikes in US interest rates. The MSCI Latin American index fell for a sixth day, down 3.4%, as emerging markets worldwide took a big hit. In Argentina, the Merval slid 4.5%, while Mexico and Brazil were both down more than 4% each. And after the Colombian IGBC tumbled by more than 10%, the stock exchange witnessed its first automatic trading suspension since the general price index was created five years ago.


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Edenor Shareholders Approve Proposals

Shareholders of Argentine electricity distributor Edenor have approved plans to sell its shares in New York and Buenos Aires. A proposal to increase the company’s share capital was also approved as was a scheme to amend Edenor’s statutes to allow the company to enter other markets, such as the telecoms market. The public offering of shares will be used to finance the company’s investment plans to improve services and meet increasing demand over the next five years.


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Mexican Inflation At 3%

Consumer prices in Mexico fell 0.45% in May, taking annual inflation down to 3%, from 3.2% as at end-April, according to Central Bank figures. Headline inflation was driven down by declines in food and energy prices. However, stripping out food and energy left core inflation up 0.15%.


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MexDer First Foreign Member To Start Trading Soon

The Mexican Derivatives Exchange’s (MexDer) first foreign member - Timber Hill of the US - is likely to start trading soon on the Mexican exchange following regulatory approval. The company plans to trade futures contracts based on Mexico’s benchmark stock index. Owned by Interactive Brokers, Connecticut-based Timber Hillis the largest equity options market-maker in the US. In March this year Timber Hill became the first foreign company to be granted “remote membership” of the exchange after regulatory changes at MexDer allowed for the entrance of foreign players. MexDer is keen to lure other international firms that trade Mexican derivatives over the counter to become remote members and instead trade via the exchange.


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Gazprom Studies Bolivia Investment

Russian energy giant Gazprom says it is studying the possibility of investing up to $3 billion in Bolivia to work with state-run YPFB to develop various energy projects. Those on the table include exporting natural gas to Mexico and the US as well as exploration of new fields.


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World Bank Green Lights Argentina Loans

The World Bank has approved $3.3 billion of loans to Argentina over the next three years to be invested in aiding sustainable development. The loans, part of the global Country Assistance Strategy (CAS), comprise 30 separate credits to support improvements in areas such as infrastructure, health, education and the environment. The approval of the loans is seen as a vote of confidence in the country’s economic recovery after the crisis of 2001-2002.


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Uruguay-Argentina Paper Conflict Reaches The Hague

The long-running conflict between Uruguay and Argentina regarding the building of two paper mills has reached the International Court of Justice in The Hague. Hearings are due to start today, Thursday, to determine whether Uruguay has violated bilateral treaties, as Argentina claims. Argentina has accused its neighbor of giving the go-ahead to the $1.7 billion project – which represents the largest single foreign investment ever - without sufficient consultation regarding the environmental impact on the Uruguay river, which separates the two countries.

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Argentina Reserves Up $5.6 Billion

Argentina’s Central Bank has added $5.7 billion of reserves since January, when the government repaid its entire $9.8 billion debt to the International Monetary Fund (IMF). Reserves rose from $18.58 billion, as at January 3, to $24.26 billion as at June 3. The Central Bank claims its policy of accumulating reserves serves to protect the economy against external shocks and aims to reduce exchange rate volatility.


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Markets Upbeat Over García Win

Lima’s general stock index (IGBVL) rose 4.04% Monday morning, reaching record highs, on the news that former president Alan García had clinched victory from nationalist Ollanta Humala. Meanwhile, the Peruvian currency, the nuevo sol, strengthened 0.82% against the dollar to levels not seen since the beginning of 1999. With 92.5% of the second-round presidential ballot counted, Alan García of Peru’s center-left political party, APRA, had won 53.20% of the votes against 46.79% polled by Humala.The markets were clearly pleased and relieved that the votes of the middle class and business community won out against the populist choice.


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Chile Economic Growth Slows

Chile’s economic growth slowed in April, with GDP expanding by only 2.8% year on year. Chile’s Central Bank said a slowdown in manufacturing and retail led to the drop in the pace of growth and may lead the Bank to hold back with increases in interest rates. Central bankers are scheduled to review rates on June 15. They last raised the benchmark rate in mid-April when they increased it by 25 basis points to 5%.


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Exit Polls Say García Wins In Peru

Alan García, former president and unlikely comeback kid, appears to be the winner of Sunday’s voting in Peru’s second-round presidential elections. Exit polls Sunday evening indicated that García had won 52.8% of the vote against 47.2% garnered byHumala. García’s first time in office, between 1985 and 1990, saw Peru default onits debt and annual hyperinflation of 8,000%. However, voters have obviously forgiven or forgotten García’s record of economic management or perhaps are simply voting against the alternative: former coup leader and ex-military man, nationalist Ollanta Humala. García polled 24.3% of the vote against Humala’s 30.6% in the first-round poll on April 9. He narrowly beat off market favorite, conservative Lourdes Flores, who gained 23.8% of the votes.


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Colombia Inflation Slows

Colombia’s rate of inflation in May slowed to 0.33%, the lowest month-on-month rise for May since 1986. Last year inflation for the month was 0.41%. Inflation for the year so far is running at 2.71%, compared with accumulated inflation of 3.51% for the first five months of 2005.


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Bolivia To Launch Iron And Steel Industry

The contract to develop Latin America’s largest iron ore deposits – Bolivia’s El Mutún – has been awarded to Indian company Jindal Steel and Power. The government says the deal marks the launch of the country’s iron and steel industry. Jindal has promised to invest $2.3 billion in the project over the next 10 years, the largest foreign investment yet secured by the new government led by Evo Morales. The company will not only extract iron ore but also produce iron and steel. Bolivia, rich in mineral and energy resources, has to date largely exported raw materials rather than processing them. The deal is likely to earn President Morales much political capital, after the government changed the terms of the original tender to ensure more job creation. The changes in the terms were to include a steel production operation and guarantee the site be fueled by natural gas. The project will include the extension of a gas pipeline and investment in local infrastructure to accommodate the terms. Jindal was the only company to remain in the bidding process after Netherlands-based Mittal Steel failed to make the final cut and Argentine Siderar withdrew from the process.


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Peru Central Bank Holds Rate; Growth Continues

Peru’s Central Bank decided to hold its benchmark interest rate unchanged yesterday,
Thursday, for the first time in six months, keeping it at 4.50%. A rise of 25 basis points had been expected by economists to help cool domestic demand, which is driving Peru’s continued economic growth. GDP expanded by 6.8% in the first quarter of the year, compared with the same period in 2005. Internal demand rose by 9.9%, driven mainly by capital investment. Meantime, the rate of inflation in May declined for the first time since September last year, falling 0.53%. Annual inflation slowed to 2.2%, within the government’s target range of 1.5% to 3.5%.


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Brazil Exports Slow

A strengthening currency saw Brazilian exports growth slow to a three-year low last month and the country’s trade surplus narrow to $3.03 billion from $3.1 billion in April. Exports rose, year-on-year, by only 4.7% in May, compared with 6.5% in April. The Central Bank is forecasting export growth this year of only 8%, versus 23% last year. As the real continues to strengthen and interest rates fall, companies are looking to domestic growth to yield returns.


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Argentina’s Quasi-par Bonds To Start Trading

Argentina’s $8.3 billion quasi-par bonds, issued last year as part of that country’s debt swap program, will start to be quoted in the markets this Friday, June 2. The peso-denominated bonds are indexed against CER and have a maturity of 42 years. They are expected to trade with a yield of around 6%. The instruments are mostly held by private pension funds (AFJPs) or insurance companies.


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Brazil Economy Expands 3.4%

The recent cuts in Brazilian interest rates succeeded in stimulating 3.4% economic growth in the first quarter of the year, compared with the same period last year, according to Central Bank figures. Increased sales of consumer goods spurred the fastest growth rate in the past three quarters. Growth is likely to continue following the further 50 basis point cut in rates yesterday, Wednesday.


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Brazil Cuts Benchmark Rate

As expected, Brazil’s Central Bank yesterday, Wednesday, cut the benchmark lending rate by half a percentage point to 15.25%. The cut is smaller than the previous three reductions, but in line with market expectations. Brazil’s interest rate is now at its lowest level since February 2001.


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