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Latin American Weekly Spotlight
March 8, 2004
Argentina: Resignation of Horst Köhler as IMF chief will not facilitate the second revision of the IMF agreement
Brasil: Government attempts to block the installation of a, investigation committee
Chile: Economic upturn consolidating
Colombia: Tax and pension reform still on the agenda
Ecuador: Better conditions for oil concessions
Mexico: Inflation expectations have risen
Peru: Unexpected surge in inflation
Venezuela: Reduced chances of the referendum against Chavez to take place
Argentina
The Global Committee of Argentine Bondholders
(GCAB) withdrew its participation from the so-called
„Consultative Groups“, which had been established by
the Argentine government. As a reason for its withdrawal
the committee stated a lack of willingness by the Argentine authorities for proper debt restructuring negotiations.
After the withdrawal of the GCAB Argentina is losing its
main negotiation partner within the consultative groups. ---- The strong increase of tax revenue in February
(+36.7% y-o-y) is a clear signal that GDP growth continues to be dynamic. ----- Consumer prices rose a lower
than expected 0.1% in February, which brought the 12month inflation rate down to 2.3%. In March, consumer
prices should rise at a higher rate due to tariff hikes in
the electricity and gas sectors.
Outlook: On Tuesday Argentina has to pay US$3.1bn to
the IMF. The Argentine government indicated its willingness to pay in case of receiving convincing signals by
the IMF that the second revision of the IMF agreement
will be successful. Although we still think that Argentina
is going to make the payment, the probability that the
IMF will not receive the money has increased over the
last couple of days. Argentina has sharpened its rhetoric
against the IMF, and at the same time private creditors
expressed their discontent with Argentina’s attitude. This
could provide enough reason for the IMF not to give in
to Argentina’s pressure, at least for now. The resignation
of the IMF's managing director, Horst Koehler, does not
make things easier, either.
Brazil
As the opposition seems to have collected enough votes
to call two investigation committees (one for the 'Waldomiro case', the other for illegal gambling), these
committees may be blocked by the government. According to the newspapers, PT and PMDB have agreed
to make no nominations for the planned investigation
committees, which thus will be unable to begin work.
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Such conduct will reduce the government's credibility.
The most recent Datafolha poll seems to confirm this, as
the approval rate of the government has fallen from 42%
in December to 28% in March. ----- Following several
months of growth, car sales fell 2.4% in February, partly
due to seasonal reasons (vacation month, less working
days). ----- The trade balance showed a surplus of
around US$ 2 bn in February. Exports rose by 14% yoy.
Outlook: : Most recent inflation indicators point downwards, which should be confirmed by the IPCA inflation
(February forecast: 0.35% mom, Thursday). ----- After
São Paulo's industrial production having been surprisingly strong in February (+1.7% mom, s.a.), we expect
that national industrial production (IBGE) will likewise
have grown (+0.4% mom, +3.9% yoy, Wednesday). ----The Senate largely approved the preliminary decree
(Medida Provisoria) concerning new regulations to the
electricity sector. Yet smaller changes are still expected
for this week. Many observers consider the respective
law as detrimental to investment.
Chile
In January, the economic activity indicator IMACEC rose
by 3.1% y-o-y which was in line with our expectations
(DBLA: 3%, consensus: 2.8%). We expect economic activity to gather some steam over the next months. GDP
growth should reach 4.8% in 2004. ----- After four consecutive months of deflation, consumer prices remained
unchanged in February. The 12-months inflation rate
came in at 0% as well. We expect that due to increasing
nominal wage gains and the likely end of the peso appreciation, consumer prices should soon start to creep
upwards.
Outlook: Exports should have increased strongly in
February (Tuesday). The strong increase in copper
prices should lift the surplus in the trade balance to
US$610mn compared to US$280mn a year ago.
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Colombia
Inflation accelerated slightly in February (6.3% yoy and
1.2% mom, against 6.2% yoy and 0.9% mom in January)
---- In January, the unemployment rate rose unexpectedly to 18.1% in the largest cities and to 17% in Colombia as a whole. This should primarily be the result of the
end of the Christmas season. We do not exclude the
possibility that the Government, due to the negative development on the job market, will increase pressure on
the central bank to continue to cut interest rates. In February the key interest rate was lowered by 0.25% to 7%.
Outlook: Shortly before the beginning of the legislative
period the government tried to find alliances by contacting different party leaders, in order to accelerate the process of the tax and pension reforms. We expect intensive
political debates on this central subject in the following
weeks.
Ecuador
The members of the investigation committee concerning
illegal election campaign donations for Gutiérrez declared that no indications were found which would confirm the accusations, and that the investigations would
now be terminated. So, there is one possible source less
that could destabilize the government. ----- Progress in
granting licenses for private investment in state-owned
oil fields: The government abandoned the plan to levy a
minimum amount for the granting of concessions (35%
of additional production). Thus the chances increase that
the 16 companies which up to now have acquired bidding rights for the licenses will make an offer during the
bidding period, which ends on April 5 (postponed). The
government hopes to increase the production of stateowned oil fields by private investment. ----- The unemployment rate, at 11.4%, nearly reached a three-year
high in January. This confirms our view that the current
growth acceleration is primarily due to the oil sector,
which is not very labor-intensive.
Outlook: This week, there could be signals from the IMF
with regard to the second revision, which is still pending,
of the current standby agreement: We expect the generous stance of the IMF to continue; at least, the current
agreement should be extended until end-2004.
Mexico
According to latest surveys President Fox still enjoys a
high popularity rating among Mexican citizens (“Reforma” and “El Universal”: 55%), despite three difficult
years in office, which can not be characterized as years
of huge structural progress in the economy. Unfortunately, the high popularity does not constitute a strong
mandate for structural reforms, as the success of the
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opposition parties in last year’s congressional elections
has shown. We still do not believe that profound structural reforms will be implemented by the law-makers this
year. ----The government reached a surplus in the public
sector of MXN25.8bn in January, which was a huge improvement over last year’s figures (+MXN9.7bn). The
reasons for the better performance were higher oilrelated income, lower interest payments and a tight control on spending. Even if oil prices will drop somewhat
over the course of the year, we are confident that the
government will keep the public deficit (narrow definition) within its upper limit of 0.3% of GDP. ---- Inflation
expectations of the private sector rose to 4.2% in February compared to 3.95% in January (for impact on
monetary policy please see “outlook”) ----Consumer
confidence, as measured by Inegi, was basically unchanged in February (95.5) compared to January (95.9).
Positive factors (slight improvement of the labor market;
strong GDP growth in the fourth quarter) were slightly
outpaced by negative factors (steep increase of interest
rates; erosion of real wages due to the acceleration of
inflation).
Outlook: This week’s focus will be the release of inflation
figures for February, due on Tuesday. We expect an increase of consumer prices of 0.6%, which would lift the
12-months inflation rate from 4.2% to 4.5%. Despite the
fact that inflation runs far above the central bank’s inflation target of 3% (=/- 1 percentage point) we do not expect a further tightening of monetary policy at the central
bank meeting on Friday, as it probably first wants to
study the impact of the recent hike in interest rates on
inflation and inflation expectations. Banxico raised the
“corto” only two weeks ago on its latest policy meeting
by MXN4mn to MXN39mn on a daily basis ---- In December gross fixed investment should have risen by 1%
compared to the same month last year. Considering the
lack of structural reforms and the increase in interest
rates, investment demand will only recover moderately,
despite the positive external conditions.
Peru
Accelerating inflation: The strike in the transport sector,
which lasted two weeks, caused a surprisingly strong increase in food prices (2% mom) and consumer prices
(1.1% mom). Compared to the previous year, the consumer price index rose by 3.4% (central bank’s target:
2.5%, DBLA forecast: 2.3%). ---- The central government
disclosed a higher than expected budget surplus for
January. This resulted from clearly higher current income (8.5%, real) and a decrease in expenditures (7.1%, real). ---- An IMF delegation traveled to Lima last
week to give advise about the construction of a new
stand-by agreement.---- Finance Minister Kuczynski proposed a gradual lowering of the banks’ transaction tax
[email protected]
(from currently 0.15% to 0.10% by the end of the year,
0.08% in 2005 and 0.06% in 2006) ---- A persistent export boom (January: + 21.2% yoy) led to a 140 million
US$ trade surplus in January. The average of the last ten
years for this month is a deficit of US$ 100 million.
Venezuela
The strategy of president Chávez seems to work: The
election authority (CNE) only considered valid 1.83 million out of the 3.4 million signatures given in favor of the
referendum against Chávez. As 2.44 million valid signatures are needed, the opposition is lacking more than
600,000 signatures. There were violent clashes with the
military (Guardia Nacional) again, in which two people
died. ----- In protest against president Chávez' policies,
the Ambassador of Venezuela to the United Nations declared his resignation. ---- Consumer prices rose by
1.6% M/M in February (less than expected, as several
administered good prices were lowered).
Dresdner Bank Lateinamerika AG
Neuer Jungfernstieg 16
20354 Hamburg
Germany
Economics Dept.
Chief economist: Dr. Heinz Mewes
Tel.:
(+49 40) 3595 3494
Fax:
(+49 40) 3595 3497
E-Mail: [email protected]
http://www.dbla.com
Outlook: The CNE will announce further steps to be
taken after having talked to the opposition and international observers. It must be determined how and when
the referendum proponents who had their signatures
declared invalid can attempt to get their signatures recognized; the CNE period of 2 days is clearly not enough
(what may have been the exact reason for determining it
such short). There is little chance left that the referendum
will take place. ------ According to the Finance Ministry,
this week debt securities of US$ 1.5 bn will be issued
and partly used for swaps. Two thirds of the issue will be
denominated in VEB (4 to 7 years), one third will be denominated in US$ (180 days).
Abbreviations:
mom = month-on-month
qoq = quarter-on-quarter
yoy = year-on-year
s.a. = seasonally adjusted
n.s.a. = not seasonally adjusted
“Latin American Weekly Spotlight“ is published in addition to our “Latin American Spotlight” and our “Latin American Spotlight Update“. All three are published in English and in German.
The information contained in this issue has been carefully researched and examined by Dresdner Bank Lateinamerika AG or reliable third parties.But neither Dresdner Bank Lateinamerika AG
nor such third parties can assume any liability for the accuracy, completeness and up-to-datedness of this information.The authors’ opinions are not necessarily those of Dresdner Bank Lateinamerika. Statements do not constitute any offer or recommendation of certain investments, even if individual issuers and securities are mentioned. Information given in this issue is no substitute
for specific investment advice based on the situation of the individual investor.For personalized investment advice please contact your Dresdner Bank Lateinamerika branch.
page 3 of 4
[email protected]
#########
March 8, 2004
Latin American Weekly Spotlights
date
Exchange rate
Argentina
Brazil
Mexico
Chile
Colombia
Peru
Venezuela
5.3.2004
5.3.2004
8.3.2004
5.3.2004
5.3.2004
5.3.2004
5.3.2004
EMBI+ Spread
bps
Argentina
Brazil
Mexico
Colombia
Ecuador
Peru
Venezuela
8.3.2004
8.3.2004
8.3.2004
8.3.2004
8.3.2004
8.3.2004
8.3.2004
date
Benchmark interest rates
%
Argentina, Peso 7 days
Brazil Selic
Mexico Cetes 28 days
Chile 90 days, PDBC
Colombia Prime Rate
Peru Overnight
Venezuela Prime Rate
5.3.2004
5.3.2004
5.3.2004
4.3.2004
13.2.2004
4.3.2004
31.12.2003
Foreign exchange reserves
US$, bn
Argentina
Brazil
Mexico
Chile
Colombia
Peru
Venezuela (FEM&Gold incl.)
3.3.2004
4.3.2004
27.2.2004
31.1.2004
31.1.2004
31.12.2003
4.3.2004
Economic activity
GDP, %-chang
2003e
Argentina
8.4
Brazil
-0.2
Mexico
1.3
Chile
3.2
Colombia
3.6
Ecuador
2.4
Peru
4.0
Venezuela
-9.2
Public sector
last
one week
one month
one year
end 2003
ytd-change, %
end 2004f
2.93
2.87
10.95
593
2670
3.47
1918
2.92
2.90
10.97
586
2654
3.47
1918
2.93
2.93
11.12
587
2740
3.49
1918
3.14
3.52
11.05
757
2780
3.48
1598
2.93
2.89
11.23
593
2780
3.46
1598
0.0
0.8
2.6
0.0
4.1
-0.3
-16.7
3.1
3.1
11.9
600
2900
3.5
2400
last
one week
one month
one year
end 2003
ytd-change, bps
5953
534
187
417
738
341
721
5720
562
184
408
737
344
753
5824
532
201
443
766
348
634
6941
1119
314
658
1510
338
1368
5739
463
199
431
799
312
593
214
71
-12
-14
-61
29
128
last
one week
one month
one year
end 2003
%-points
end 2004f
1.75
16.27
6.16
1.45
#N/A N.A.
2.80
10.26
1.75
16.28
6.32
1.45
#N/A N.A.
2.80
15.96
1.75
16.31
6.46
1.63
11.17
2.80
18.12
8.13
26.29
9.26
2.80
11.89
3.70
37.77
1.81
16.33
6.01
2.29
11.32
2.50
37.77
-0.1
-0.1
0.1
-0.8
#WERT!
0.3
-27.5
4.0
14.0
6.5
2.8
8.0
2.6
15.0
ytd-change
date
date
last
one week
one month
one year
end 2003
ytd-change
end 2004f
15.0
52.5
69.8
16.0
11.24
10.2
22.7
15.0
52.9
68.9
#N/A N.A.
#N/A N.A.
#N/A N.A.
22.546
15.0
53.4
66.6
15.98
10.92
10.3
22.41
10.3
38.5
56.5
16.43
11.07
9.6
22.55
14.1
49.3
65.8
16.43
11.07
9.6
21.30
0.9
3.2
4.0
-0.4
0.2
0.6
1.4
17.0
52.3
65.0
16.0
10.5
10.9
22.4
2004f
2005f
Q303
Q403e
Q104f
Q204f
GDP 2003e, US$ bn
5.5
3.5
2.8
4.8
3.8
3.7
3.8
6.0
3.0
3.5
2.6
4.5
3.5
1.6
3.7
5.0
9.8
-1.5
0.6
3.0
4.2
10.2
-0.1
2.0
3.4
3.1
7.5
2.4
1.8
4.4
4.7
5.4
5.2
3.7
4.8
3.8
3.5
-7.1
2.8
3.3
2.9
26.3
2.3
3.4
125
492
614
72
77
27
61
82
Budget balance, % of GDP
Argentina
Brazil*
Mexico**
Chile***
Colombia
Peru
Venezuela
Public debt, % of GDP
Amortization, US$ bn
Gr. financing needs, US$ bn
2003e
2004f
2003e
2004f
2003e
2004f
2003e
2004f
1.1
-5.2
-0.6
-1.0
-3.0
-1.9
-3.6
1.6
-2.6
-0.3
0.2
-2.8
-1.8
-4.4
138
83
28
16
63
39
42
137
79
28
14
61
40
46
19.8
94.2
23
0.8
5.5
1.1
4.7
19.8
83.0
29
0.8
5.3
1.5
6.1
19.1
72.1
26
1.4
7.8
2.3
7.7
18.4
67.2
31
0.8
7.9
2.7
10.0
* Amortisations only federal debt, including short term debt
** Amortisations without Cetes
*** debt, amortization and financing needs: central government only
External Sector 2004f
External debt
% of exports s.t., % of total
Argentina
Brazil
Mexico
Chile
Colombia
Ecuador
Peru
Venezuela
364
233
83
148
246
223
238
122
24
12
28
18
11
14
10
6
Debt service
US$ bn
% of exports
32.8
64.0
33.3
6.9
9.1
2.6
3.6
5.0
83
68
17
23
56
34
28
18
Current account
% of GDP
US$ bn
4.4
0.2
-1.8
0.4
-1.7
-2.0
0.0
7.1
6.1
1.3
-11.0
0.3
-1.6
-0.6
0.0
6.3
Trade Balance
US$ bn
FDI (net)
US$ bn
Import cover
months
14.1
24.4
-7.8
4.4
0.1
0.2
1.7
11.6
0.0
13.0
14.0
1.5
2.0
1.2
1.1
1.0
6.1
6.6
3.5
6.3
6.2
1.4
9.4
10.0