Default Risk Tumbles Most in World in Fernandez Economy: Argentina Credit

by Ben Bain and Drew Benson for Bloomberg, September 6th, 2010.

Argentina’s bond risk is falling the fastest of any country as South America’s second-biggest economy heads toward its largest expansion since 1992, increasing the government’s ability to pay its debt.

The cost of protecting Argentine debt against non-payment for five years with credit-default swaps plunged 274 basis points, or 2.74 percentage points, to 854 from June 3 through last week, the biggest decline worldwide for the past three months, according to CMA DataVision.

Argentina’s credit-default swaps became cheaper as an economic expansion that President Cristina Fernandez de Kirchner said last month quickened to a 9 percent annual rate increased tax revenue. They may tumble as much as 200 basis points more by the end of the year, said Nick Chamie, global head of emerging- markets research in Toronto at RBC Capital Markets, a unit of Canada’s biggest bank.

“All in all, it’s good news for Argentina with regards to economic prospects and overall risk premiums,” Chamie said. (continue reading… )

Brazilian Economy Expands Robustly

by Matthew Cowley & Jeff Fick for The Wall Street Journal, September 4th, 2010.

Brazil‘s economy maintained its torrid pace of growth in the second quarter, continuing a boom in Latin America’s largest economy despite a series of interest rate hikes.

Growth surpassed most expectations, and will likely lead economists to raise their forecasts for 2010 as a whole. But a debate rages over the prospects in 2011, with some economists arguing the government should be applying the breaks now, both through lower spending and higher interest rates, to avoid overheating next year.

Gross domestic product expanded 8.8% in the second quarter from a year ago, the Brazilian statistics agency, or IBGE, said Friday. That was above the median forecast of 7.9% from a survey of 15 economists by Dow Jones Newswires.

Finance Minister Guido Mantega said the first half performance means the economy will grow by at least 7% this year, which “would represent the best performance in 24 years, and without inflation.” Of the world’s major economies, only China is doing better, said Mr. Mantega.

But many economists believe growth will be better than the government’s forecast. (continue reading… )

Can Chile Recapture’Golden Decade’?

by Latin American Chronicle, September 2nd, 2010.

Can Chile recapture the growth of its ‘golden decade’?

Chile’s economy appears to have held up well against significant recent headwinds, and some private-sector observers go so far as to suggest that growth rates similar to those of the “Golden Decade” may be realized again.

Despite the earthquake and subsequent tsunami in February, job losses and the closing of numerous small businesses last year because of the global financial crisis, Chile was the top destination for foreign direct investment in Latin America during the first quarter of 2010. During the recent World Conference for Trade and Development, the United Nations reported that Chile, with $5.7 billion in foreign direct investment, had outpaced Brazil ($5.6 billion) and Mexico ($4.3 billion) among favorite locations for investors in the first quarter.

What’s more, the Santiago Chamber of Commerce forecasts that Chile’s foreign capital flow this year could reach $15 billion to $20 billion. This is reflected in the dizzying pace in the service sector, communications, mining and retail sales resulting from higher spending on public and private reconstruction initiatives, and meaningful expansion in internal demand, according to a press note from the country’s Central Bank. (continue reading… )

South America could be a good friend, but we ignore it

by Julian Glover for The Guardian UK, September 2nd, 2010.

Development and democracy flourish on the continent, and trade with it would help the UK to escape recession.

Achacachi is a rough little town in Bolivia, one long rutted street lined with greasy beer halls and soup shops skilled at refuelling the poor in a hurry. At dawn, in the cold, it leaves few impressions: a pit stop for country buses in the Aymara tribal heartland of stubborn Andean isolationism, a town notorious for its political temper, given to blocking the road with boulders when it does not get its way.

“Evo mi Presidente“, reads the graffiti on Achacachi’s dusty walls, for if Evo Morales’s attempted revolution means anything, it is in places like this. The country has fallen into the hands of its people, the latest and still mostly optimistic participants in Latin America’s saga of leftist disappointments. Buying a round of coffee – thick black syrup in a tin mug, diluted with lukewarm water – I offered a 10 boliviano note, about 90p, and asked the stall-holder to keep the difference. “We don’t need it now,” she said, proudly but without malice, handing me back my change. “The people of Venezuela are helping us.”

It’s decent of her to hope, though the only obvious sign of anything changing in Achacachi is a new football stadium, one of many Morales has built in his name. The first indigenous leader in a country whose people have always been exploited, Morales has the misfortune to play a bit part in Latin America’s endless looped film of student heroes: Castro, Che, Allende, the Sandinistas, and now Chávez. He, at least, is the genuine article. The thing such leaders have in common is a defiant self-reliance, characteristic of Latin America, a reaction against the superpower to the north and a consequence of our own indifference. (continue reading… )

Mexico: The new old guard

by The Economist, September 2nd, 2010.

How ten years in power have changed the former opposition leaders.

Skulking around Morelia after dark, a 17-year-old Agustín Torres would wait until midnight before sticking up posters for the National Action Party (PAN). Any earlier, and he risked being photographed by authorities monitoring subversives in the western city. “I wanted to be against the system, so I joined the PAN,” says Mr Torres, now 33 and a congressman.

These days, the PAN is part of the system. After 61 years in opposition, it wrested the presidency from the hegemonic Institutional Revolutionary Party (PRI) in 2000 and held it in 2006. Its strengths reflect its legacy as the protagonist of Mexico’s transition to multi-party democracy. Unlike the big-tent PRI, the conservative PAN knows what it stands for. “Whereas the PRI is driven by power, the PAN tends to be driven by ideology,” says Luis Rubio, the head of CIDAC, a think-tank. And unlike the fractious Party of the Democratic Revolution (PRD), its leftist counterpart, the PAN runs a slick operation. It even boasts an international reach, winning 57% of the expatriate vote in 2006. (continue reading… )