2018 February 24 by admin
With the US planning to lift “temporary protection status” for Northern Triangle El Salvador, Honduras and Nicaragua and Haiti migrants, remittances jumped 8% to $75 billion for the seventeen countries in the Inter-American Dialogue database last year. The pace was a multiple of 1% regional GDP growth and mirrored export increase. For Central America and the Caribbean 3.5% growth was due to a 15% remittance uptick, and the numbers reflected continued North American labor demand as well as dollar depreciation in Mexico, the Dominican Republic and Costa Rica. The violence-prone Triangle area has been in recession for a decade and families continue to head to the US border with apprehensions also declining. In Guatemala as an example 15% of the Western Highlands population left and transfers were up 17% according to the central bank. One-quarter of El Salvador’s citizens want to leave, surveys show, and in the Dominican Republic despite greater stability the number of transactions has jumped. Haitian emigration on the eighth anniversary of the record earthquake is toward Canada and South America as well, particularly to Brazil and Chile, which now hosts 100,000 in contrast with 5000 before the event. Mexican remittance growth was steady at 6%, but the weaker dollar may have prompted slightly lower volume. The individual principal amounts sent roughly reflect the 2016-17 aggregate changes, but deportation fears may be forcing more savings on hand in case of such action. The flows contribute in the range of 5-35% of GDP, and work abroad is often the main alternative to informal employment at home, with substandard pay and labor protection. In El Salvador and Haiti immediately targeted for status termination, they account for one-third of national income, and Haitian migrants with the TPS designation are 6% of the total, the Dialogue report notes. President Trump allegedly used an epithet to describe the poorest hemisphere country, as a 2017 survey of five US cities revealed mounting Latino anxiety over potential law enforcement crackdown or new taxation.
On average a dozen payments are transmitted annually and only one-tenth are through the internet. With a tax 40% polled would resort to informal services, and one-quarter plan to cut amounts. One-third of immigrants think they will be deported, and 60% do not expect home government support. Over half would be open to a fine to normalize status, and the same portion claimed jobs were harder to get with the Administration’s tougher despite the healthy US economy. 70% of respondents believe that the door will be shut altogether to legitimate refugees as the provisional shelter program also lapses. Honduras’ external bond was shaky as President Hernandez was inaugurated for a second term after a disputed election fostering street protests and a security force response with live ammunition. The opposition candidate, a sports broadcaster, cited computer manipulation of his apparent victory and national strikes were organized against “dictatorship” as the Organization for American States urged a rerun. Chile may harden its line against Haitians after President Pinera’s second term win, which upgraded the growth forecast to 3.5% on boosted private sector confidence and modest rate cuts alongside but he may turn previous social spending promises to rubble.
2017 November 29 by admin
Jamaican stocks were up almost 75 percent on the MSCI Frontier index and external bonds were reopened at record low 5-6 percent yields, as the IMF praised strong compliance under the second review of the 3-year $1.7 billion program. Fiscal year 2016-17 growth was 1.5 percent on second half mining, weather, and agricultural lag offset by “buoyant” construction and business outsourcing which reduced unemployment to 12 percent. Headline inflation was 4.5% in August, within the target zone, and the central bank dropped the benchmark rate 25 basis points to sustain double-digit credit expansion with bad loans now under 5 percent of the total. The current account gap rose to 2.5% of GDP with car and machinery imports on $2 billion in net international reserves and slight local dollar depreciation in the last quarter. In the financial sector securities dealer oversight tightened and competitive foreign exchange auctions were launched. The budget was roughly in balance with a 7 percent primary surplus amid slow progress on reducing public sector wages and “reshaping” government, according to the Fund’s October report. Pension reform is under preparation with Inter-American Development Bank help, and one-fifth of assets in two big state bodies, the Urban Development and Factories Corporations, could be divested though the stock exchange and direct tenders, with the plan a key trigger for the market rally. While all securities brokers observe a master retail agreement, legislation has not been finalized for a new bank resolution regime and pension fund portfolio guidelines for more domestic and international diversification. The central bank may need recapitalization, and foreign exchange exposure is a “sizable share” of financial institution balance sheets, equal to 10 percent of GDP for non-loan investment. Intermediaries often finance themselves through subsidiaries and are in turn tied to corporate conglomerates threatening wider spillover risks, the analysis cautioned.
A separate IMF piece of work soon to come out as a book examines the broader Caribbean distressed debt legacy over the past decade which peaked at 15-20 percent levels and have only marginally improved with lingering restructuring, sale and write-off obstacles. The highest loads are in the Eastern Caribbean in St. Kitts and Nevis and Dominica, while at the opposite end Trinidad and Tobago, with stocks ahead 7 percent, has less than a 5 percent burden. They contribute to economic drag, and courts take on average three years for insolvency cases. Valuation and registration are inadequate and social customs also weigh against disposal as property foreclosure is shunned. The research asked bank executives and government officials to rank the chief resolution impediments, and the former stressed economic, legal, collateral, and real estate conditions, while the latter cited poor creditor information and underwriting and the absence of formal impaired asset markets. The authors split the difference by urging clearer loss recognition rules and greater credit bureau use as in Jamaica in recent years. Judicial and bankruptcy frameworks should be revamped and beyond the Bahamas a pan-regional NPL market could be set up, building on OECS harmonization efforts in asset management and credit reporting to create “momentum” rather than creative accounting, they suggest.
2017 September 18 by admin
Central American bonds sold off as Guatemala’s president Morales, formerly a well-known comedian, ousted the UN’s anti-corruption monitor as it investigated his family and political party, and El Salvador grappled with a pension reform standoff accumulated over two decades with total liabilities now at $25 billion or 90 percent of GDP. Costa Rica also tripped up on new external debt authorization and fiscal outlays for court spending which may not get parliamentary backing ahead of February 2018 elections, as Panama’s President Varela, with record low 35 percent approval ratings, was embroiled in the Brazil construction company Odebrecht bribery scandal, with alleged payments to his campaign and for a metro project bid. Guatemala’s business community is at odds with popular support of the UN integrity body, which dates back decades to the “dirty war” period of army control, and street rallies have condemned the President’s “clown circus” in expelling the mission to possibly salvage his own immunity. Economic growth is around 3 percent, as criminal gangs and violence have spurred emigration once targeting the US, but with increased border enforcement often staying instead in Mexico. El Salvador’s government, with both the FMLN and ARENA parties holding a similar number of assembly seats, initially missed obligations in the mixed public-private system in April, as they argued about overdue contribution charge and retirement age changes. Ratings agency downgrades of at least one notch followed, with S&P assigning “selective default” until the amount was cleared in July on budget appropriation. The next big chunk due is in October and in the wake of court rulings urging compromise the ruling FMLN declared it would consider opposition proposals, which could include caps on monthly draws and private manager fees alongside higher taxes. Performance has lagged the EMBI sub-index as spreads jumped 50 basis points in recent months, with the pension clash and IMF program likelihood scuttled indefinitely especially in light of previous results.
Private pension pioneer Chile has also been debating overhaul to ensure basic floors but debate remains stuck with President Bachelet’s unpopularity and the race on to succeed her in early 2018, with previous incumbent and conservative party stalwart Pinera in the lead. Shares are ahead at roughly the MSCI index 25 percent average on copper price recovery, although this year’s growth is forecast at 1-1.5 percent on 2 percent inflation, which may allow a 25 basis point rate reduction at the next central bank meeting. However Finance Minister Valdes and other officials resigned with confidence ebbing toward the end of Bachelet’s second term amid a cabinet fight over a mining venture’s environmental fallout. Colombia in contrast has share gains only half that range, with growth around the same level and an interest rate cut already on higher than target 4.5 percent inflation. The gross debt burden is near 50 percent of GDP, 10 percent above the “BBB” median, and the latest fiscal package with a 3 percent deficit may not stave off a downgrade in advance of next March polls. The outlook is negative and the current account hole remains structural with oil exports off a bottom but still lackluster. Ex-guerilla FARC members entered congress after signing a peace pact and receiving demobilization funds, and the ELN may follow suit as lengthy civil war costs shift to their aftermath.
2017 June 24 by admin
Cuban asset prices sank as the Trump administration announced partial reversal of bilateral travel and commercial openings and harshly criticized authoritarian human rights practices overlooked in other regions. The tougher line fulfills a presidential campaign pledge to Miami’s exile community cheering the changes, while business lobbies like the US Chamber of Commerce were upset that global competitors would have easier access, as their countries long ago approved individual tourism and joint ventures under military control that will now be banned after the Treasury Department issues guidelines. Airlines had reduced or severed routes before the decision, as visitor infrastructure from internet availability to hotel occupancy frustrated demand with renewed diplomatic relations two years ago. However big cruise lines with expansion plans through end-decade may preserve their strategy as they cater to groups with accommodations in place, but disappointments also mounted with the lack of credit card acceptance, dual exchange rate, and poor organized visit experience for foreigners. Starwood was the only US operator to offer a resort as an alternative to state-run hotels, as the Brookings Institute projection of $10 billion in hospitality earnings by 2030, twice current imports, appeared remote without underlying tax and administrative shifts as well promoting more private sector investment. Nearby Haiti, with the hemisphere’s lowest per capita income, has been considered a more promising destination, and new President Moise will encourage agricultural and industry hubs with reliable electricity supply around northern beach locations in his economic strategy under an IMF staff-monitored program.
In the Dominican Republic in contrast tourism revenue was up 10 percent last year to over $6.5 billion, almost one-tenth of output, with 2017 set to deliver another record. European visitors now account for one-quarter of the total, with North Americans still dominant at two-thirds. Remittances in turn, mainly from the US, swelled near 15 percent as Q1 economic growth continued at a 5 percent clip as the regional leader. A primary budget surplus has helped halve the deficit to 2 percent of GDP, and the current account gap is the same with higher gold exports and slashed oil imports, with the difference covered by mining and hotel FDI. Costa Rica is close with 4 percent growth heading into the 2018 election season, with inflation within the 3 percent target range. Fiscal reform has stumbled on political opposition with public debt hitting 60 percent of GDP, with the external portion rising faster on international bond issuance. The 10 percent trade deficit likewise persists, and the central bank has warned capital goods demand may not translate quickly into productive capacity. El Salvador is caught in a low growth twin deficit trap with a $600 million global bond in February used to repay local Treasury bills, as pension fund obligations have not been met amid government infighting. Panama alone has maintained its investment grade as Chinese diplomatic recognition was shifted from Taiwan to Beijing in advance of its president’s White House trip. With expansion Canal toll earnings jumped 20 percent in the first quarter, and re-exports through the Colon Free zone have also picked up to support 5 percent growth. A fiscal responsibility law has enabled sovereign wealth fund transfer, and the Panama papers tax evasion saga has faded although reputation isolation lingers.
2017 February 13 by admin
After a yearlong stretch of election delays and reruns, Haiti President Moise, an agricultural entrepreneur touted by his predecessor, took the oath of office in February to an audience of dignitaries from main donor countries. The IMF at the same time released a report on its $40 million rapid credit facility activated in the wake of Hurricane Matthew which showed flat growth and an inflation spike to 15 percent at the end of 2016 with continued double-digit currency depreciation. A joint World Bank-IDB task force estimated damage at $2 billion or one-quarter of GDP. Before that disaster drought and reduced external assistance through Venezuela’s Petrocaribe program had combined with extended political turmoil to deter foreign investment and increase dollarization. Reconstruction will widen the budget gap to 5 percent of GDP, and the central bank is to refrain from direct financing assuming bilateral and multilateral aid pledges are delivered. Garment sector exports, 90 percent of the total, remained intact and the diaspora raised remittances after the storm, but the current account deficit will exceed 10 percent of GDP. Growth may recover to 2 percent by fiscal year close with rebuilding activity, and foreign reserves may dip slightly but would still cover over four months imports. However the setback will elevate public debt to the high distress risk category, and the new government should aim to reprise economic management targets missed under the last full Fund arrangement, including on arrears accumulation and state electricity company overhaul. The central bank and finance ministry seem committed to tighter fiscal and monetary policies and have hiked bank reserve requirements to slash credit expansion to 5 percent, but internal capacity and safeguards remain weak, and future engagement will depend on stronger teams in place, the paper suggested.
Venezuela’s self-generated economic meltdown worsened last year with estimates of 20 percent output shrinkage and 800 percent inflation, as Vatican-mediated talks between the Maduro regime and political opposition reached an impasse over prisoner release and parliamentary power revival. Free trade bloc Mercosur, where Argentina-Brazil ties have warmed under new leadership, ousted the country for anti-democratic behavior and the Washington-based Organization of American States may also suspend membership. Families of jailed leaders have come to the US in a bid to influence the Trump Administration to harden the bilateral stance and decry the overall rule of law absence. The President declared 2017 as “new economic history” by naming a ruling party socialist deputy to head the central bank who has advocated exchange rate unification and other changes. However he will face continued control preferences among the President’s close advisors, so that adjustments are likely to be minor especially with the recent doubling of oil prices. Available reserves are around half annual $20 billion import needs and external debt service remains important after state fuel company PDVSA’s short-term maturities were extended and it lost foreign partners and may no longer have available cash for public social spending. Both direct and portfolio investment have dried up with even China cutting its losses after a reported $50 billion in credit for hydrocarbon deals the past decade may have been washed away in a default storm.
2016 December 27 by admin
As Hurricane Matthew devastation lingered in a large swathe of the island outside Port au Prince, Haiti’s chronically delayed presidential election was finally held with just 20 percent turnout, but a winning 55 percent voting share by the former incumbent’s designated successor, banana farmer J. Moise. The second place candidate Celestin was 35 points behind and again alleged widespread fraud that will be investigated in a partial result audit. His victory was slimmer in the original 2015 contest that was annulled after violent protests and rigging suspicions, and the opposition Lavalas party has indicated a willingness to cooperate after such a prolonged confrontation in part to rebuild after the latest natural disaster, which has overwhelmed UN relief pledges. The IMF offered a no-interest $40 million emergency facility and estimated damage at one-fifth of GDP. The 2010 earthquake which leveled the capital wreaked far greater destruction calculated at $8 billion but also a commensurate aid response, although the government and partners jointly admit to ineffective coordination that has left thousands still living in makeshift tent cities and a 60 percent poverty rate in the hemisphere’s poorest country. One-fifth the budget still comes from international assistance and the $2 billion remittance lifeline is double exports and FDI together. Officials set up a new centralized reconstruction agency to guide efforts into the next administration, and President-elect Moise intends to prioritize agriculture, corruption and climate change. He was previously head of the local chamber of commerce, and was favored by influential families with large industrial and financial holdings in the race while campaigning as a political novice outsider. His farming enterprise had close ties to former President Martelly, but unlike other allies he avoided scandal taint and criminal gang rivalry. His experience with foreign investors was limited but over the past year and a half speeches seemed to extend promotional efforts which may be smaller-scale than showpieces like the US and Inter-American Development Bank-backed Caracol free trade park, which failed to generate promised employment and infrastructure.
Cuba and Venezuela have been allies, but their influence has waned with their own economic setbacks and leadership transitions. Fidel Castro’s death at 90 highlighted the grim competitive and growth outlook after years of incremental reforms pushing hundreds of thousands to private sector small ventures, while keeping the main commodities and tourism mainstays under comprehensive state control. Exchange rate unification does not feature on the near-term agenda despite urgent foreign business pleas, and the US embargo may now remain in place under President Trump, who assigned a staunch advocate to his Treasury Department planning team. Cuban secondary debt and the closed-end Herzfeld fund prices jumped after the leader’s passing was announced but soon settled at previous ranges with marginal GDP growth forecast this year and likely economic and diplomatic impasses ahead, aggravated by the withdrawal of Caracas’ support as President Maduro’s regime clings to survival. He removed 100 bolivar notes from circulation in an effort to curb smuggling and hyperinflation estimated at 500 percent, on 10 percent output contraction and a 25 percent of GDP fiscal deficit. The state oil company completed a short-term bond swap to avoid default and had to sweeten initial terms as the government also relaxed bank reserve requirements for allocation to strengthen shelter.
2016 November 30 by admin
Central American credits joined Mexico in absorbing the brunt of post-Trump election repositioning with their own close trade and remittance ties through the CAFTA agreement, coupled with fiscal and political doubts as investors prepare for tougher commodity and tourism terms. The Dominican Republic remains in favor as El Salvador is shunned, with Costa Rica and Panama under increased skepticism. In the sub-region only Honduras is under a formal IMF program, but that protection is unable to stoke confidence in the face of harsher US import and immigration restrictions in the next administration. The President-elect has vowed immediate deportations of millions of illegal workers starting with convicted criminals, and wholesale renegotiation of hemispheric commercial accords since original ratification decades ago. El Salvador’s 2 percent growth is the area’s slowest as mining hopes were dashed, and the 3.5 percent of GDP fiscal deficit is to be funded by $550 million in external bond issuance following delayed congressional approval. Half the 65 percent of GDP public debt is domestic, and $1 billion in short-term Treasury bill flotation the latest cycle was a record. The trade shortfall has been roughly offset by remittances above 15 percent of output, but annual 5 percent growth could halve under new Washington curbs, also expected to slash anti-poverty and economic reform foreign aid which fell under a special program during the Obama years. The Dominican Republic’s 6 percent expansion pace is triple its neighbor’s, with gold exports and domestic financial service and retail demand notable fresh drivers. Inflation is half the 4 percent target, but could creep up in 2017 with higher energy costs. The current account gap is modest at 1.5 percent of GDP, as visitor earnings jumped 10 percent to $5 billion through September, with 15 percent from South American vacationers. Remittance flows are the number three foreign exchange earner, and finance local small business as well as basic household needs according to studies, so a northern crackdown could quickly translate into depressed consumer and corporate sentiment.
Costa Rica’s economy has advanced 4 percent with telecoms and transport sector strength, on negligible 1 percent inflation. The 6.5 percent of GDP budget hole continues to defy consolidation efforts pledged by the government in its core platform, but politically untenable with its weak parliamentary influence. Currently 95 percent of spending comes from legal and constitutional mandates that remain sacrosanct and require annual double-digit borrowing increases. The large trade deficit is also structural and despite high-tech hub ambitions, tourism and related industries are still the competitive mainstays, with potential employers criticizing the local skills base. Panama is growing a healthy 6 percent and budget retrenchment has progressed under a responsibility law, with the investment-grade sovereign rating intact. However inflation is approaching the 4 percent target and infrastructure development may have peaked with completion of the Canal widening project. Revenue was projected to rebound 15 percent next year before the prospect of trade conflict, on the heels of the Panama papers anti-corruption and money laundering setbacks. The Trump team backs a push to repatriating offshore funds parked for tax and regulatory advantages to spur a cash migration wave for its own public works schemes, according to bankers bewildered by the successive sagas.
2016 October 20 by admin
Venezuela’s state oil company PDVSA came up empty in initial efforts to attain minimal 50 percent debt swap acceptance, despite higher yields in exchange for maturity extension, as creditors questioned the reliability of US Citgo gas station collateral again pledged to close the deal after issuance last year. Arbitration claims have also been filed against the assets serving to block agreement, as equity holders are likewise disturbed they would rank behind creditors in the new arrangement. Prices had lurched to 80 cents to the dollar before the failure, which may prompt further term enhancement for the $5 billion operation. At a ceremony marking Colombia’s peace accord with FARC rebels later rejected by referendum, President Maduro met with US Secretary of State Kerry but continued to foreclose the possibility of turning to the IMF or other “imperialist” institutions for help. He is in office until 2019, and the captive courts have not authorized signatures for a recall vote and stripped the opposition party-dominated parliament of budget powers. The private sector formal foreign exchange rate was devalued, but dollars are still scarce, as 800 percent inflation is reported and staple goods are only available on the black market aided by reopening of neighbor borders. The President’s approval rating is just 20 percent, and the cabinet is replete with military officers without appetite for takeover or large scale arrests so far while keeping their distance from leading civilians. Groups continue to return from advising and staffing the security forces in Cuba, where normalization with Washington took another step with easing of personal and business travel and banking and export rules within the confines of the decades-old embargo. President Obama before leaving the post released a broad policy directive designed to establish a bilateral relations foundation into the next administration. It cited increased private sector ties in agriculture, health and technology as a theme, and regulatory progress eliminating Havana’s penalties on dollar conversion. The dual exchange rate system and state monopolies persist, and the government remains in default on pre-revolution debt despite relief granted by other bilateral creditors. It has not applied for readmission to the Bretton Woods institutions, although Cuban economists have participated in research and events incorporated in the work agenda.
The island hosted Colombia’s guerilla negotiations, as the demobilization pact was defeated by a whisker in October’s plebiscite. Stakeholders went back to the table to forge compromise provisions that could win endorsement, but the political jolt was another setback for the sovereign rating already on negative outlook. A truckers strike could gap GDP growth at 2 percent, and inflation is far from the 3 percent target with the benchmark interest rate near 8 percent. President Santos, who got the Nobel peace prize for his effort, had planned to pivot to fiscal reform passage post-referendum with the deficit at 4 percent of GDP. Personal income and consumption tax increases are in the mix, along with simplification and loophole closure, but the working coalition in Congress has turned shakier. Andean observers betting on changes are now looking to Peru, where equities are outperforming as the MSCI Latin America winner and main tax goal is to collect informal money escaping the system to date but also denying citizens their social service fill.
2016 June 12 by admin
Mexican shares were flat through May as President Pena Nieto’s popular approval rating dipped to 30 percent halfway through his term, with both growth and inflation stuck in the 2-3 percent range. The “three for three” reform on public official wealth disclosure and conflict of interest has yet to be adopted in Congress with lukewarm support despite civic group activism, after the President’s family was involved in questionable real estate deals. The ruling PRI is set for a thrashing in state elections reflecting political and economic unease and continued law and order breakdown, with student killings still unresolved and a top soccer player reportedly kidnapped by dug gangs. Retail sales decline follows the lowest consumer sentiment reading in two years, and the central bank is again poised to raise interest rates with the US Federal Reserve with the peso drifting at 18/dollar. The current account deficit persist around 3 percent of GDP, and foreign portfolio continues to outrun direct investment to cover the gap. The IMF estimated FDI inflows at just 1.5 percent of output, one-third Brazil’s fraction, with a negligible impetus from Pemex’s private opening on slack oil prices. A new leftist party founded by previous presidential contender Lopez Obrador is expected to make headway in provincial pools and demands resumed state control in industry and finance. The exchange rate intervention formula could again come under review amid a strong showing as the recent hands-off stance hikes the cost of imported consumer goods and manufacturing inputs. Global investors starting to focus on the US presidential race also express worry on about the vituperative rhetoric and border wall building promise of Republican standard-bearer Donald Trump, and question the Democratic candidates’ immigration and foreign policy positions as well particularly the absence of free-trade agreement backing. The TPP would update the two-decade old NAFTA and subsequent amendments, but is unlikely to see a congressional vote before the Obama term ends, according to experts.
Argentina was up over 10 percent on the MSCI frontier index, as the sponsor began to study the possibility of core universe return as part of the Macri government’s medium-term reintegration path. However after a giant external debt market the central bank reacted to peso appreciation by suspending overseas purchase of local instruments as it also cut the local benchmark rate toward 35 percent. Following a high court ruling around $5 billion in public pension fund arrears must be met, with the immediate catalyst of a tax amnesty due to mobilize a multiple of that amount, according to projections under more flexible rules than previous attempts. President Macri absorbed a setback in Congress after his early momentum when he resorted to vetoing a no-layoff civil servant bill promoted by the opposition Peronist party. His predecessor Christina Fernandez is under investigation for suspicious hotel deals and central bank currency transactions under the former control regime. Recession will linger this year with the fiscal deficit at 7 percent of GDP, the trade surplus eroding, and both inflation and poverty rates expected to stabilize at 30 percent. Another round of elections is scheduled in 2017, and President Macri and his technocrat team must shed their elite image if his political grouping has any hope of winning legislative majority and sealing the “change” slogan.
2016 May 18 by admin
Ecuador bonds slumped after an almost 8 scale temblor and aftershock killed hundreds and the government put the rebuilding tab at $ 3 billion or 3 percent of GDP, spurring rumors that it may turn to the IMF for long-term support after other official sources came up short. President Correa had hinted at another external debt issue before the disaster, but investors were demanding near double-digit yields with oil export-related recession predicted this year and the fiscal deficit goal already raised to 3.5 percent of GDP on an assumed $25/barrel price. A $1 billion compensation payment to Occidental Petroleum increased the burden and was offset by initial spending cuts and new taxes, but other contractor arrears are estimated at $2 billion. China extended a $900 million loan and was on track to offer several billion more before the earthquake according to officials. The Inter-American Development Bank and other providers immediately chipped in $650 million to repair damage, and corporate income tax and VAT rates were hiked alongside temporary earnings and wealth levies, the latter applying to assets over $1 million. The President indicated possible sale of state holdings and bond market return for additional funding, but with elections a year away as he prepares to position a successor a full IMF program would seem politically remote although limited emergency facilities could be tapped. He is also touting friendlier joint venture arrangements to secure immediate cash as with a Schlumberger project in 2015, and downplaying the virtual currency alternative to the dollar enshrined in recent law. However the once united sub-regional socialist bloc has splintered with crises and fresh free market leadership in Argentina and Venezuela, and Bolivia’s resounding rejection of another term for President Morales despite opinion approval above 50 percent. His party has been embroiled in scandals, and economic growth may slip to 3 percent this year on hydrocarbons and mining industry decline. The trade surplus disappeared and reserves dropped to $12.5 billion in March as the central bank defended the overvalued currency. A $6 billion public investment campaign will absorb the slack, but the fiscal gap could further widen after it approached 7 percent of GDP in 2015. The IMF’s latest Article IV report recommended exchange rate flexibility to cushion internal and external imbalances, and now that the election referendum is over Finance and Planning Ministry technocrats may consider changes.
Paraguay’s sovereign rating is at the same “BB” with a former business executive as president committed to diversification from agricultural reliance and bureaucratic reduction. Financial services grew over 12 percent last year with such encouragement as the trade surplus hit 1.5 percent of GDP in January-February. Soybean sales continue soft after a 30 percent plunge in 2015, but energy import savings are steady. Infrastructure building is expected to spur capital goods demand and weakness in Brazil, a main commercial partner, will erode exports. Inflation may outstrip output growth this year at 5 percent due to higher food and education costs as industries like hospitality take off to supplement the longstanding beef diet.