Industrial output in Argentina rose 4.1% year-on-year in March and 6.1% in the first quarter. Growth was led by the automobile sector, whose output rose 30% in the quarter. All other sectors registered output growth except tobacco, which dropped 27% year-on-year.
Category: Daily Brief
Posted inDaily Brief
Brasil Telecom’s Profit Falls
Net profit at Brazil’s third largest network Brasil Telecom fell 38% in the first quarter to $17.6 million, although sales rose 18% to $957 million. The company has extended discounts of as much as 50% on wireless calling plans to compete with rivals Vivo, Telecom Italia Mobile and America Movil, which control most of the Brazilian market.
Posted inDaily Brief
Camargo Correa to Buy Loma Negra
Camargo Correa, Brazil’s fourth-biggest cement producer, said it has agreed to buy Loma Negra, Argentina’s largest cement company, for $1.03 billion in cash and assumed debt. Camargo didn’t provide more details about the deal. Loma Negra produces more than 3 million tons of cement per year in nine plants in Argentina and employs 1,900 people. The sale is subject to approval by Argentina’s National Commission for the Defense of Competition. This is the third time an iconic Argentine company has sold out to a Brazilian competitor after brewery Quilmes and oil producer Perez Companc sold out in 2002.
Posted inDaily Brief
Embratel’s Profit Rises
Brazilian long-distance carrier Embratel, controlled by Mexico’s telecoms giant Telmex, posted a net profit of $16.6 million for the first quarter, up from $1.8 million a year earlier. The company’s EBITDA totaled $178.4 million, up 4% year-on-year. Embratel attributed its positive results to a weaker US dollar and lower operating costs.
Posted inDaily Brief
Fear and Greed
The decline and fall of General Motors holds a certain grotesque fascination for onlookers. It posted $1.1 billion in first quarter losses and a credit rating downgrade to junk status looks inevitable. The decay of GM has two implications for Latin America.
The first is its impact on the high yield bond market. Most Latin American debt has a junk rating. Trouble in the high yield market will impact the market for Latin American bonds too. Investors will expect higher yields. The spread of Latin American bonds over US Treasuries has already risen above 400 basis points. A higher Fed Funds rate will keep the pressure on emerging market debt.
The second impact is the threat of what one New York investment banker calls the “disintermediation of Latin America.” GM can’t make cars profitably because it can’t compete with Asia. A decade ago, Latin America would be the principal beneficiary from the decline of American industry as rust belt factories moved south. But now, it is more likely that China will occupy the vacuum left by American industry. In the future, Latin America could be little more than a commodity exporter.
Both threats are manageable. Governments have strengthened their capital structures so the impact of a downturn in the bond market should be bearable. The demise of GM was largely expected and investors positioned themselves accordingly. The danger of industrial disintermediation is more serious. Governments need to spend more in education and infrastructure and throw open their economies to free trade. Companies need to invest more. Most Latin American countries have already set off down this path. But instead of walking they have to sprint.
Posted inDaily Brief
Fujimori Promises Return
Former Peruvian President Alberto Fujimori, who has been living in exile in Japan since 2000, said he is working to return to Peru and wants to run in the country’s presidential election next year. Fujimori is wanted in Peru for alleged crimes committed during his presidency, including involvement in the military’s killing of civilians and misappropriation of public funds. In February, Peru’s constitutional court upheld the Peruvian parliament’s 2001 resolution to ban Fujimori from public office for 10 years.
Posted inDaily Brief
Ipiranga Closes Refinery
Ipiranga, Brazil’s second-largest oil company, shut down an unprofitable refinery, saying it was unable to compete with state-owned Petrobras. Ipiranga has been hurt by the government’s efforts to control inflation by slowing fuel price increases charged by Petrobras, which controls 98% of the market in Brazil, even as crude oil prices have climbed to record highs. Petrobras has raised fuel prices 18% since January 2004, while crude oil prices have climbed more than 50%.
Posted inDaily Brief
Peasants Invade Finance Ministry
Landless peasants invaded the Brazil’s Finance Ministry headquarters Friday, occupying it for six hours to press the government to free up more money for land reform, investment and jobs. The protesters left after negotiating with the police. The peasant groups, which are usually allied with President Luiz Inacio Lula da Silva, say Palocci is holding up funds that should be used for land reform and settlement of rural families.
Posted inDaily Brief
Seixas-Correa Out of WTO Race
The World Trade Organization eliminated Brazil’s Luiz Felipe de Seixas Correa from the running to be its next director-general, saying that European Union candidate Pascal Lamy leads the race for the position. The other candidates are Uruguay’s Carlos Perez del Castillo and Mauritian Foreign Minister Jaya Cuttaree. The decision on who will succeed Supachai Panitchpakdi for the four-year post must be made by consensus before June.
Posted inDaily Brief
Snow Pressures Argentina
US Treasury Secretary John Snow said the US would “engage” Argentina to push for a settlement with holdout creditors that own about $20 billion in defaulted Argentine bonds. In February Argentina persuaded holders of $62 billion of a total $82 billion of defaulted bonds to exchange for new securities worth about 30 cents on the dollar.