Citigroup has appointed Jay Collins as head of its Public Sector Group, a division of the bank originally created for Stan Fischer, the former first deputy managing director of the International Monetary Fund. Fischer left Citigroup to become president of the Central Bank of Israel. Collins was previously a banker at Nikko-Citigroup’s investment banking division and was chief operating officer for Latin America.
Category: Daily Brief
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Venezuela Sells Bonds
Venezuela sold $1.6 billion of 20 year dollar-denominated bonds to domestic investors last week. President Hugo Chavez is tapping domestic banks and other investors who have excess cash because of two-year-old restrictions on dollar purchases in Venezuela. The government has sold $4.5 billion of 15-year, seven-year and six-month dollar bonds to local investors over the past two years, the first ever such sales in the domestic market.
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Brazil’s Inflation Rises
Brazil’s inflation rose .61 percent in March, up from .59 percent in February. The annual inflation rate rose to 7.54 percent, within 0.1 percentage point of a 14-month high. The central bank wants to bring inflation down to its target of 5.1 percent. It’s set to make its next decision on interest rates April 20.
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Lavagna Stands Firm
Argentina’s Economy Minister Roberto Lavagna rejected calls by the International Monetary Fund to hold further talks with bondholders who turned down the country’s debt restructuring offer. An IMF spokesman on April 8 said Argentina should “develop a realistic strategy” to resolve the demands of non-participating bondholders. Argentina earlier this year agreed to swap $62.3 billion in defaulted debt for new securities, which the country says ends its three-year default. About 20% of bondholders rejected terms and some are suing the government in US courts to demand full repayment.
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People
The Brazilian government has confirmed Elifas Gurgel do Amaral, 49, as president of Anatel, the federal telecom regulatory agency. Gurgel, an engineer and reserve army colonel, had taken over on an ad hoc basis in January. He is a close ally of Communications Minister Eunício Oliveira and member of the PMDB party, a member of the ruling coalition. The government picked Gurgel over senior career Anatel officials, despite opposition from Finance Minister Antonio Palocci and telecom operators concerned that nominally independent Anatel is losing its autonomy. Brazil has one of the largest and fastest-growing telecom markets in the developing world.
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Brazil: Industrial Output Growth Slows
Brazil’s industrial production expanded at the slowest pace in five months in February as rising interest rates curbed demand. Industrial output rose 4.4 percent from the year-earlier period after increasing 6 percent in January. The slowdown indicates the pace of economic growth is easing, which may take pressure off the central bank to keep boosting the benchmark lending rate. Central bankers have raised the benchmark overnight rate seven times since September, leaving it at a 17-month high of 19.25 percent.
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Mexican Inflation Accelerates
Mexican consumer prices rose 0.45% in March as higher international oil prices pushed up prices for gasoline, natural gas and jet fuel. The Central Bank also said prices for agricultural goods are rising. However, the core inflation rate, which excludes volatile energy and food prices, fell to 0.31% last month from 0.42% in February.
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Brazil: Power Rates to Increase
Brazil’s electricity regulator granted utilities bigger rate increases than analysts had forecast, raising concern that inflation may accelerate. Companhia Energética de Minas Gerais, the country’s largest combined power generator and distributor, can raise prices 21% while Companhia Paulista de Força e Luz, which serves São Paulo state, can boost rates 9%. The Central Bank is trying to lower inflation, which hit 7.4% in the 12 months through February.
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Mexico’s Backward Politics
There are many reasons to dislike Mexico City’s mayor Andrés López Obrador. He is a populist and a nationalist with retrograde ideas on economic policy. Amlo, as the mayor is known, believes in democracy but centralizes power in his own hands. He is personally honest, but surrounded himself with crooks. Yet to even consider barring the country’s most popular politician from running in next year’s presidential election shows how insecure Mexico’s ruling elite has become. His impeachment will begin Thursday on charges that he ignored a court order stopping the city from building a hospital access road on private land.
Mexico is Latin America’s biggest economy and one of just three in the region with an investment grade rating. But its political sophistication lags far behind Brazil, Colombia or Chile. The Revolutionary Institutional Party ruled Mexico for 71 years until the current conservative government of President Vicente Fox took office in 2000. Removing Amlo from the race would ensure the PRI’s return to power.
He has promised a campaign of civil disobedience if he is removed from office and prevented from running for president. Markets are in turmoil as well they might. Economic upheaval often coincides with government changes. The next government’s legitimacy would suffer if Amlo is barred from the election. Mexico is no banana republic, so it should stop behaving like one. It cannot hope to evolve into a modern and sophisticated state until its politicians grow up.
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Brazilian Bonds Rise
Brazilian bonds rose Tuesday on expectations that declining US bond yields will prompt investors to seek higher returns on riskier emerging-market debt. Brazil’s benchmark bond due in 2040 gained 55 cents to $111.25 as the yield on the benchmark 10-year US Treasury note held near a four-week low, making emerging market bonds more attractive. Brazil’s government owes creditors about $450 billion, making it the largest debtor in the developing world.