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.
Category: Daily Brief
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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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Brazilian Bonds Gain
Brazil’s benchmark bond due in 2040 rose $1.10 to $114.20 after US Fed policy makers played down inflation fears and hinted they would continue raising interest rates at a measured pace. Yields on US 10-year Treasuries fell to a five-week low, helping lure investors to higher-yielding emerging market bonds. The extra yield investors demand to hold a Brazilian 10-year bond instead of a similar maturity Treasury has narrowed to 3.45 percentage points from 4.12 percentage points on March 28.
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León Opposes Chavez Plan
Venezuelan Central Bank director Armando León urged President Hugo Chávez to alter his plan to use foreign currency reserves for social spending, saying the government should set aside windfall oil exports before they’re converted into reserves. Chávez wants to take $7.5 billion in “excess reserves” from the Central Bank to spend on infrastructure and social programs targeting the poor. The Central Bank’s foreign reserves have almost tripled to $25.7 billion from $9.3 billion in March 2002.
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Chile: Copper Exports Up
Copper exports from Chile were up 16% year-on-year in March to $ 1.62 billion for a total $3.78 billion in the first quarter. Copper is Chile’s number one export and strong demand, especially from China and the United States, is helping the economy grow at a robust rate. China recently overtook the US and the leading importer of Chilean copper.
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New York Report
Brazilian Finance Minister Antonio Palocci was in a self-confident mood this week. In a swing through New York, he told investors, bankers and business leaders that “For years we talked about crises. Next year we will be talking about the continuation of long-term growth, we won’t be using the word ‘crisis’.”
Palocci said Brazil is better situated to handle volatility now that it has inflation in check, and slashed the government’s dollar-linked debt. Henrique Meirelles, Central Bank governor, defended his tough stance on inflation – he has pushed short-term interest rates to 19.25% – by underlining how lower inflation contributes to lower interest rates in the long term. Joaquim Levy, treasury secretary, echoed Meirelles when he underscored the importance of sustainable growth. “Reducing fiscal risk is task number one and reducing the size of our debt is the way of achieving that,” he said. Levy highlighted the rising level of domestic savings in Brazil as a “degree of protection that is very important if the external environment changes.” Levy pointed to the buoyancy in Brazil’s primary equity markets and the number of initial public offerings as evidence of the higher degree of confidence. Palocci and Levy said growth is starting to benefit lower-income groups through job creation and through improved access to the banking system.
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Chile: More Growth Predicted
Economists expect Chile’s GDP to grown 5.8% this year, according to a poll conducted by the country’s central bank. This figure is slightly less than the government’s projection of 6%. The central bank raised its lending rate to commercial banks 25 basis points last week to 3 percent in a move to control inflation. Chile continues to benefit from strong global demand for copper.
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OAS Vote Ends in Tie
The Organization of American States will begin the process of electing a new secretary-general from scratch again, starting with new nominations, following a fifth 17-17 tie vote Monday. A new vote is scheduled for May 2. Chile’s Interior Minister José Insulza tied with Ernesto Derbez, the former foreign minister of Mexico and a former World Bank official. Insulza had the support of most major South American countries, the Caribbean Community and Venezuela’s President Hugo Chávez.
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Citigroup Wins Victory
Citigroup won approval from Brazilian regulators to retake control of three phone companies, defeating a challenge by the former manager of its $728 million investment fund, Daniel Dantas. The decision clears one obstacle to Citigroup’s plans for removing Dantas and the executives he named while he managed the bank’s shares in Brasil Telecom, Brazil’s third-biggest telephone company, and two mobile phone companies. Dantas has been fighting to stay in control of Brasil Telecom since March 9, when he was fired by Citigroup.