Goldman Sachs expects Peru’s central bank to maintain its policy rate at 3.0% today, in line with market consensus. Goldman says in a report that consumer prices fell 0.14% in October, the second month in a row Peru experienced negative inflation. Goldman sees the 3.0% rate as stimulative, but not exceptionally so. Lacking inflationary pressure, the central bank will remain comfortable at this level for sometime, Goldman says, with a hike not coming until the first quarter of 2011.
Category: Economy & Policy
Posted inDaily Brief
Mexico Best For Doing Business: WBank
Mexico is the best place in LatAm for companies, according to the World Bank’s Doing Business 2011 survey. Despite worsening drug-related crime, Mexico has moved up 6 places in the global ranking to 35 in the study, released last week. “The region’s top-ranked economy, Mexico launched an online one-stop shop for initiating business registration, improved construction permitting, and increased options for online payment of taxes,” says the multilateral. Twelve of 20 economies in LatAm have reformed business regulation to expand opportunity for local firms in the past year, according to the World Bank. Peru improved business regulation the most in the region, moving up 10 places in the global ranking on the overall ease of doing business, to 36th out of 183 economies. Peru was also among the world’s 10 most active economies, improving in 4 of 9 areas covered by the report. It created an online one-stop shop for business registration, improving the ease of business start-up more than any other economy. Peru also streamlined permits for construction, introduced fast-track procedures at the land registry, and eased trade with a new Web-based electronic data interchange system, the World Bank adds. “Economies in Latin America are improving regulation with faster, transparent, electronic systems,” says the multilateral. Chile moved up to 43 from 53 in the global ranking, while Grenada did best in the Caribbean, it adds. Doing Business analyzes regulations that apply to an economy’s businesses during their life cycle, including start-up and operations, trading across borders, paying taxes, and closing a business. It does not measure security, macroeconomic stability, corruption, skill level, or the strength of financial systems.
Posted inDaily Brief
Brazil Elections Seen Credit Neutral
Brazil’s election results are broadly credit neutral for its sovereign rating, says Fitch. The ratings agency says the Rousseff administration is likely to continue Brazil’s macro policy framework. However, Fitch questions whether Rousseff will take measures to make the economy stronger while addressing some of its fiscal weaknesses. It adds that the rating could benefit from continued sound management of the economy, further strengthening of the balance sheet and fiscal improvement. Fitch also says the rating could be upgraded if Rousseff improves the structure of public finances. Much-needed policies to encourage investment and growth could also lead to an upgrade.
Posted inDaily Brief
Daimler Mexico to Issue Domestic Bond
Daimler Mexico, the car manufacturer, is planning to issue up to MXP1bn 3-year bonds which investors expect to price at 40bp over TIIE next week. The bonds are rated AAA on a national scale, with Bancomer and Banamex leading the transaction. Proceeds will be used for working capital.
Posted inDaily Brief
Mexico Debt Pipeline Refills
NR Finance, the Mexican subsidiary of the financing arm of Nissan-Renault, is coming to market November 17 for up to MXP3bn, via Banamex and Scotia. The 3-year bonds pay a spread over TIIE and are rated AA+ on a national scale. The following week, car leasing company Unifin will issue up to MXP400m in 5-year bonds that will pay a spread over TIIE in a deal lead by Ixe. The bonds are rated AAA on a national scale. Proceeds will be used to repay debt and working capital. Scotiabank and Banco Interacciones are also expected to come to the bond market at the end of November, according to regulatory filings. Interacciones is looking to issue up to MXP1.5bn in 3-year bonds by the end of the month. The notes are rated Ba1/A1.mx by Moody’s. Scotia is re-opening a 5-year bond, issued in October for MXP2.312bn 5-year at TIIE+40bp. It is looking to add MXP830m at the same spread to pay for general corporate purposes, says a banker at Scotia. Elsewhere, CFE will issue a dual tranche, 4-year floating and 10-year fixed the week after next. Investors expect the Mexican electricity authority to price at 30bp over TIIE for the 4-year and 120bp-130bp over Mbonos for the fixed tranche.
Posted inDaily Brief
Mexico Rates Seen Steady Until 2012
RBC does not expect Banxico to tighten Mexico’s monetary policy rate, currently at 4.50%, until late 2012. “Given uncertainty surrounding whether the large amount of capital flows into EM is temporary or permanent, Banxico is likely to proceed very cautiously in its future decisions and to gauge potential market reactions to these moves,” RBC says. It adds that when Banxico does eventually tighten, it will do so gradually, in 25bp increments. Meanwhile, Morgan Stanley says Banxico could resort to chopping the rate this year. “We suspect that the central bank isn’t ready to ease, though we believe that the next move is more likely to be a rate cut rather than a hike . . . and thus we are removing any tightening from our forecast horizon,” it says.
Posted inDaily Brief
Dilma Win Fails to Stir Brazil Markets
With the markets largely having anticipated Dilma Rousseff’s victory, there was limited movement in assets following the Brazilian presidential election Sunday. Brazil’s dollar curve barely moved Monday, say traders, with the 2019 bonds up 0.25 points to 118.85-119.25. The EMBI Brazil index shed 7bp, according to a report from RBC, and the Bovespa gained 1.2%. “Solid gains in congress and among state governorships will ensure Rousseff will have a strong power-base to continue with Lula’s policies, and the expectation is that no material economic policy shift is likely,” RBC says. It expects that whoever is named finance minister will outline some sort of 2011 fiscal adjustment plan to reassure the markets. Likely candidates are Antonio Palocci and Luciano Coutinho, both seen as acceptable by the markets. Rousseff is unlikely to face as favorable external conditions as Lula enjoyed during most of his tenure, RBS notes, while she also lacks Lula’s popularity. Ironically, it says, these factors “could translate into good news, as Rousseff will need to face the challenges to guarantee sustainable growth, which requires a resumption of reforms.”
Posted inMagazine
M&A: Asia’s Resource Play
Mexican telecoms and Brazilian oil pump up the deal volume numbers claimed by advisors, but flow is still up year-on-year, even after stripping out distorting Telmex and Petrobras trades.
Posted inMagazine
Brazilian Boutique Investment Banks Get Squeezed
The crop of boutiques that sprang up from the bulge bracket wreckage faces fresh competition. They will need relationships, international connections and a proper structure to survive.
Posted inMagazine
The Bank of the Year
Brazil’s government-controlled lender is using a natural size advantage to pursue niches it does not already dominate. Careful international expansion is next for Banco do Brasil.