Transcript power point slides

Economic & Country Risk Review
For the ICTF’s Global Credit Professionals Symposium
Chicago, April 16, 2013
By H. Belcsak, President, S.J. Rundt & Associates, Inc.
Megatrends
Nuclear Proliferation
Islamic Terrorism
BRICS Unity?
The Money Machine
LOGO
Nuclear Proliferation
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The threat from North Korea
Dangers in Pakistan
Iran in the background
Sunni-Shiite confrontation
Islamic Terrorism
• Al Qaeda metastasized
• A world-wide net
• Aqab, Aqim, Al-Shabaab, Boko
Haram
• From local terrorism to attacks
abroad
• Can these movements be
defatted?
BRICS Unity?
• The Durban meeting
• Brazil-China accord ($30 billion)
• $100 billion currency fund (BoP or
currency crisis) 41-18-5
• Development bank
• 43% of world population, $4.4 trillion in
reserves, $282 billion trade, $263 billion
FDI
• But…How will the currency fund operate?
How will bank be funded? Pay-in for
bank? China’s role? More differences
than similarities
The Money Machine
• Japan’s unprecedented
experiment
• Fed, BofE, ECB
• Asset inflation
• Currency wars
• Protectionism
• No exit plans
• Potentially grave
consequences down the road
Our Backyard
Latin America
LOGO
General
• Two policy trends persist
• Brazil-style approach is
winning, moderate inflation
• Change of leadership in
Venezuela will not make much
difference
• Lessened upward pressure on
currencies
• Difficulty with economic unions
such as Mercosur
Argentina
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Deal for bond holdouts?
Pressure on peso
Devaluation inevitable
Kirchner can still win, but
challenges from within Partido
Justicialista
• Price and pay freezes
• Fed-up farmers
Chile
• Slight slowdown (4.8% for
2013)
• Poor outlook for copper
• Diversified economy
• Inflation just 1.5%
• Interest rates relatively high
• Elections in November (will
Bachelet run?)
Colombia
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Negotiations with FARC halted
Unacceptable demands
Rash of new attacks
Impact on oil – coal due to
strikes, but no threat to
international liquidity ($37
billion in reserves)
• GDP +4%, inflation 1.83%
• Interest rates low, peso softer
Mexico
• Resilient economy (3.5% this
year) inflation 3.7%
• Peso +8.4% in 2012, now
slowed ascent
• PRI leadership brings no major
shift in direction
• Re-shoring
• “Pact for Mexico”
Peru
• Remarkable performance past
ten years
• GDP nearly doubled
• Strong capital inflows
• Reserves $64 billion
• No need to worry about the
external accounts
• President Humala and mining
investment
Venezuela
• Maduro victory was narrow
• Challenges from Capriles and
from within
• Increased Cuban dominance
• No improvement in relations
with US
• New Sicad FX market
• Won’t remedy dollar shortages,
food shortages
Europe
The euro is still in trouble
LOGO
General
• The importance of the Cyprus
bailout
France
• 75% tax rate shot down
• No big blow for budget, but
personal setback
• Unemployment 10.6%, going
up
• 27% job approval ten months
into Hollande’s tenure
• Public spending = 57% of
national wealth, tax burden =
46% of GDP
Germany
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Mixed economic news
Exports remain vital
Now drives things in Europe
A mean power?
September elections
The outcome will be interesting
Arab Summer
Middle East
LOGO
Egypt
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Keystone
Sliding toward crisis
Morsi the autocrat
Opposition plans to boycott
elections
• Shortage of food, bread
rationing
• Burnt through reserves, despite
help from many sides
Iraq
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No external account problems
GDP gain 12%-13% in 2012
But all oil-based
Maliki regime keeps losing
credibility
• A number of simultaneous
crises
• Secessionist trends
A Source of Growth
Asia
LOGO
China
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Weak 2013 start
But still 7.0%-7.5% for the year
Imports help global economy
Concern about inflation now
greater than that for slowed
economic growth
• Yuan’s role as international
payment medium growing fast
Japan
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Bold monetary experiment
Needs structural changes, too
GDP just 0.2% fourth quarter
CPI -0.3%
Yen down 29% since
September, warnings from
other countries
• J-curve effect
Africa
On the Verge of a Boom
LOGO
Africa
• The Colonial curse
• Difficult to do business
• Oil
• Old
• Angola, Nigeria,
Congo Brazzaville
• New
• Ghana, Uganda,
South Sudan
• Mining
• Mozambique, DR of the
Congo, Tanzania,
Zambia
• Agriculture
• Ethiopia, Kenya,
Malawi,
Open Discussion