The cut in the official primary surplus target to 1.9% of GDP for 2014, from 2.3% previously, was welcomed by private economists as an overdue ‘reality check’. Announcing the move at a press conference on 20 February, Finance Minister Guido Mantega said the government would freeze R$44bn (US$18.44bn) in public spending to meet the primary surplus target, up from R$38bn last year. “Our projections are attainable and realistic and conservative, so we should deliver this result in December," he stated. The revised projection is based on real GDP growth of 2.5% year-on-year in 2014 (down from a previous forecast of…

The new government led by by President Juan Orlando Hernández is moving to accompany its tough military security policy with a financial attack on organised crime in the country. On 10 March the national defence and security council (CNDS), which is headed by the president, launched an intervention in the public transport sector, citing the need to stamp out an extortion industry that generates almost US$28m annually. Bus and taxi companies are the main targets of so called ‘war tax’ (impuesto de guerra). Extortion generates an estimated HNL25m (US$1.29m) a month in the capital Tegucigalpa and its sister Comayagüela alone,…

Bolivia's government is increasing its control over the economy in several ways. However, this is unlikely to unsettle investors, given the very favourable position of the economy and its good future prospects. In its 10 February report following its latest Article IV Consultation with the government of Bolivia, the International Monetary Fund (IMF) highlighted two ways in which the leftist government led by President Evo Morales is increasing its control over the economy. One is the ongoing use, since 2009, of the central bank (Banco Central de Bolivia, BCB) as a source of funding for public sector entrerprises and development…

On 25 February, Argentina's government reached an agreement with Spain's Repsol in relation to the April 2012 expropriation of a controlling interest in the main local energy group Yacimientos Petrolíferos Fiscales (YPF). This is the latest in a series of rather orthodox, investor-friendly moves by the government led by President Cristina Fernández in the last nine weeks or so. Financial market participants perceive that financial risks have reduced. We agree. A ‘virtuous circle’ of lower inflation, falling interest rates and a stronger currency remains some way away, and will be difficult for policymakers to achieve: however, this outcome is no…