Following a record result in 2015, Mexican automotive exports – roughly three quarters of which are destined for the US – have fallen back in recent months, even as demand in the US economy continues to recover. In April, Mexico’s total automotive exports fell by 15.6% year on year, with a 9% fall in exports to the US. This rather incongruous result is explained by the fact that even though US demand has recovered, consumer demand in the US for light vehicles (i.e. small passenger cars) is falling. In part, the sharp fall in petrol prices has prompted a demand…
The 23 June signature of a definitive bilateral ceasefire agreement between the government led by President Juan Manuel Santos and the Fuerzas Armadas Revolucionarias de Colombia (Farc), the main left-wing guerrilla insurgency in the country, holds out the promise of an end to over half a century of internal conflict, prompting expectations of a ‘peace dividend’ for the economy. Like other Latin American economies, Colombia has been adjusting to the sharp fall in global energy and mineral prices since 2013. However, both the central bank (BanRep) and the IMF expect the economy to have a soft landing – and in…
Oi files for bankruptcy: Oi, the only locally controlled mobile phone operator in Brazil, filed for bankruptcy protection with debts of BRL65bn (US$19bn) on 20 June, after rescheduling talks ahead of a EUR231m bond repayment failed to produce agreement. The company has been badly affected by the Brazilian recession, but analysts say it also suffered from serious problems caused by an attempt by the previous Partido dos Trabalhadores (PT) government to turn it into a ‘national champion’. Despite big ambitions and government help, the company was mismanaged (it had six chief executives in five years) and became heavily leveraged. State…
In early 2016, financial stress in Mexico reached the highest level since the global financial crisis according to one measure. This appears to have been the result of investors’ general aversion to emerging markets risk. The IMF’s approval, at the end of May 2016, of a new two-year US$88bn flexible credit line (FCL) should mean that any further slowing of the global economy, or future volatility in financial markets, should have limited impact on Mexico. Since early 2009, some countries with strong track records on economic management have been eligible for FCLs from the IMF. These are essentially emergency credit…
Latin American countries continue to suffer serious corruption issues, often centred on the three-way crossing point between politics, public sector contracting and business. A case in point is Guatemala, where it now seems that the bribery network that led to the impeachment and imprisonment of the former president Otto Pérez Molina last September was wider and more complex than originally thought, and included major irregularities in the management of a container port, Terminal de Contenedores Quetzal, known as TCQ. Guatemala has become notorious for the La Línea corruption case – a sophisticated illegal network, first uncovered in 2014, involving senior…
According to the United Nations’ Economic Commission for Latin America and The Caribbean (ECLAC), inflows of Foreign Direct Investment (FDI) dropped by 9.6% in 2015 to US179.1bn. ECLAC cautions that FDI could fall by a further 8% in 2016. In a briefing paper[1] released on 15 June, ECLAC reported that FDI into Latin America and The Caribbean slipped to its lowest level since 2010 last year. This was partly due to the general deceleration of economic growth in much of the region – most notably in Brazil. It was also due to lower investment in the mining and hydrocarbons sectors.…
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