EWD Publications LATIN AMERICA

December 2006 News East-West Debt

East-West Debt started its activities in 1997 when Dutch and Belgian economists and counsellors with more than 15 years of experience in the market found each other and decided to establish a structured cooperation.

East-West Debt permanently monitors political and financial situation in several high-risk countries.
Indeed, political and international events influence our solutions for solving certain overdue trade or bank debt.

East-West Debt gives its best to register all recent developments in several high risk countries for our clients. East-West Debt managed to gather a tremendous amount of information over the years, which gives us the possibility to exchange this knowledge with our customers. The knowledge that we have built up is partly published in the form of newsletters which we send out on a regular basis to a controlled network of financial professionals within multinationals, governments and banks all over the world.

Click here for our latest Januari, 2007 publication.
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From the januari 2007 publication:

AS LATIN AMERICA GOES LEFT IS THERE REASON FOR PANIC?
As Latin America makes a steep tilt towards the left is there reason to panic? At the moment the answer to that question, surprisingly, seems to be "no"!
Both the annual IMF rapport and the MSCI index, a measure for Latin American equities, give a (moderately) optimistic outlook for the economy of most Latin American countries.
The outlooks were fairly dim and it was supposed to be a difficult year for investors in Latin America as many countries in the region, including Brazil and Mexico, the two biggest, went to the polls. Fears of a swing to the left were mostly realized. The left returned in Chile, in Brazil Luiz Inacio Lula da Silva was re-elected. In Nicaragua former Marxist guerrilla leader Daniel Ortega bounced back to power. In Bolivia the gas reserves were nationalized by Mister Evo Morales. In Venezuela Hugo Chavez's power remains undiminished. Cuba is still under the influence of the Castro siblings and still strongly supported by Chaves. All these left wingers happily supporting each other all in one region, it could be enough to give any sane capitalist nightmares. So how come the figures are really pretty good?
The Morgan Stanley Capital International Latin American index has gained 109.7 per cent over the past two years. The indices for Argentina, Brazil, Columbia and Mexico have all more than doubled in the same period. The IMF stated that "Latin America is experiencing its most vigorous three-year period of growth since the 1970s". However the IMF did warn that the rate of expansion was still considerably less than that of competitors and if investments in the region would not expand, the growth would definitely begin to slow down.
So what is the secret to the regions apparent success in spite of what seems politically unpalatable circumstances in most of the region?
Are investors not seeing the dangers of all these left wingers in command? Or are these lefties not doing such a terrible job after all? Actually they have been much more responsible than feared. Most understood that a return to inflation would hurt the poor, furthermore various income transfer programs were put in place to help the poor and boost consumer spending levels. These programs such as Brazil's Bolsa familia, Chile's Solidario and Oportunidades in Mexico have proven their worth as a tool for poverty reduction and are being widely copied in the region.
But apart from these schemes on micro-economic level what has really boosted the economy of the Americas?
The fact remains that the market growth has been achieved without particularly strong economic growth to back it up. The main reason is therefore the all time high of the oil price of course! Also the general commodities boom has really helped the region. Most countries in the America's would be very wise to take advantage of this huge windfall and not start overspending. The region should have a serious look at their formidable foreign debt and do something about it whilst they can. The IMF has also warned the region that it should not miss a chance to do so.
The good news is that at the moment our fears of a semi Marxist bankrupt region are unfounded and investment opportunities are still good.