Latin America

[winston]

Argentina:-

The world’s richest investors are quietly grabbing beautiful land in the blue-chip resort markets of Argentina.

George Soros and Ted Turner alone own 1.3 million acres.

[winston]

Latin America's fastest economic expansion in 30 years may be coming to an end as the global credit crunch stunts investment and squeezes demand for the region's commodities.

"We're in a serious economic crisis," Colombian Vice President Francisco Santos said in an interview in his Bogota office. "Financing is going to get scarcer and scarcer, and that means that investment is going to be difficult to attract."

Latin America may also see a drop in remittances from emigrants living in the U.S. Money transfers from Mexicans living outside the country dropped a record 12.2 percent in August, the central bank said yesterday. Remittances accounted for almost 3 percent of Mexico's gross domestic product last year.

"Mexico is very tied to the U.S., and they're going to get hammered," said Mark Weisbrot, co-director of the Washington-based Center for Economic and Policy Research.

– Bloomberg

[millionairemind]

Another country that looks like on the brink of default...

Argentine Debt Rating Cut by S&P Amid Default Concern (Update3)

By Drew Benson and Lester Pimentel

Oct. 31 (Bloomberg) -- Argentina's debt ratings were cut by Standard & Poor's for the second time in less than three months amid mounting concern the global financial crisis and a tumble in commodity export prices will lead to default.

S&P lowered the South American country's foreign debt rating to B-, six levels below investment grade and in line with countries including Bolivia and Lebanon, from B after cutting it from B+ on Aug. 11. The rating outlook is stable, S&P said.

Argentine bonds have plummeted this month, pushing benchmark dollar-denominated yields as high as 30 percent, as the tumble in commodities crimps the country's export receipts and tax revenue. Bond declines deepened last week after President Cristina Fernandez de Kirchner announced plans to nationalize pension funds, a move many investors said is a bid to use the funds' $26 billion to avert the country's second default this decade.

``Bond prices have predated the rating agency downgrade -- stuff is trading at pretty distressed levels already,'' said David Bessey, who manages more than $8 billion of emerging-market debt in Newark, New Jersey, for Prudential Financial Inc. ``They are taking some pretty unorthodox measures to try to shore up their balance sheet. Global investors are not comforted by that.''

Argentina's peso slid 0.4 percent to 3.3979 per dollar at 9:51 a.m. New York time, extending its losses this month to 7.8 percent. The government's 8.28 percent dollar bonds maturing in 2033, which were issued as part of a 2005 debt restructuring, gained today, pushing their yield down 1.18 percentage points to 27.96 percent, according to JPMorgan Chase & Co. The bonds yielded 14.19 percent a month ago and 10.91 percent on June 30.

The pension takeover plan ``has shaken the local financial markets and overall confidence,'' S&P said in a statement. ``The downgrade reflects our heightened concerns about the deteriorating economic and political environment.''

[kennynah]

Don't cry for me Argentina .....

[winston]

Ecuador May Default on $30 Million Interest Payment By Lester Pimentel and Daniel Cancel

Nov. 14 (Bloomberg) -- Ecuador said it may default on a $30 million interest payment as a tumble in oil erodes export receipts, putting President Rafael Correa on the verge of fulfilling a two-year-old threat to repudiate the country's debt.

Correa will use the 30-day grace period on the bond payment, which is due tomorrow, to analyze legal opinions, Finance Minister Maria Elsa Viteri said at a news conference in Quito.

The price on the $510 million bond maturing in 2012 plunged to as low as 14 cents on the dollar, sending yields over 100 percent, as investors braced for the first sovereign default since the global financial crisis deepened in September. Standard & Poor's cut the country's rating three levels today to CCC-.

``It's up to the president to analyze the alternatives,'' Viteri said. ``All options are on the table.''

Correa, a 45-year-old economist who laces his speeches with phrases in the native Quechua language, has been threatening since the 2006 campaign to halt payments on debt he determines is ``illegitimate.'' In September, he called a debt auditing committee's preliminary findings ``harrowing,'' saying some of the obligations were fraudulently contracted.

``We're waiting for the opinions, recommendations so that the president can make a truly positive decision,'' Viteri said.

Ecuador's finances have come under strain as oil, which accounts for 60 percent of the country's exports, has plunged 61 percent from a record high in July to $57.23 a barrel.

`Burning Reserves'

Ecuador, which last defaulted in 1999, needs an oil price of $95 to cover all the spending in its budget and a price of $76 to avoid depleting its $6.3 billion of foreign reserves, according to Barclays Capital Inc.

``They are burning reserves,'' said Eduardo Levy-Yeyati, an emerging-markets analyst at Barclays. ``The question is whether they will keep paying if oil prices don't recover.''

Ecuador's foreign debt totaled $10 billion as of September, according to Goldman Sachs Group Inc. That's equal to less than 25 percent of its $44 billion annual gross domestic product.

Correa, who earned his Ph.D. at the University of Illinois at Urbana-Champaign, won a landslide victory in November 2006 after promising to rewrite the constitution and boost spending on the poor. He said in September that he'd suspend debt payments before trimming spending on education and health care.

``The willingness to pay is obviously not there,'' said Alberto Bernal, an emerging-markets strategist for Bulltick Capital Markets in Miami.

`Extreme' Move

While the drop in oil has crimped revenue, the government still has enough money to service its debt, Bernal said. Viteri said at the news conference that the government has the cash to make the $30 million payment on time.

``The government still has liquidity,'' Bernal said. ``Not paying $30 million sounds extreme. It's too early to kick the table.''

The yield on the 2012 bonds, which were issued as part of a restructuring in 2000, surged 13.29 percentage points to 82.79 percent at 2:20 p.m. in New York, according to JPMorgan Chase & Co. The yield climbed to as high as 108 percent earlier today.

The bonds' price sank 5 cents on the dollar to 20 cents after plunging 17 cents yesterday. The bond traded at 99.5 cents on Sept. 8, a week before the collapse of Lehman Brothers Holdings Inc. deepened the global economic slump that has throttled demand for crude oil.

Correa's government has used this tack before, saying in February 2007 that it would wait till the 30-day grace period to make an interest payment. Correa then reversed course, opting to make the $135 million payment on time.

``Ecuador is the only country that has explicitly said it might not repay debt,'' said Cathy Elmore, who manages $700 million of emerging-market debt at WestLB Mellon Asset U.K. Ltd. in London. Still, she said she was surprised by today's move. ``I don't think anyone expected it right now. It seems odd to me. Their fiscal situation at the moment is okay.''

[mocca_com]

Argentina tries gov't car loan plan

Consumers to get low interest car loans as carmakers agree to produce low-cost models.

Last Updated: December 6, 2008: 3:37 PM ET

BUENOS AIRES, Argentina (AP) -- Argentina's auto industry will get a 3.1 billion peso ($900 million) boost with cut-rate loans for first-time new car buyers, the government said Saturday.

Production Minister Deborah Giorgi's announcement detailed a key part of a broader economic stimulus package based largely on assets of the recently nationalized pension system.

Giorgi told a news conference that six automakers will each offer two models selling for $10,000 or less for people buying a new car for the first time.

The companies, most of which saw sales drop sharply in November, will have to promise to shun layoffs and hold down profit margins on cars sold under the program.

Buyers can choose a pre-savings plan under which delivery times are determined by lottery or they can contract low-interest financing. Payments are supposed to range around $230 a month.

Argentina's auto industry employs about 150,000 people and exports about $8 billion a year, but the country's automakers association reported that local auto production dropped 28 percent in November from the same month in 2007, with exports down about 25 percent.

The government announced on Thursday that it would invest about $3.9 billion, most of it from state-run banks and pension funds, to grant low-cost loans to farmers, industry and automakers to confront the global credit squeeze.

The government said the program affects vehicles sold by local branches of France's Renault SA and PSA Peugeot Citroen, Ford Motor Co. (F, Fortune 500) and General Motors Corp. (GM, Fortune 500) of the U.S., Fiat Group SpA of Italy and Germany's Volkswagen SA.

Source: AP

[winston]

Peru

Forget sizzling China or bubbling Brazil. The world's best performing stock market this year, with bulls even more rampant than machos on an alpaca farm, is Peru's. Lima's general index has more than doubled; Shanghai has risen by "only" 85 per cent.

The boom is due to the resource companies that dominate the local market; Peru is the world's third largest copper, zinc and tin producer, the largest silver miner and fifth biggest gold producer.

Liquidity is tight, but recently launched exchange-traded funds provide a painless way for foreign investors to join the Independence Day celebrations on Tuesday.


–Financial Times

[winston]

I'm surprized with the slowdown in Mexico. If the Mexicans are not remitting money home from the US, does that not tell you about the slowdown in the US ?

Mexico's economy taking hits from all directions

Mexico's gross domestic product down 10 percent from same period last year
Analysts: Main cause of Mexico's nosedive is economy's dependence on U.S.
"If the United States isn't importing, Mexico isn't exporting"
Also: decline in tourism, oil and tax revenues; fewer expats send home earnings

By Arthur Brice, CNN

(CNN) -- The Mexican economy went off a cliff in the second three months of 2009, with the gross domestic product dropping 10.3 percent from the same period last year, according to government figures.

The GDP for the second quarter also declined 1.1 percent from the first three months of the year, the National Institute of Statistics and Geography said Thursday.

The GDP, which is the market value of all goods and services in a country, is used to measure a nation's economic performance.

Analysts say the main cause of Mexico's nosedive is that the nation's economy is tied strongly to that of the United States, which is mired in the deepest economic downturn since the 1930s.

About 80 percent of Mexican exports go to the United States, said Allyson Benton, an analyst with the Eurasia Group consulting firm.

"If the United States isn't importing, Mexico isn't exporting," Benton said.

Susan Kaufman Purcell, director of the Center for Hemispheric Policy at the University of Miami, said Mexico can take some measures but "until the U.S. economy really starts recovering, Mexico is going to have a hard time moving up."

Other factors dragging the Mexican economy down include a tourism decline caused by the H1N1 flu outbreak and fears over continuing violence, declining oil and tax revenues, and fewer Mexicans abroad sending money back home.

"They're getting a blow from almost every corner," Purcell said.

Oil revenues, long Mexico's main source of money, are being hurt by lower global prices and declining production. Purcell and other analysts point to the rapid decline of the Cantarell oil field, at one time the world's second-largest. Production at Cantarell peaked in 2004 and has been falling by more than 10 percent every year since then.

"Oil production has been in decline since 2004 but it has declined significantly over the past couple of years," Benton said.

Mexico, which relies on oil revenues for roughly 40 percent of its budget, also is hurt by falling prices for crude oil. According to some estimates, Mexico needs oil to be at $70 a barrel to sustain revenue levels. Prices on Friday hovered around $70, but earlier this year they had dipped to close to $30 a barrel.

Remittances from Mexicans working abroad, most of them in the United States, also have fallen victim to the economic downturn. Fewer jobs in the United States means fewer opportunities for Mexicans to find work and send money home. Remittances rank after oil in terms of revenue for the country.

That revenue fell from $26 billion in 2007 to $25 billion in 2008, Mexico's Central Bank said, and is expected to decrease even more this year.

Tourism, Mexico's third-largest source of revenue, has declined steadily since an outbreak of the H1N1 flu was first discovered in Mexico in April.

In addition to a global recession that has affected travel everywhere, tourists had already been wary of going to Mexico because of violence that has seen more than 11,000 people killed since President Felipe Calderon came into office in December 2006.

The Mexican government said earlier this month that the tourism downfall has already cost the nation up to $300 million and some analysts say that figure is sure to climb.

The H1N1 outbreak also caused revenue shortfalls because the government closed bars, restaurants and many other public places at the height of the epidemic this spring.

As a result of all these circumstances, tax revenues have taken a hit.

"The big problem in economic decline in both Quarter 1 and Quarter 2 has been much lower tax revenues," Benton said. "When you are not producing or you are firing people, you don't have taxes."

For example, Purcell said, the taxes that Mexico's state-owned Pemex oil company pays to the government have fallen by up to 40 percent.

Mexican officials see hope on the horizon, however.

"In June of this year, the economy probably stabilized or touched bottom, and ... we'll start to see a recovery in the next quarter," Deputy Finance Minister Alejandro Werner told the Wall Street Journal.

Purcell said Mexico could help itself by adopting labor and tax reforms and modernizing its energy policy. For example, she said, Mexico's labor laws make it difficult to fire unproductive employees and Pemex has not been aggressively pursuing other oil fields to replace Cantarell.

She doesn't see that happening, particularly since Calderon's PAN political party suffered a drubbing in last month's midterm elections and no longer controls Congress.

Mexico's economic problems, she said, are "a combination of bad luck, bad planning and a stalemated political system."

http://edition.cnn.com/2009/WORLD/ameri ... index.html

[winston]

Latin America Rebound to Be ‘Strong,’ Barclays Says (Update1)
By Veronica Navarro Espinosa

Sept. 23 (Bloomberg) -- Latin America’s economic recovery will be “remarkably strong,” bolstering currencies and spurring interest rate increases in 2010, Barclays Plc said.

“We expect a strong 2010,” Barclays analysts wrote in the bank’s emerging-markets quarterly report dated yesterday. “Robust growth prospects in Latin America bode well for capital inflows, equity prices and FX appreciation.”

The Brazilian real and the Mexico peso offer the most potential “to trade the region’s rebound,” the analysts wrote. They raised their estimate for Latin America growth in 2010 to 4.4 percent from 3.6 percent.

http://www.bloomberg.com/apps/news?pid= ... 7BYn6lPsDo

[winston]

Uruguay


The Perfect Place for Expatriates By Tom Dyson

I'm writing to you from a farm in South America...

There are three horses outside my bedroom window. My host, Fitzroy, lets horses roam his property. In the morning, we find them munching grass on the front lawn. And when we're having afternoon tea on the back patio, they'll come wandering slowly past...

In a moment, my wife and I will walk across the garden, past the horses, to the main house, where we'll join Fitzroy's family for breakfast. The housekeeper, Alexandra, is there. She's already set the table, pressed the oranges, and prepared a large plate of organic sausage, ham, and eggs.

After breakfast, we'll saddle the horses and Fitzroy will take us for a trot around his property...

We're in Uruguay, in a town called Punta del Este.

They call Uruguay the "Switzerland" of South America because of its powerful banking secrecy laws. It's also one of the last countries in the world where you can own property anonymously. Finally, there's no tax on foreign earnings. So Europeans and South Americans move here to avoid income taxes.

These laws attract money to Uruguay. Uruguay is the second-richest country in South America, after Chile.

For six weeks every summer, Punta del Este is the most important party town in South America. If you're a celebrity here, this is where you come for your summer vacation. If you're a wealthy aristocrat from Brazil, Argentina, or Columbia, you come here to party with the celebrities.

During this "party month," tables at nightclubs sell for $10,000 a night, rents jump 4,000%, and it takes two hours to move across town because of the traffic.

Luckily, high season doesn't start until January. For now, we're the only tourists in town...

For full-time residents, Punta del Este is a sleepy seaside town. Three-quarters of the houses and apartments are empty. Most of the restaurants are closed. And they disconnect the traffic lights. The standard of living for these folks is extraordinarily high...

Fitzroy, for example, lives in a large country house with wooden floors and big windows. He has a lake, a forest, and a horse paddock on the grounds. On the other side of the lawn, there's a cottage for the housekeepers and another cottage for guests.

He told me his country estate would sell for around $750,000 if it were on the market today. The same property in England or America would cost 10 times as much...

We went on a tour of Punta del Este's real estate market with Fitzroy. We found dozens of seaside cottages and small homes for under $200,000. They come with neat lawns, brightly painted walls, and fruit trees. Most of them even have separate quarters for housekeepers. A full-time housekeeper costs $400 a month. The country club charges $150 a month for offseason membership. And the top private school charges $200 a month per pupil.

The weather is wonderful. It never freezes. In the summer, you rarely need air conditioning. Travel connections are great, too. The international airport is two hours away and offers direct flights to the United States and Europe.

In short, Punta del Este is the perfect location for expatriates. It's cheap, easy to reach, and the quality of life is unbeatable, even in America. Best of all, there's going to be a property boom here as money flees from the bankrupt governments in America and Europe.

If you ever get the chance to visit Punta del Este, I highly recommend it. Just make sure you avoid the party season... unless you like that sort of thing.

Source: Daily Wealth