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Fiscal adjustment
BRAZIL POLITICS - Report 15 Sep 2015
The government announced a set of spending cuts and tax increases totaling R$ 64.9 billion on Monday, September 14. Almost 50% of this total (R$ 32 billion) would come from the re-creation of the CPMF (Provisional Contribution on Financial Operations), which depends upon congressional approval.R$...

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Forecast update
CHILE - Report 14 Sep 2015
A great deal of water has flowed under the bridge since our last forecast, so we decided to update it. In a nutshell: we expect lower growth and higher inflation for the next two years (at least). We are not alone. Consensus Forecasts, the government and the Central Bank have moved in the same di...

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Week of September 14
BRAZIL POLITICS - Report 14 Sep 2015
The main topics for the week are the spending cuts announcement and the impeachment debate in the House. The Senate votes on the Provisional Measure that increases the CSLL for financial institutions. AlexandreTombini (Tuesday) and Mangabeira Unger (Thursday) speak on the economic crisis in the S...

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The Downgrade of the Credit Rating
BRAZIL ECONOMICS - Report 14 Sep 2015
To anyone who pays a minimum attention to the indications given by Brazil’s CDS quotations, it has long been clear that the country – sooner or later – would lose its investment grade rating. Last month, its quotations had already climbed well off the average relationship between the S&P credit r...

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Urgent: Improve Migration Policy
HUNGARY - Report 14 Sep 2015
The influx of Middle Eastern refugees is placing rising pressure on Hungary, and is becoming the country’s top political issue. The government has two options, neither of them favorable for Fidesz or for Hungary. The country could either defy the EU, blocking the entry of new migrants and allowin...

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Weekly Tracker: September 13-19
TURKEY - Report 13 Sep 2015
After devastating PKK attacks on Turkish security forces, Turkey experienced near-riots in the West, which may get worse if a cease-fire is not declared. This is not a likely scenario, but Ankara doesn’t have a viable strategy to combat terror, either. But we remain optimistic for a lasting solut...

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CBR keeps rates unchanged, no signs of future tightening
RUSSIA ENERGY / FINANCE - In Brief 11 Sep 2015
As we have expected, CBR decided today to stay on hold and keep interest rates unchanged. The bank left key rate at 11% after five consecutive cuts since February. The decision was widely expected as current situation presents dilemma for monetary authorities. RUB declined more than 25% against U...

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Inflection points
VENEZUELA - Forecast 11 Sep 2015
We extend our forecast horizon to 2017. We envision a short-term policy path that’s unsustainable. Hence dramatic forks (“inflection points”) lie somewhere in the road ahead, at which regime change, major policy reform, and default on the sovereign debt become real possibilities. When Venezuela w...

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Dilma Rousseff Government
BRAZIL POLITICS - Report 10 Sep 2015
The government reacted with dissonance to the news of Standard & Poor’s downgrade of Brazil’s investment grade rating. The Ministry of Finance lamented the rating agency’s decision and is trying to find alternatives to counteract the negative impact of the announcement. In an interview with TV...

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Economics: A Pass-through Effect to Come
MEXICO - Report 10 Sep 2015
The increase in producer prices as tracked by Mexico’s national Producer Price Index (PPI) suggests that the higher costs will eventually translate into a higher rate of consumer inflation. We should note the need to analyze the rise in producer prices from various angles. One of these is rela...

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Politics: Government Re-launch Fails to Lift Off
MEXICO - Report 10 Sep 2015
Hopes that this year’s State of the Nation Report and President Enrique Peña Nieto’s accompanying nationwide address might signal a major change of approach and policies were dashed last week as seemingly self-critical introductory remarks quickly gave way to self-serving and questionable claims ...

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On Q2 Growth: “Damn the Torpedoes…”
TURKEY - Report 10 Sep 2015
The Turkish economy grew by a higher than expected 3.8% in Q2, y/y, thanks to a sharp increase in domestic demand (6.8%, y/y), which made a 6.7 pps contribution to overall GDP growth in Q2. The contributions of net exports and inventories were negative, broadly in line with expectations, shaving ...

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August inflation increased 15.8% y-o-y; CBR will stay on hold in September
RUSSIA ENERGY / FINANCE - In Brief 09 Sep 2015
Inflation reached 15.8% y / y (+0.4% m / m) in August, despite the seasonal decline in prices for fruit and vegetables (-9.8% m / m). The main reasons for the acceleration of inflation are related to the dynamics of the ruble exchange rate. In particular, in August, non-food products rose by 0.8%...

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Industrial Production and Weakening of the Real
BRAZIL ECONOMICS - Report 08 Sep 2015
The steep drop of industrial output in July (Graph 1) threw another bucket of cold water on the estimate of GDP for the third quarter, which will almost certainly show further contraction. On the demand side, neither household consumption nor gross fixed capital formation changes this scenario. T...

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Week of September 8
BRAZIL POLITICS - Report 08 Sep 2015
Despite the holiday, this will be a busy week. Vice President Temer and PMDB leaders meet with governors to discuss the financial situation of the states. Congress analyzes the presidential vetoes. The Senate may vote on the repatriation bill. The Sugar-Alcohol sector discusses CIDE with governme...