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Country Insights

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What might cause speculators to buy?
CHINA FINANCIAL - In Brief 08 Jul 2015
Broadly speaking speculators buy or sell assets for two reasons: 1. Some event is expected to cause, either for technical or fundamental reasons, a near-term change in the supply of or demand for an asset large enough to affect prices, even if only temporarily, and they transact in anticipation o...

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What policies can stabilize the market?
CHINA FINANCIAL - In Brief 08 Jul 2015
We must avoid the tendency to think of interventions aimed at stabilizing markets as being independent of the structure of the market. In my Peking University seminar I warn my students that because most of the world’s leading economists have been directly or indirectly trained in a tradition tha...

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China’s markets are unpredictable but mechanical
CHINA FINANCIAL - In Brief 08 Jul 2015
China’s Spinal Tap stock market is a volatility machine whose every knob has been turned to eleven. Value investors lack the tools they need to project or value cashflow, and so cannot play their stabilizing role no matter what policy enticements are implemented. Policy interventions undermine th...

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Signs of Trouble, Despite Growth
MEXICO - Report 08 Jul 2015
Executive Summary Economic activity continues to grow in 2015. During Q1, aggregate supply and demand of goods and services grew by a real 3.5% from Q1 2014. GDP expanded by 2.5% y/y, but just 0.4% q/q, seasonally adjusted, extending the flattening trend experienced since early 2013. The prospect...

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2015 First Half Report: A False Dawn
CHILE - Report 07 Jul 2015
Executive Summary In the first months of this year, economic data gave us some hope. But the optimism did not last long. In addition, the absence of presidential leadership during the first half of this year has been noticeable and damaging. In January we witnessed what could have been the ...

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2015 First Half Report: A False Dawn
CHILE - Report 07 Jul 2015
Executive Summary In the first months of this year, economic data gave us some hope. But the optimism did not last long. In addition, the absence of presidential leadership during the first half of this year has been noticeable and damaging. In January we witnessed what could have been the ...

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Maduro's endorsement of the Greek referendum
VENEZUELA - In Brief 06 Jul 2015 2 responses
Maduro’s rhetoric yesterday was more heated than necessary in favor of Tsipras’s referendum, in our view. It’s too early to judge whether Maduro simply took the opportunity to reinforce his nationalistic message, or whether he started building a narrative aimed at sustaining a decision to default...

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Deconstructing polls and cash flows
VENEZUELA - Report 06 Jul 2015
Executive Summary Surveys have shown the opposition leading by 15–20 points for the past three months. The most likely scenario for December’s parliamentary elections is for the opposition to win the popular vote and a majority of seats in the National Assembly. Owing to the country’s voting syst...

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What is the Risk of Brazil Losing its ‘Investment Grade’ Rating?
BRAZIL ECONOMICS - Report 06 Jul 2015
Executive Summary Brazil’s public debt as a proportion of GDP is lower than many other countries that have investment grade status, but almost none of these need primary surpluses to reduce the debt/GDP ratio. On the contrary, due to the low interest rates in those countries, that reduction ca...

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Russia’s International Agenda
RUSSIA / FSU POLITICS - Report 06 Jul 2015
Protests in Armenia against an energy price increase caused suspicions in Moscow of a potential Maidan-type scenario. Although the protests are not anti-Russian in nature, continued negligence and taking Armenia’s partnership for granted may eventually undermine Russian influence in the region. ...

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Week of July 6
BRAZIL POLITICS - Report 06 Jul 2015
President Dilma Rousseff launches the National Energy Plan, part of her positive agenda. The House votes on political reform and the change in the FGTS correction. In the Senate, the new Petrobras participation model for the pre-salt may be analyzed. The IBGE releases IPCA figures for June. Dilma...

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What is the Trade Balance Trend?
BRAZIL ECONOMICS - Report 06 Jul 2015
We recently presented empirical evidence that the depreciation of the nominal exchange rate does not assure better performance of exports. The reason is not a supposed inflexibility of exports to the stimulus of a weaker currency, but rather the fact that since 2011 the deprecation of the exchang...

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The Long, Hot Summer
TURKEY - Report 05 Jul 2015
Executive Summary Turkey’s plans to invade several border towns in Syria are for real, but delayed because of objections from the military and the U.S. These may be revived in August, or if Kurdish militia or ISIS capture critical territory. More broadly, AKP is signaling a change in its Syria po...

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June Inflation: Food To the Rescue
TURKEY - Report 03 Jul 2015
Consumer price inflation dropped by a sharper than expected 0.5% in June (June 2014: 0.3%), thanks to a 2.8%, m/m, drop in food and beverage prices (June 2014: +0.4%). This reduced the 12-month CPI rate more visibly than anticipated to 7.2%, from 8.1% in May. This is pretty much where all the goo...

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The China Loan
VENEZUELA - In Brief 02 Jul 2015
The 5th Amendment to the Agreement Between The Governments of China and Venezuela on the Joint Sino-Venezuela Financing Fund was signed on 26 June 2015 and published in Official Gazette No. 40.692 dated 30 June 2015. Doubts about China’s willingness to increase the outstanding amount of loans to ...