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En route to hyperinflation
VENEZUELA - Report 31 Jul 2015
We forecast the NCPI August MOM inflation rate at 18.3 percent. The YOY rate rises to 208.5 percent in August from 171.0 percent in July.

Inflation accelerates reflecting the rapid rise of the price of the dollar in the parallel market in July (41.8 percent), steady monetary expansion, supply...


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Costa Rica: Fiscal Challenges
CENTRAL AMERICA - Report 31 Jul 2015

Executive Summary

The outlook for Costa Rica for the next 17 months is for modest growth, and relative stability. But fiscal vulnerability will present challenges for controlling inflation, interest rates and the exchange rate.

By yearend, we expect to see modest economic gro...


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CBR stopped buying FX due to increased ‘volatility’; further rate cut is expected tomorrow
RUSSIA ENERGY / FINANCE - In Brief 30 Jul 2015

Since June 28th CBR stopped its regular purchases of FX to replenish its reserves. Purchases have started since mid-May at the rate of $200 mln per day. Till the end of July CBR bought about $10 bln on ...


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Can this tell us about future price action?
CHINA FINANCIAL - In Brief 30 Jul 2015

If this model is appropriate (i.e. if enough investors believe that there is a consensus around brokers selling substantially once the index breaks 4,500), there are two obvious implications. First, if Beijing wants the market to keep rising, it must...


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The consensus about the consensus
CHINA FINANCIAL - In Brief 30 Jul 2015

I don’t know if this is indeed what triggered the selling, but on Thursday, July 23, following a string of uninterrupted up days, the market closed at a new recent high of 4,124, after which it dropped sharply every day for the next three days to clo...


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Long stocks = short synthetic put?
CHINA FINANCIAL - In Brief 30 Jul 2015

My worry was that as the index approached 4,100 or higher, the threat of intense selling by capital-tight brokers at 4,500 meant that anyone buying shares was implicitly giving away a free call at 4,500, and the higher prices went, the less upside th...


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But is there a speed bump?
CHINA FINANCIAL - In Brief 30 Jul 2015

There was one measure about which there is some disagreement as to its size and its importance, but this might be more than counterbalanced by the very simple and clear signal it gives. Sorry for repeating my earlier messages, but here is what I wrot...


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The power of Beijing's "brute force"
CHINA FINANCIAL - In Brief 30 Jul 2015

Three weeks ago Beijing managed to stop the panic with the use of what I called “brute force”, by which I meant that there was never likely to be much impact from interest rate moves, regulatory changes, margin relaxation, and so on. This is because ...


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Back to Orthodoxy, Timidly, Obscurely
TURKEY - Report 30 Jul 2015

The CBRT Governor Erdem Basci presented the third Inflation Report of the year today.There were no significant revisions to inflation forecasts with the (midpoint) of end-2015 forecast revised up by 0.1 pp to 6.9% (from 6.8% earlier), and the end-2016 forecast kept unchanged at 5.5% as before....


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Turn back to the center?
CHILE - Report 30 Jul 2015
Executive summary The recently appointed Minister of Finance, Rodrigo Valdés, rang the alarm: the fiscal situation is not as good as we may think. Fiscal discipline is in Valdés´s DNA. He convinced most relevant actors that there is not enough money to push the reforms as fast as previously ex...

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Bubble Burst, the Chinese Way
CHINA - Report 29 Jul 2015
Executive Summary Though growth is still low, we expect it to pick up H2, driven by several positive factors. GDP grew 7% y/y in Q2, flat on Q1. Industrial output in Q2 was up 6.3% y/y, virtually flat on Q1. But output was up 6.8% y/y in June, its highest level this year, and up 1.2 pps fro...

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Economics: Programs Fail to Avert Poverty Rise
MEXICO - Report 29 Jul 2015

Executive Summary

Last week the National Council for the Evaluation of Public Policy (Coneval) released new poverty data for Mexico based on information contained in the National Statistics Office’s National Survey of Household Income and Spending for 2014 (ENIGH 2014), which we ana...


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​Chief Prosecutor initiates investigation into HDP
TURKEY - In Brief 28 Jul 2015

After Erdogan accused the pro-Kurdish rights party HDP of being the accomplice of PKK and reiterated that the Kurdish Peace is over, Turkey’s Chief Prosecutor didn’t waste time leaking it to the press that his office began collecting evidence with a ...


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Politics: Death Knell of CNTE Power in Oaxaca
MEXICO - Report 28 Jul 2015

Executive Summary

Last week Oaxacan state officials announced they were eliminating the Oaxaca State Public Education Institute (IEEPO) and creating a new body to manage public education. This is a major blow to the power of Local 22 of the National Teachers Union (SNTE), until now ...


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Default Evaded; Progress in Sight
UKRAINE - Report 28 Jul 2015

Executive Summary

The Ministry of Finance paid a $120 million coupon on its Eurobond on July 24th, which postponed feared default and reduced chances of a moratorium on debt repayment. The story is still long from over, and the Ministry of Finance will continue negotiating with credi...