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Economic & Country Risk Review

Economic & Country Risk Review. For the ICTF’s Global Credit Professionals Symposium Chicago, April 16, 2013 By H. Belcsak, President, S.J. Rundt & Associates, Inc. Megatrends. Nuclear Proliferation. Islamic Terrorism. BRICS Unity?. The Money Machine. Nuclear Proliferation.

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Economic & Country Risk Review

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  1. Economic & Country Risk Review For the ICTF’s Global Credit Professionals Symposium Chicago, April 16, 2013 By H. Belcsak, President, S.J. Rundt & Associates, Inc.

  2. Megatrends Nuclear Proliferation Islamic Terrorism BRICS Unity? The Money Machine

  3. Nuclear Proliferation • The threat from North Korea • Dangers in Pakistan • Iran in the background • Sunni-Shiite confrontation

  4. Islamic Terrorism • Al Qaeda metastasized • A world-wide net • Aqab, Aqim, Al-Shabaab, Boko Haram • From local terrorism to attacks abroad • Can these movements be defatted?

  5. BRICS Unity? • The Durban meeting • Brazil-China accord ($30 billion) • $100 billion currency fund (BoP or currency crisis) 41-18-5 • Development bank • 43% of world population, $4.4 trillion in reserves, $282 billion trade, $263 billion FDI • But…How will the currency fund operate? How will bank be funded? Pay-in for bank? China’s role? More differences than similarities

  6. The Money Machine • Japan’s unprecedented experiment • Fed, BofE, ECB • Asset inflation • Currency wars • Protectionism • No exit plans • Potentially grave consequences down the road

  7. Our Backyard Latin America

  8. General • Two policy trends persist • Brazil-style approach is winning, moderate inflation • Change of leadership in Venezuela will not make much difference • Lessened upward pressure on currencies • Difficulty with economic unions such as Mercosur

  9. Argentina • Deal for bond holdouts? • Pressure on peso • Devaluation inevitable • Kirchner can still win, but challenges from within Partido Justicialista • Price and pay freezes • Fed-up farmers

  10. Chile • Slight slowdown (4.8% for 2013) • Poor outlook for copper • Diversified economy • Inflation just 1.5% • Interest rates relatively high • Elections in November (will Bachelet run?)

  11. Colombia • Negotiations with FARC halted • Unacceptable demands • Rash of new attacks • Impact on oil – coal due to strikes, but no threat to international liquidity ($37 billion in reserves) • GDP +4%, inflation 1.83% • Interest rates low, peso softer

  12. Mexico • Resilient economy (3.5% this year) inflation 3.7% • Peso +8.4% in 2012, now slowed ascent • PRI leadership brings no major shift in direction • Re-shoring • “Pact for Mexico”

  13. Peru • Remarkable performance past ten years • GDP nearly doubled • Strong capital inflows • Reserves $64 billion • No need to worry about the external accounts • President Humala and mining investment

  14. Venezuela • Maduro victory was narrow • Challenges from Capriles and from within • Increased Cuban dominance • No improvement in relations with US • New Sicad FX market • Won’t remedy dollar shortages, food shortages

  15. Europe The euro is still in trouble

  16. General • The importance of the Cyprus bailout

  17. France • 75% tax rate shot down • No big blow for budget, but personal setback • Unemployment 10.6%, going up • 27% job approval ten months into Hollande’s tenure • Public spending = 57% of national wealth, tax burden = 46% of GDP

  18. Germany • Mixed economic news • Exports remain vital • Now drives things in Europe • A mean power? • September elections • The outcome will be interesting

  19. Arab Summer Middle East

  20. Egypt • Keystone • Sliding toward crisis • Morsi the autocrat • Opposition plans to boycott elections • Shortage of food, bread rationing • Burnt through reserves, despite help from many sides

  21. Iraq • No external account problems • GDP gain 12%-13% in 2012 • But all oil-based • Maliki regime keeps losing credibility • A number of simultaneous crises • Secessionist trends

  22. A Source of Growth Asia

  23. China • Weak 2013 start • But still 7.0%-7.5% for the year • Imports help global economy • Concern about inflation now greater than that for slowed economic growth • Yuan’s role as international payment medium growing fast

  24. Japan • Bold monetary experiment • Needs structural changes, too • GDP just 0.2% fourth quarter • CPI -0.3% • Yen down 29% since September, warnings from other countries • J-curve effect

  25. Africa On the Verge of a Boom

  26. Africa • The Colonial curse • Difficult to do business • Oil • Old • Angola, Nigeria, Congo Brazzaville • New • Ghana, Uganda, South Sudan • Mining • Mozambique, DR of the Congo, Tanzania, Zambia • Agriculture • Ethiopia, Kenya, Malawi,

  27. Open Discussion

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