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Tue 18 Jun 2019 / Latin America Caribbean

Bolsonaro's Brazil in public debt peril

Jair Bolsanoro's move into Brazil's presidential palace raised market hopes that he would revitalise the country's economy, build a political consensus for much-needed pension reform and place public finances on a more sustainable track. So far, he has failed to make much progress in these areas as he engaged in divisive politics and his administration became riven by internal squabbles. Brazil is vulnerable to a full-blown public debt crisis, which will have global consequences, if the government fails to devise a credible programme.

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Thu 13 Jun 2019 / Asia Pacific,Global

China writing new interbank rules

China's commercial banks have struggled in the international arena. They are the biggest in the world, but must abide by rules written over the past few decades by western banks, despite having operated correspondent accounts for many years and working as trusted partners in the global interbank market. Chinese banks' sense of unease about not setting the rules of the game has led to the establishment of many joint interbank associations with major emerging and partner economies around the world.

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Wed 12 Jun 2019 / Global

Trump tariffs threaten world economy

Donald Trump's hard-lin e stance on the China trade issue could lead to a slowing in the world's second largest economy. This is bound to have spillover effects on economies with which the country has strong trade links, and could contribute to global financial market instability. Seemingly oblivious to the lessons from the collapse of Lehman Brothers during the 2008 financial crisis, Trump appears to think that the US economy is insulated from the rest of the world economy and is immune from a global financial market meltdown.

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Wed 5 Jun 2019 / Global

Emerging markets spoil IMF optimism

The IMF is pinning its hopes for a much-needed boost to the world economy on an emerging market rebound in the second half of 2019. But continuing calamities in major emerging economies undercut such optimism. Argentina seems likely to befall more problems in the lead up to its presidential election in October, and Turkey's currency crisis is equally unlikely to abate in the near term. In Brazil, the first 100 days of President Jair Bolsonaro's administration are dashing investor hopes that the country could pursue serious economic reform.

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Tue 16 Apr 2019 / Global

Belt and Road delivers crucial capital

China's Belt and Road initiative provides access to capital for connected emerging markets that have not had the necessary investment grade ratings to tap international bond markets. Infrastructure, the core of Belt and Road funding, is and has been the engine of growth for most economies. But these emerging markets have never had the opportunity to attract offshore investors who require ratings dictated by their corporate policies. Nor do those investors have a high enough risk appetite to venture into uncharted emerging markets.

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Thu 11 Apr 2019 / Latin America Caribbean,Middle East,Global

'Submerging markets' pose global threat

Renewed currency weakness in Argentina and Turkey underlines the risks that emerging markets, or rather 'submerging markets', could pose to the global economic recovery. Fortunately, given their relatively small size, the Argentine and Turkish economies cannot by themselves constitute a significant threat. The same, however, might not be said of Brazil and Mexico. Both these countries appear vulnerable to crisis in the light of the seemingly shaky economic stewardship of their respective new presidents.

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Mon 18 Mar 2019 / Latin America Caribbean

Brazil on rough road to reform

Last month the Brazilian government presented its 'New Social Security' proposal to Congress. The government says the reforms are necessary to spark economic growth, though critics argue the new system would put excessive strain on the poor. President Jair Bolsonaro is resisting negotiations with congressional leaders on the basis of the traditional tit-for-tat that has long prevailed in Brasília, illustrated by the large presence of non-politicians in cabinet and in the leadership of state-owned enterprises and regulatory agencies.

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Thu 21 Feb 2019 / Asia Pacific

Financing emerging Asia infrastructure

Despite much discussion and effort, private capital is still not playing the role it can or should in financing infrastructure projects in emerging Asia. Increased geopolitical uncertainty and shifts in terms of sources of infrastructure financing, as well as broader trade and political partnerships, are accentuating market sensitivity in the region. In the light of such uncertainty, multilateral institutions such as the Asian Infrastructure Investment Bank can bolster public investment, given their ability to lend counter-cyclically and take longer-term exposures.

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Tue 12 Feb 2019 / Latin America Caribbean

Venezuela's death spiral

Under President Nicolás Maduro, Venezuela has fallen ever further into an economic death spiral. Evidence of this comes from Venezuela's inflation rate, which is running at 139,839% per year. At the same time that Washington declared economic war, Caracas announced it was going to devalue the bolívar in an attempt to allow its value to align with that in the black market. The official bolívar-dollar exchange rate plunged and shot past the black market rate. This realignment carries significant implications.

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Thu 24 Jan 2019 / Global

Emerging market trials persist

Last year's thrashing in all emerging market investment classes, with debt, equity and currencies in simultaneous decline for the first time in a decade, prompted reconsideration of allocation rationale into the next decade. Crises in Argentina and Turkey in 2018 were in part a replay of 2013 Federal Reserve-induced 'taper tantrum', as retail foreign investors sold indiscriminately. Contagion may yet spread, but for now index performance will continue to be subdued without the spectre of uncontrolled crashes.

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