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Markets Warn of Political Risk in Chile, Colombia and Peru | Economy

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Markets Warn of Political Risk in Chile, Colombia and Peru |  Economy
Street in the community of Morro San Cristobal in Lima.Paolo Aguilar / EFE

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The economies of Chile, Colombia and Peru are showing strength even amid the ongoing COVID-19 pandemic, according to various investment banks and the country’s rating agency, but their political environment is contributing to market volatility. In reports released this week, analysts expressed concerns about populist politics, pressure on public finances and social unrest.

“The intense electoral cycle in the Andean region is increasing financial uncertainty amid growing pressure from social spending,” analysts at Fitch Ratings wrote in a report released Thursday. Chile will elect a new president later this year, elections will take place in Colombia in early 2022, and Peru has recently been sworn in by a new government. “Political tensions and social unrest that could impede economic growth or fiscal consolidation accumulated before the pandemic exposed weak health and social safety nets and income inequality,” the company said in a report.

Chile

The Chilean economy grew 1% in the second quarter of this year from the previous quarter, according to official data released on Wednesday. This slight slowdown from 3.4% growth in the first quarter is due to an increase in the number of infections reported in March, forcing the authorities to reintroduce containment measures. But economic forces such as private consumption, government spending, and investment continued to develop.

“Looking ahead, another round of withdrawals from pension funds, still low interest rates, strong global copper demand and a massive vaccination campaign should help the economy gain momentum in the coming quarters, which means Chile is in a good position to spearhead the region’s economic recovery this year, ”said Luciano Rostagno, market strategist at investment bank Mizuho, ​​in an address to clients. “We project gross domestic product to grow 10% this year, up from 9.0% the previous year.”

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Fitch, for its part, highlighted the government policies promoted by Congress in its report: “The most well-defined constitutional reform process in Chile has frustrated the population in the institutional environment, but Congress has initiated populist measures such as the withdrawal of funds from pension funds, and the presidential race remains open. “. Fitch downgraded Chile’s sovereign debt rating during the pandemic, but maintained investment grade.

Colombia

Colombia’s GDP grew 17.6% in the second quarter compared to the same period last year, but fell 2.4% from the previous quarter – more contraction than analysts had predicted. “Manufacturing, construction, and wholesale and retail trade saw a sharp decline in production in the second quarter amid rising coronavirus infections and disruptions caused by violent protests,” Rostagno said.

“We expect Colombia’s economy to pick up momentum in the coming quarters, as a marked drop in coronavirus cases allows the economy to resume operations and rebound, and favorable trade conditions will help boost the industrial sector,” said the markets specialist. “However, we must bear in mind that political uncertainty remains a major obstacle and can hamper investment.”

Polls show left-wing candidate Gustavo Petro will enter the second round of Colombia’s presidential elections in June, Fitch said in its report. “Petro does not advocate constitutional change, and the system of checks and balances will prevent radical changes in politics. The tax reform proposals were revised after widespread reaction, ”the agency added. Fitch downgraded Colombia this year, causing its debt to lose its investment grade.

Peru

Peru’s economy was also impacted by mobility restrictions at the start of the second quarter, so analysts expect quarterly GDP, which will be released on Monday, to be close to the level of the previous quarter.

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“In June, activity continued to show strong year-on-year growth, even above the level reached in June 2019 (before the health crisis),” analysts at investment bank BBVA said in a report released this week. “And employment is also following a normalization trajectory, but weak confidence in private sector agents is likely to affect their future spending, holding back both activity recovery and employment.”

Weak confidence refers to the uncertainty that investors have expressed about Peru since the rise to power of President Pedro Castillo, whose government has already passed its first resignation and has been criticized for mistakes and lack of clarity. “Political uncertainty remains high in Peru following the election of Pedro Castillo with a leftist populist platform,” Fitch analysts say. “Castillo has moderated some of the campaign’s proposals, and radical changes in the free market economic model will be met with resistance.”

“But their plans for a Constituent Assembly could impact investment and growth prospects,” the agency added. “Governance challenges overshadow the prospects for reforms to reduce informality in the labor market.”

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Politics

The dollar continues to reflect the political scenario

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The dollar continues to reflect the political scenario

Yesterday, financial agents evaluated the opposite decision of the Federal Supreme Court (STF) regarding the so-called secret budget. In addition, a decision was made by STF Minister Gilmar Méndez to issue an injunction that would exclude the Bolsa Família from the spending cap rule, with investors trying to understand how this measure would affect the processing of the transitional PEC in the Chamber of Deputies. Oh this PEC!!!!

Since he is an exchange investor, any reading that the budget will be exceeded or become more flexible will negatively affect the exchange market, whether through the PEC or in any other way. We will continue with volatility today.

Looking beyond, the US Central Bank (Fed), although slowing down the pace of monetary tightening at its December meeting, issued a tougher-than-expected statement warning that its fight against inflation was not yet over, raising fears that rising US interest rates will push the world’s largest economy into recession.

The currency market continues to react to political news. The voting on the PEC is saved for today. It is expected that it will indeed be reviewed to open the way tomorrow for discussions on the 2023 budget.

Yesterday, the spot price closed the selling day at R$5.3103.

For today on the calendar we will have an index of consumer confidence in the eurozone. Good luck and good luck in business!!

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Andrés Sánchez consults with the Ministry of Sports, but refuses a political post.

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Goal.com

The former president of the Corinthians dreams of working for the CBF as a national team coordinator. He was consulted shortly after Lula’s election.

Former Corinthians president Andrés Sánchez was advised to take a position in the Ministry of Sports under the administration of Lula (PT). However, he ruled out a return to politics. dreams of taking over the coordination of CBF selectionHow do you know PURPOSE.

No formal invitation was made to the former Corinthian representative, only a consultation on a portfolio opportunity with the new federal government, which will be sworn in on January 1, 2023.

Andrés was the Federal MP for São Paulo from 2015 to 2019. At that time he was elected by the Workers’ Party. However, the football manager begs to stay in the sport, ruling out the possibility of getting involved in politics again.

Andrés Sanchez’s desire is to fill the position of CBF tackle coordinator, which should become vacant after the 2022 World Cup. Juninho Paulista fulfills this function in Brazil’s top football institution.

The former president of Corinthians was in Qatar to follow the World Cup along with other figures in Brazilian football. During his time in the country, he strengthened his ties with the top leadership of the CBF.

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The EU has reached a political agreement on limiting gas prices – 19.12.2022

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Germany sentenced Russian to life imprisonment for political murder by order of Moscow - 12/15/2021
BRUSSELS, DECEMBER 19 (ANSA). European Union countries reached a political agreement on Monday (19) to impose a natural gas price ceiling of 180 euros per megawatt hour (MWh). The main sources of income for Russia and the minimization of the use of energy as a weapon by the regime of Vladimir Putin.

The agreement was approved by a supermajority at a ministerial meeting of member states in Brussels, Belgium, after months of discussions about the best way to contain the rise in natural gas prices in the bloc caused by Russia’s invasion of Ukraine. .

The value set by the countries is well below the proposal made by the European Commission, the EU’s executive body, in November: 275 EUR/MWh. However, the countries leading the cap campaign were in favor of an even lower limit, around 100 EUR/MWh.

Germany, always wary of price controls, voted in favor of 180 euros, while Austria and the Netherlands, also skeptical of the cap, abstained. Hungary, the most pro-Russian country in the EU, voted against.

The instrument will enter into force on 15 February, but only if natural gas prices on the Amsterdam Stock Exchange exceed 180 euros/MWh for three consecutive days. In addition, the difference compared to a number of global benchmarks should be more than 35 euros.

Italy, the EU’s biggest supporter of the ceiling, has claimed responsibility for the measure. “This is a victory for Italy, which believed and worked for us to reach this agreement,” Environment and Energy Minister Gilberto Picetto tweeted.

“This is a victory for Italian and European citizens who demand energy security,” he added.

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Currently, the gas price in Amsterdam is around 110 EUR/MWh, which is already a reflection of the agreement in Brussels – in August the figure even broke the barrier of 340 EUR/MWh.

However, Russia has already threatened to stop exports to countries that adhere to the ceiling. (ANSA).

See more news, photos and videos at www.ansabrasil.com.br.

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