CAF Announces new common agenda for China and Latin America

UNA AGENDA COMÚN PARA CHINA Y AMÉRICA LATINA

En Beijing se realizó la tercera edición de la Conferencia CAF-ILAS, dedicada este año al tema Desarrollo y Transformación: Una Agenda Común para China y América Latina

El Presidente Ejecutivo de CAF –banco de desarrollo de América Latina– en visita a ese país se reunió con altas autoridades del mundo político, financiero y académico de Beijing y Shanghái.

(Shanghái, 10 de mayo de 2013).- “Desde América Latina y China debemos avanzar conjuntamente en la construcción de una relación estratégica de largo plazo que sea integral, dinámica y equilibrada”, dijo Enrique García, presidente ejecutivo de CAF –banco de desarrollo de América Latina– durante una visita de trabajo de cinco días a China, donde se reunió con altas autoridades del mundo político, financiero, empresarial y académico de Beijing y Shanghái.

Ésta se realizó en el marco de la III Conferencia CAF-ILAS, así como en la labor de este banco multilateral en tender puentes entre ambas regiones, con miras a promover el desarrollo sostenible de América Latina.

En la primera etapa del periplo, en Beijing, se destacaron los encuentros sostenidos con el Ministerio de Relaciones Exteriores, el Ex-Im Banco de China; y el International Economic Club of China. El Presidente Ejecutivo de CAF subrayó las excelentes relaciones entre la institución financiera latinoamericana y el país asiático, cumpliendo así su rol catalítico entre ambas regiones.

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Chinalco Mining tumbles 6.3pc on trading debut

[Source] : South China Morning Post

Shares in Chinalco Mining Corp International, which is developing a copper mine in Peru, closed 6.3 per cent lower than their offered price on their trading debut yesterday.

The sharp price fall might have been caused by retail investors, who tended to have a short investment horizon and were not familiar with the company’s operations and outlook, analysts said.

Chinalco Mining is the overseas non-aluminium and non-ferrous metals arm of state-owned Aluminum Corp of China (Chinalco).

“Chinalco Mining’s operation in Peru is a long way from Hong Kong and production will only begin late this year, so it’s not easy for local investors to picture its prospects,” said Christfund Securities research director Simon Lam Ka-hang.

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inPERU: La estrategia para atraer inversionistas extranjeros

CSA Analysis – Latin America – China in focus

As the spread of article excerpts below will exhibit, the China – Latin America relationship and its future will be more than simple a complementary exchange of Latin American natural resources for Chinese manufactured goods. Although, as the 4th article indicates below, from China’s State Media Giant Xinhua explains, the corner stone of Sino-Latin American relations still remain within the realm of the “complementary exchange,” the two regions offer one another.  However, as CSA attempts to exhibit in this piece, the growth of Sino-Latin American ties also includes:

1/ Cheap Chinese Loans (especially to countries cut off from borrowing  raising money on international markets), which represent new sources in which Latin American countries can borrow money and raise money instead of traditional means they have been forced to reply upon since independence – Loans from European and US Banks, issuing bonds, shares in companies on international stock markets, and other financial market market vehicles where international investors allocate their money in Latin America.

2/ Beyond new markets for China’s manufactured goods, China has began to aggressively expanded into Latin America’s service sectors — Banking, Telecommunications, Logistics, and more.

3/ Defense… A rather sensitive and misunderstood area of cooperation because both China and their counter-parts in Latin America do not go into great detail to explaining very clearly what their ultimate goals for enhancing military cooperation may be.  As the author of this blog who has followed this topic for many years, I am personally of the opinion that is it all about following the money trail. An actual military alliance or very close military ties with a specific country in Latin America would be very difficult for me to imagine.  The US, various countries within Latin America, others and around the world would have serious reasons to prevent such from every being reality. Not to mention, US Presidents throughout history have periodically used the proclamation of the policy outlined in the Monroe Doctrine, signed into being US President Monroe on December 2, 1823 to justify intervention in the hemisphere.

The Monroe Doctrine in short, is a statement made to the world that further efforts by other nation states to colonize land or interfere with independent states in North or South America would be viewed as acts of aggression, requiring U.S. intervention if deemed necessary. 

U.S. presidents, including Theodore Roosevelt, John F. Kennedy, Lyndon B. Johnson, Ronald Reagan have all fallen back on this proclamation to justify action in one form or another.  I don’t doubt for a second that if China’s expansion in the region, militarily speaking reached a tipping point where the a present day US President would find a means in which to justify intervention.  Perhaps again falling back on the policy outlines by the Monroe Doctrine, and adapted within context of current, present day geopolitics of the world.

Instead, as I mentioned above it’s about the money. The US, Europe, The UK, Russia, and now even Japan (which recently passed legislation allowing it to participate in the ever more lucrative market or arms trade), is where China’s primary interest lies. Just like China wants markets for its manufactured goods and services, there is also a great deal of money to made in selling the arms markets of the world, especially when you consider a region which has oddly enough in recent years began to increase military spending (see this article for more information regarding Latin America’s increase in Military Spending.

 

China Grabs Share in Latin America Wind With Cheap Loans

[Source] : BusinessWeek

By Stephan Nielsen on November 20, 2012

Chinese wind-turbine makers have broken into the South American market, the world’s fastest- growing, by offering government-backed loans at interest rates as much as 50 percent lower than local offerings.

The package deals can get buyers to choose Chinese machines over those of Western manufacturers such as Vestas Wind Systems A/S (VWS) of Denmark or General Electric Co., much in the way the U.S. government helps American exporters sell everything from cotton to satellites by guaranteeing loans or insurance.

…

Chinese Loan

Geassa, short for Generadora Eolica Argentina del Sur SA, is seeking a 12-year loan with a two-year grace period and an annual interest rate of 6 percent above Libor, the London interbank offered rate. The financing may be complete by June, he said. The company will use Chinese turbines and hasn’t selected a supplier.

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Correlation Breakdown as Asia, Latin America Diverge: Currencies

[Source] : BusinessWeek

By Ye Xie on November 20, 2012

Asian currencies that once moved in lockstep with their Latin American peers are diverging by the most ever as China attracts investors to the region without boosting commodities, the main exports for Brazil and Chile.

The four-week correlation between the currencies of the two regions reached minus 1 last month, meaning they always move in the opposite direction, according to index data compiled by Bloomberg and JPMorgan Chase & Co. As recently as May, the correlation was plus 1 as the indexes moved in tandem. The Chinese yuan has climbed to 19-year highs amid gains in retail sales and the South Korean won reached the strongest since 2011, while Brazil’s real and the pesos in Mexico, Chile and Colombia weakened over the past two months.

“Usually when people buy China, it boosts currencies in both Latin America and Asia,” Dirk Willer, the head of Latin American local-markets strategy at Citigroup Inc. in New York, said by phone. “But this time around, given that the commodity link isn’t working, people get bought up on Asia but not on Latin America. There’s a long-term structural story.”

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China Construction Bank Still Looking to Expand Into Latin America

[Source] : The Wall Street Journal

By Ryan Dube November 21, 2012, 1:37 p.m. ET

LIMA, Peru–State-run China Construction Bank Corp. (CICHY, 0939.HK, 601939.SH) is still looking to expand to Latin America and could announce plans to open an office in the region “quite soon,” a company executive said.

China’s second-biggest bank by assets is looking at acquisition targets and expansion opportunities throughout the region but especially in Brazil, said John Weinshank, head of corporate banking and trade finance at China Construction Bank’s U.S. branch.

Chinese companies are investing heavily in Latin America as they look to develop natural resources needed to fuel the Asian country’s rapid growth. One of the biggest Chinese investments in the region was the $7.1 billion deal by state-owned China Petrochemical Corp., or Sinopec, to purchase a 40% stake in Repsol YPF SA’s (REP.MC, REPYY) Brazilian unit.

In Peru, one of the world’s top mineral producers, Chinese companies are developing several copper and iron-ore projects. Together, these projects will require investments of about $11.4 billion, according to figures from Peru’s Mines and Energy Ministry. Chinese-owned projects represent about 20% of the total pipeline of investment projects in Peru’s mining sector.

“The bank is very keen to expand into the region and set up a foothold,” Mr. Weinshank said in an interview during the Latin American Banking Federation’s annual conference in Lima, which ended Tuesday. “Our customers are here and are doing business, so we have to follow our customers.”

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Economies of China, Latin America complementary: bank official

[Source] : Xinhua / China People’s Daily

LIMA, Nov. 20 (Xinhua) — The economies of China and Latin American countries are highly complementary, and bilateral trade has enjoyed rapid growth, a Chinese bank official told the 46th Annual Meeting of the Latin American Federation of Banks here on Tuesday.

The expansion of China’s domestic demand has been a driving force of Latin American economies, Ma Suhong, deputy division chief of Urban Finance Research Institute at the Industrial and Commercial bank of China said on the last day of the two-day event.

Ma noted that China invested a total of 12 billion U.S. dollars in Latin America in 2011. She attributed the fast development of China-Latin America cooperation partly to China’s large domestic need and economic woes suffered by the United States and European countries.

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Chinese defense minister meets with Latin American guests

[Source] : Xinhua / China People’s Daily

BEIJING, Nov. 20 (Xinhua) — Defense Minister Liang Guanglie met with delegates to the 1st China-Latin America high-level defense forum on Tuesday.

Liang hailed the increasingly close relations between China and Latin American countries in recent years, noting that the two sides have enjoyed frequent high-level visits, deepening political mutual trust, strengthening communication and cooperation, as well as effective coordination on major international affairs.

He said the forum shows that China attaches great importance to developing military relations with Latin American countries.

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Latin America on Obama’s re-election – US views of the region – US Latin American Foreign Policy

As many news programs, news papers, bloggers, and commentators of all sorts have mentioned — Latin America (Immigration Reform and the War on Drugs to) where virtually ignored throughout the entire campaign and mentioned only one time during the Presidential Debates by Mitt Romney.

Yes there are a great many problems around the world.  Particularly in the Asia-Pacific, North Africa, and Middle East regions.  Not to mention the Eurozone economic crisis, or Hurricane Sandy, but to totally ignore 3/4 of the geographic space in the Western Hemisphere… As your author I say “Shame on you United States of America, and I implore your elected officials to begin paying more attention to your neighbors down South!”

Below CSA presents some articles from different perspectives and sources which are examining this question of why the US has so ignored the region of Latin America.

 

Reuters: Analysis: Obama faces Latin America revolt over drugs, trade

By Brian Winter
SAO PAULO | Fri Nov 9, 2012 9:55am EST
(Reuters) – President Barack Obama will face an unprecedented revolt by Latin American countries against the U.S.-led drug war during his second term and he also may struggle to pass new trade deals as the region once known as “America’s backyard” flexes its muscles like never before.

Washington’s ability to influence events in Latin America has arguably never been lower. The new reality is as much a product of the United States’ economic struggles as a wave of democracy and greater prosperity that has swept much of the region of 580 million people in the past decade or so.

It’s not that the United States is reviled now – far from it. Although a few vocally anti-U.S. leaders like Venezuela’s Hugo Chavez tend to grab the media spotlight, Obama has warm or cordial relations with Brazil, Mexico and other big countries in the region.

Most Latin American leaders were rooting, either privately or publicly, for his re-election on Tuesday.

Click here to read the complete article direct from Reuters

 

The Guatemala Times: The US elections: a view from Latin America

It has been this year’s most notable absentee: whatever happened to Latin America as a theme in the presidential campaign?

A great paradox in Tuesday’s United States elections is that of the growing significance of the Hispanic vote and the almost total absence of Latin America on the candidates’ agenda. The Hispanic vote is particularly important in swing states such as Florida and Nevada, although its presence is much wider—in California, Texas, Arizona, New York, New Mexico and Illinois, among other states.

Though the relationship between Hispanic voters and black candidates has been historically a complex one, Hispanics came through for Barack Obama in 2008, with 65% of their votes going to the candidate of “hope and change”. This time, polls indicate as much as 70% of them will vote for the incumbent president. This could make the difference between winning or losing in Nevada (where Obama is ahead, albeit by a small margin) and in Florida (which is essentially tied).

In years to come, the state to watch is Texas. According to many observers, the growing Mexican-American population there, whose most visible up-and-coming leader is Julian Castro, the charismatic mayor of San Antonio, who delivered a rousing keynote at the Democratic Convention in Charlotte last August, will mean that some point in the near future the Hispanic vote will have Texas switch from a Republican to a Democratic majority state. With California and New York already in that camp, flipping Texas may mean relegating the Republican party to a permanent minority condition in the Electoral College, confined to the Deep South and the Rocky Mountain states.

Click here to read the complete article direct from the Guatemala Times

 

World Policy Blog: The U.S. Should Stop Ignoring Latin America

By Robert Valencia

A great share of the world grew disappointed after seeing the last debate between President Barack Obama and former Governor Mitt Romney, where foreign policy rhetoric geared heavily toward Middle East and Chinese affairs. Latin America only received one brief mention by Romney. Given the current domestic gridlock in Washington D.C. and the mounting turmoil in Syria and Afghanistan, Latin America is doomed to be on the back burner once again, but a new White House administration should change this by curbing the War on Drugs and strengthening its bonds with Brazil, the second largest economy in the Americas

Latin Americans should not expect a 180-degree change in U.S. policies after the election. During the first Republican debates this year, three presidential hopefuls—Romney included—talked about Cuba and Venezuela’s possible connections with Al-Qaeda, and expressed their wish to see Fidel Castro dead. Yet no Republican candidate offered concrete steps in fostering democracy, strengthening economic bonds or improving security.

Both Obama and Romney have vowed to continue the U.S. War on Drugs. At the Summit of the Americas in Colombia, President Obama emphasized that he would not change the draconian policy, despite its dire consequences for those both north and south of Rio Grande. Likewise, Romney made clear on U.S. Hispanic TV channel Univision that he would continue the same drug policies as the current administration. No, the White House will not change its position, despite the outrageous death toll in Mexico, the new routes for smuggling narcotics onto U.S. streets, the indiscriminate incarceration of U.S. citizens of color for possessing small amounts of drugs, and the disastrous effects on Central American villages of military raids against drug kingpins.

Click here to read the complete article direct from the World Policy Blog

 

NACLA (North American Congress on Latin America): Obama’s Election and the Caribbean: What Does it Mean?

Kevin Edmonds
The Other Side of Paradise
November 8, 2012

Early Wednesday morning the Caribbean breathed a sigh of relief with the re-election of Barack Obama. A Romney victory would have ushered in a period of uncertainty, as it was expected that he would pursue a more aggressive stance towards Cuba and other left leaning governments in the region. During the debates however, it became apparent that Latin America and the Caribbean was not an area of deep concern for either candidate as the foreign policy discussion was intensely focused on matters relating to the potential conflict with Iran, security in post-Gaddafi Libya, Israel/Palestine, Syria and the trade imbalance with China.

While Caribbean Prime Ministers immediately extended their congratulations to Obama, their expressions of cautious optimism also came with calls for more meaningful engagement with the region. For example, Dominica’s Prime Minister Roosevelt Skerrit sent his congratulations to Obama, remarking that “The relationship between the United States and Dominica continues to be strong, based on mutual respect…we work very diligently on matters relating to regional security and we look forward to advancing those efforts. Clearly, the U.S. focus is on anti-terrorism matters and they moved away from issues relating to development in the region. But I am hoping that the new term of President Obama there would be some kind of re-direction towards developmental issues.”

Click here to read the complete article direct from NACLA

 

The Huffington Post: Latin America 2013: A Look Ahead

By Eric FarnsworthVice President, Council of the Americas

Assuming that the world does not end, according to the Mayan calendar in December, 2013 will be an important year south of the U.S. border. There are a number of issues to watch in determining the hemisphere’s direction, although most depend less on the Nov. 6 election results and more on factors that are out of White House control. Savvy observers of the region will watch the 10 “C’s” as the real policy drivers.

The first of these is Castro, as in Raul and Fidel. The U.S. election may bring a moderate tightening or loosening of U.S. restrictions on engagement with the island. The Cuban regime may or may not continue its episodic policy liberalization — Cuban perestroika — as a means to extend rather than overturn the Cuban system. But the real driver of change will be the death of one or both of the Castros. While it’s true that no one has yet won a bet predicting their death, even the Castro brothers will succumb at some point to nature. Each passing year makes that more likely. When they do, there will be a power struggle on the island, and the United States will be faced with the critical decision of how to respond. This will be a game-changer, with historic implications, sucking the oxygen out of other hemispheric policy matters at least for a time. It is the one issue above all others that has the potential to scramble hemispheric policy, putting bilateral relations on the road to normalization and removing an irritant in the broader hemispheric agenda. Or not. The truth is that nobody knows what will come after the Castros, but the U.S. response must be nuanced and appropriate so as to encourage, rather than discourage, the advent of true democracy on the island.

The second “C” is related: Chavez. Having been re-elected Oct. 7 to another presidential term, Venezuela’s Hugo Chavez nonetheless is battling cancer, which some say is quite serious; others give a more optimistic prognosis. Whatever the truth, it appears that Chavez is taking steps to position his supporters to continue the Bolivarian Revolution after he passes, most notably with the elevation of Nicolás Maduro to the vice presidency. Still, nobody in Venezuela appears to have the same charisma as Chavez, whose margin of victory in October was much less than in previous elections. Chavez won; Chavismo apparently took it on the chin. A power struggle is a strong possibility after Chavez passes away. Here, again, if Chavez dies, the United States will face an immediate challenge, working with others in the hemispheric including Brazil and Colombia to midwife a peaceful transition with a hoped for institution of the transparent social democratic model that has worked wonders in Brazil, Chile, Peru, Uruguay, and elsewhere in the Americas.

Click here to read the complete article direct from The Huffington Post

Venezuela y China – El Universal

[Source] : El Universal

ALFREDO TORO HARDY | EL UNIVERSAL
jueves 20 de septiembre de 2012 12:00 AM

Muchos países latinoamericanos se quejan de una relación desigual con China. No es el caso venezolano

En 2011 el comercio entre Venezuela y China alcanzó 18 millardos de dólares, lo que multiplicó por 24 los 742 millones de dólares que registró el intercambio comercial en 2003. Al culminar este año se estima que el intercambio llegará a 23 millardos, lo que representaría 31 veces más que nueve años antes. En 2011 la balanza comercial favoreció a Venezuela y otro tanto se espera que ocurra en 2012 (“Venezuela-China”, Special Supplement, ChinaDaily, June 28, 2012).

Pero más allá del comercio están los proyectos previstos o en desarrollo bajo la cobertura del Fondo de Inversiones conjunto que comenzó a operar en 2007 y al cual, hasta noviembre de 2011, China había comprometido 32 millardos de dólares. Para finales de 2011 Venezuela contaba con una cartera de más de 25 mil millones en proyectos de desarrollo financiados por el China Development Bank. Algunas de las iniciativas bajo ese marco se localizan en territorio venezolano y otras en China.

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Noticias de Argentina y China en foco

China confirmó que comprará más soja argentina

[Source] : Primera Edicion

El Gobierno de China confirmó la compra de 2,4 millones de toneladas de productos de soja argentinos, lo que significó un incremento del 10 por ciento en lo que va del año en comparación con igual período de 2011.

Así lo indicó el ministro de la Administración Estatal de Granos (AEG) de China, REN Zhengxiao, durante un encuentro con el titular de Agricultura argentino, Norberto Yauhar, quien resaltó que se recuperaron las ventas de aceite de soja a China.
También señaló que existe interés de la Argentina por “consolidar su posición como proveedor de granos y sus derivados a China”, expresó un comunicado oficial. Durante la reunión ambos funcionarios enfatizaron en la firma del “Memorando de Entendimiento sobre Cooperación en Materia de Granos” que tuvo lugar entre ambos Ministerios en junio pasado. Fue durante la visita del primer ministro WEN Jiabao a la Argentina. “Asimismo, Yauhar remarcó que se encuentra plenamente operativo el Protocolo Fitosanitario para exportar maíz argentino a China, esperando que las grandes empresas estatales de China (SINOGRAIN, COFCO, Chinatex, entre otras) comiencen prontamente a realizar las primeras órdenes de compra”, se explicó. Se buscó agilizar los procesos de comercialización mediante reuniones de referentes de la delegación argentina con empresarios.

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China ya superó a la Argentina como proveedor de autopartes a Brasil

[Source] : La Cronista

EDUARDO LAGUNA San Pablo

Con precios competitivos y escala de producción suficiente para abastecer su mercado local de vehículos -el más grande en términos globales-y enviar productos al resto del mundo, China está entre los cuatro mayores proveedores de autopiezas de Brasil.

Este año, los chinos superaron a Argentina, tradicional socio de la industria automovilística local, pero que perdió la cuarta posición por las barreras comerciales que impuso Brasil en respuesta a las trabas levantadas por el gobierno de Cristina Kirchner a la entrada de productos brasileños al país vecino.

Los proveedores nacionales se quejan por los bajos precios de los productos chinos, que aseguran se obtienen, muchas veces, sacrificando la calidad. Los importadores, a su vez, destacan el papel de los importados como regulador de precios y calidad de los productos brasileños, forzando a la industria nacional a aumentar la competitividad.

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Argentina está más cerca de exportar embriones bovinos a China

[Source] : Punto Biz

El Ministro de la Administración General de Supervisión de Calidad, Inspección y Cuarentena (AQSIQ) de China, ZHI Shuping, le confirmó hoy al Ministro de Agricultura, Ganadería y Pesca de la Nación, Norberto Yauhar, la realización a partir del mes de octubre de auditorías en nueve centros de inseminación artificial y transferencia de embriones bovinos. “Es el último paso para poder comenzar a exportar a China estos productos”, afirmó Yauhar luego de la reunión en la sede de la AQSIQ, en Beijing.

En este sentido, ZHI Shuping aseguró que “la relación con Argentina está viviendo una etapa muy exitosa. Hay una necesidad de ambos países de fortalecer esta relación estratégica”.

Las inspecciones servirán para hacer operativos los Protocolos Sanitarios firmados en la visita de mayo. “Argentina no sólo transfiere productos con alto valor agregado, sino también tecnología, conocimiento y desarrollo agropecuario”, remarcó Yauhar.

Como resultado del encuentro, el titular de la cartera agropecuaria nacional además confirmó: La inspección veterinaria a nuestro país para concluir el análisis de riesgo para la exportación de caballos vivos a China. “Existe una gran demanda de caballos para actividades deportivas y esparcimiento, y esta visita es un requisito esencial para poder completar la negociación y firmar el Protocolo Sanitario que abra el mercado chino a nuestros caballos”, resaltó Yauhar.

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China, un mercado jugoso para México

(*) Note: Apologies to non-Spanish speaking readers of CSA. This article and its content I have only been able to find in Spanish. 

 

[Source] : Alto Nivel

Las empresas mexicanas pueden perder una oportunidad de oro si no exportan al otro lado del Pacífico. Pero ya existe una incubadora para acelerarlo.

Muchos hilos comerciales se están tejiendo en Asia, y México corre el riesgo de perder una oportunidad de oro si no comienza a exportar al otro lado del Pacífico. La balanza comercial México-China es claramente favorable para Pekín, las exportaciones mexicanas han crecido hasta superar los 5 mil millones de dólares (mdd) en 2011, pero sus importaciones desde ese país son casi 10 veces superiores.

Después de Estados Unidos, desde donde México importa más de la mitad de todos los bienes y servicios que compra fuera, viene China, origen de más del 15% de las importaciones.

Otros países asiáticos, como Corea del Sur, representan el 4% de las importaciones nacionales, aproximadamente. Taiwán y Malasia se cercan al 2% cada uno. Sin embargo, la mayoría de las exportaciones mexicanas siguen dirigiéndose a Estados Unidos, lo que pone en evidencia la carencia de productos mexicanos en los mercados asiáticos. Esta tendencia puede crecer si se abre una zona de libre comercio con Asia y las consecuencias para la industria nacional, aunque impredecibles, son potencialmente desastrosas, a menos que Gobierno y empresas tracen una estrategia integral de comercio con Asia.

Diferentes estudios indican que China será la primera economía mundial en las próximas décadas. El ritmo y la constancia del crecimiento del gigante asiático es incuestionable y el ascenso de una clase media china trae consigo un mar de posibilidades comerciales para las empresas que miran al lejano oriente.

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Asia eyes Brazil’s growing consumer market – Focus

[Source] : GMA News

SAO PAULO — With Europe and the United States in the economic doldrums, Asian manufacturers are setting their sights on Brazil’s lucrative consumer market ahead of the 2014 World Cup and the 2016 Olympics.

This week, the manufacturers took their roadshow to Sao Paulo, Brazil’s economic capital, for a three-day trade fair showcasing samples of products – such as electronics, textiles, home goods and building materials – they hope to sell across the region.

China Sourcing Fairs, the first such event to be held here, drew 340 suppliers from mainland China, 41 from Hong Kong, 29 from India and seven from Taiwan, as well as potential buyers from across Brazil and South America.

Click here to read the complete article

Currency Flows Reversing China to Colombia as Trade Slows

[Source] : Bloomberg Businessweek

Just three months after the biggest developing economies sold dollars to support their currencies, policy makers from Colombia to China are moving to weaken exchange rates and revive exports as the International Monetary Fund forecasts the slowest trade growth in three years.

Colombian Finance Minister Juan Carlos Echeverry urged the central bank on Aug. 3 to boost minimum dollar purchases from $20 million a day, saying the country needs “more ammunition” to drive down the peso in the global “currency war.” The Philippines banned foreign funds from deposit accounts and unexpectedly cut interest rates in July as the peso hit a four- year high. In China, authorities lowered the yuan reference rate to the weakest since November, which according to Citigroup Inc. will create “headwinds” for other Asian currencies.

After spending more than $59 billion in foreign reserves in May and June to stem currency depreciation, developing nations are reversing policies as the European debt crisis outweighs the risk of faster inflation. South Korea and Chile may weaken exchange rates to make their exports cheaper, according to UBS AG. The IMF estimates global trade will expand at the slowest pace since 2009.

“Policy makers will become more aggressive,” said Bhanu Baweja, a London-based strategist at UBS. “The currency strengthening is in contrast with the state of the economy. That argues for much weaker foreign-exchange rates.”

Click here to read the complete article from Bloomberg Business Week