By Jude Webber in Buenos Aires and Naomi Mapstone in Lima
Foreign investors pondering a plunge into Latin America will note with interest Mercer’s latest cost-of-living study, which confirms São Paulo as the most expensive city in all the Americas and high-altitude La Paz as the cheapest.
Of course, cost of living is just one of many factors that go into decisions about allocating staff and resources – not least the level of investment risk, which is still high in a region that sees its shares of coups, caudillos and nationalisations.
These risks aside, the region has made great economic strides and is proving ever more enticing. According to the latest United Nations estimates, FDI to the region should rebound 40 to 50 per cent this year after shrinking 42 per cent to $76.7bn in 2009 from a record high of $132bn the year earlier.
Vale: signs of a plot worry markets
Perhaps the bad news was already mostly priced in. Shares in Vale traded sideways on Wednesday after an almost 5 per cent slump the day before when investors factored in the possibility of more political interference from Brasilia in the world’s largest iron ore producer.
Vale said late Monday that Fabio Barbosa, the company’s CFO since 2002, was leaving the company to “pursue new professional challenges”. However the common suspicion is that Barbosa’s departure was related to last year’s moves by the government – which has a power of veto in the firm – to exert more influence over its dealings.
One all. That’s the score today between Spain and Portugal. After forcing its Iberian neighbour out of the football World Cup on Tuesday night, Spain got its payback on Wednesday when Portuguese prime minister José Socrates invoked the state’s golden shares in Portugal Telecom to override a shareholder vote in favour of the sale of its Brazilian joint venture to partner Telefónica of Spain.
Telefónica’s long struggle to take exclusive control of Vivo, Brazil’s biggest mobile operator and the jewel in the crown of both companies’ international portfolio, has become a proxy for centuries of rivalry. When national pride is at stake, commercial logic is often pushed aside.
Brazilian GDP: how much better can it get?
By Andrew Downie in Sao Paulo
The economic news from Brazil just gets better. The central Bank today predicted annual growth for 2010 would hit 7.3 per cent, a rise on the 5.8 per cent it predicted in March and an indication it expects the spectacular growth during the first quarter to continue for much of the year.
The increase follows a whopping 9 percent growth in GDP the first quarter, fuelled by strong domestic demand. What risks there are come from the rest of the world, says the bank, pointing to the potential worsening of Europe’s debt crisis.
But the central bank does not ignore the domestic worries. With a slight nod to the dangers of overheating, bank officials raised their forecast for annual inflation, to 5.4 per cent from 5.2 per cent. The bank recently raised interest rates after years of steady decline and they now sit at 10.25 per cent. A further increase is expected at the next rate-setting meeting in three weeks.
World Cup: Adidas ahead in battle of the brands
The Jabulani ball Adidas designed and manufactured for the tournament may have been controversial, but Europe’s largest sportswear manufacturer has had a good World Cup, at least when it comes to competition with industry rivals.
For a start, four teams wearing its kit (Germany, Argentina, Spain and Paraguay) have progressed to the competition’s quarter finals, while rival manufacturers have only two sides represented in this stage of the competition. Ghana and Uruguay play in Puma kits; Brazil and Netherlands in strips provided by Nike.
What’s more, since Adidas teams play against each other in matches due to take place this coming Friday and Saturday, two Adidas teams are certain to make the semi-final stage giving the company a 50:50 chance of appearing in the finals.
The Hungarian forint and Romanian leu recovered today boosted by positive decisions from the International Monetary Fund, which also gave support to markets in the rest of central and eastern Europe.
The Hungarian forint, the world’s worst performing currency this quarter, bounced back after six days of losses, advancing 0.9 per cent against the euro at Ft285. It recovered from this week’s record lows against the Swiss franc, as concerns about the levels of foreign-denominated debt receded a little.
Dubai: yet another shock for the sheikh
The blows to Dubai just keep on coming. Moody’s downgraded government-linked Dubai Holding Commercial Operations Group (DHCOG) yet again today, and warned that more downgrades could come.
DHCOG, the non-financial arm of Dubai Holding – an entity owned personally by Dubai’s ruler Sheikh Mohammed bin Rashid al Maktoum – is often said to be one of the healthier parts of the conglomerate, thanks to its ownership of companies such as the Jumeirah Group.
However, like a multitude of other Dubai-linked vehicles, it too got heavily involved in property development in the ritzy emirate, and is now paying the price.
Ukraine’s tax reform: stalling at the start
Ukrainian president Viktor Yanukovich has barely started with his long-awaited economic reforms – and already he is in trouble.
A close ally let the cat out of the bag this week. Lawmaker Vadim Kolesnichenko told an economic forum: “We should clearly understand, that its impossible to adopt deep structural and economic reforms now, because we will hold elections soon.”
The polls he was referring to – municipal and provincial elections on October 31 – are hardly the most important in Ukraine’s tumultuous election history. But for politicians all polls matter – so reform is in trouble.
Indian business leaders fear UK immigration cap will hurt business
Curry is a favourite dish among the British and most of the country’s 9,000 Indian restaurants boast chefs who hail from the land of daal and chapati. But those authentic flavours that are loved so much may soon be a little less than authentic.
The UK’s immigration cap has stung Indian industry leaders who are worried that that the new rules against non-EU immigration might impact Indian companies who heavily invested in the UK as well as those UK-based companies that rely on workers from the south Asian peninsula, particularly in services sectors such as IT, food and hospitality.
Dubai’s ambitions unbowed as world’s biggest airport gets flying
Don’t let Dubai’s debt pile fool you. The Gulf emirate still has the ambition to shock the world with its mammoth projects. Al Maktoum International airport, a huge $32bn development – nearer the border with Abu Dhabi than Dubai city itself – opened its first runway and cargo terminal to 12 freighter operators this week ahead of next March’s opening of a new passenger terminal – but the plan is to develop the world’s busiest airport.
Al Maktoum may be a legacy of Dubai’s boom years, which have now turned into a $110bn debt mountain and gaping real estate overhang. But the government shows no signs of slowing down aggressive expansion of both passenger and cargo flights, as the emirate seeks to exploit its strategic position and healthy track record in the industry.
Long after USSR’s collapse, red tape distorts Russian economy
Nearly 20 years after the collapse of the Soviet Union, Russia still has such a distorted economy that rules and regulations divert profits from one sector to another in cumbersome and highly-politicised ways.
Or, as a report from Troika Dialog, the Moscow investment bank, puts it: “The way to make money [in Russia] is to buy artificially cheap stuff (electricity, gas, rail transport) and turn it into something that can be exported at international prices (aluminium, fertilizer, steel).”
Local ban on open pit mining puts Xstrata’s Tampakan project on hold
A newly approved local government ban on open pit mining in the southern Philippine island of Mindanao shows why mining investors in the South-east Asian country of over 90m people need not just money and guts but also a lot of patience.
Signed by the governor of South Cotabato province, about 1,000km south of Manila, on her last day in office, the provincial environment code imposes an absolute prohibition on open pit mining ostensibly for being harmful to the environment. The local law could potentially derail plans by a unit of Swiss-based Xstrata Copper to develop South-east Asia’s biggest untapped copper and gold deposits in the province’s Tampakan town.
Deal of the day: Carlyle invests $190m in China Fishery group
By Francesca Ficai of mergermarket
Private equity group Carlyle’s announcement today of a $190m investment in the Singapore-listed fishing group China Fishery is a sign of the increasing attractiveness of suppliers to China’s food chain. Rising affluence in China and the demand which goes with it for a more diversified and higher quality diet are among the factors which have convinced investors like Carlyle, which will get a 13.62 per cent stake in the business through the private placement, to fill their boots.
Romania and Hungary to receive continued aid from IMF
Investors breathed a sigh of relief on Wednesday as both Hungary and Romania looked set to receive the continued, confidence-building assistance of the International Monetary Fund.
The leu broke a savage five-day losing streak after the IMF said its board would meet on Friday to discuss the disbursement of Romania’s next €900 million loan tranche. The leu hit a record low against the euro on Tuesday amid fears that the IMF might be forced to delay much-needed financing.
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