capital flight

This is cyclone 96S, currently heading for the island of Mauritius:

Source: MetoMauritius

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In 11 years as Russia’s central bank governor, Sergey Ignatyev has generally kept a low profile. But he seems to have decided to go out with a bang.

In a Vedomosti newspaper interview on Wednesday, he revealed that nearly $50bn was transferred out of Russia “illegally” in 2012 and more than half the money may have been controlled by a single group of people. That sounds vague. But it isn’t. In Russia, a single group of people could only operate on this scale with the knowledge of those in power. A brave man is Ignatyev. Read more

By Marcus Svedberg of East Capital

It became quite popular last year to question emerging markets in general and the Brics in particular. Analysts started to doubt the sustainability of their economic models following a deceleration in growth rates, even though the source of the problem was primarily to be found in developed economies.

This was perhaps a macro version of the irrational financial “flight to safety” that characterised most of 2011. Read more

Huge capital outflows have been a glaringly visible sign of Russian business people’s distrust of president Vladimir Putin’s rule. Worried about corruption, property rights and the rule of law, the rich have been funneling their money abroad. Right?

Wrong, actually. So says a study published this week which argues that Russian outflows are only half as big as officially reported, due to peculiarities in Russia’s statistics. The new analysis won’t be the last word on a complex subject – but it’s already prompted Russian officials to consider taking another look at the numbers. Read more

Bruce Bower of Verno Capital.

Market watchers have been preoccupied with a myriad of crises over the last three years, but it is still surprising that the world seems to have missed an important fundamental change in Russia’s economy.

Since 2009, Russia has abandoned fixed or managed exchange rates and moved towards a freely floating rouble. Monetary policy and interest rates, previously set by global financial markets, are now managed by the Central Bank of Russia (CBR) in an inflation-targeting system similar to most western central banks. The benefits are obvious: the economy now has a shock absorber to offset volatile movements in the price of oil and international capital flows. How will this benefit investors? Read more

In 2009, G20 leaders proclaimed: “The era of banking secrecy is over.” They pledged to close down secrecy jurisdictions that enabled banks to take risks off their balance sheets and allowed wealthy companies and individuals to evade tax.

It was an empty pledge, according to a weekend report by former McKinsey chief economist James Henry, and it is costing emerging market governments a lot of money. Read more

There was a big drop in capital flight from Russia during the second quarter of this year, according to the latest central bank figures. At first glance, that could be read as a sign that confidence in the investment climate is returning after huge capital flight over the last year.

But economists say the drop may have more to do with seasonal factors and the falling price of oil – leaving exporters with less cash to stash abroad – than with any belief that Russia is on track for institutional reforms that would combat corruption and better protect property rights. Read more

To the rising flow of anecdotal evidence suggesting China’s rich are taking their money out of the country, add this: China is now one of the fastest-growing sources of international buyers for US real estate.

According to a report published by the National Association of Realtors this week, buyers from China and Hong Kong made up the second largest group of foreign buyers of homes in the US in the 12 months to March – behind only Canadians – accounting for $9bn of sales. Read more

Dubai’s recovery after 2011′s regional unrest has been plain to see. The city’s hotels are bursting again, and real estate agents are smiling as the property market bounces off last year’s floor.

The flow of deposits into the UAE as money fled the regional unrest was spotted in central bank figures last year, but new statistics show that Dubai’s financial centre recorded an even more dramatic increase in deposits. Read more

As well as bashing the US and the independent media in assaults on his critics, Russian prime minister Vladimir Putin isn’t sparing big business.

In a meeting with media representatives on Wednesday, Putin berated Washington over missile defence and, as the FT reported, turned on the independent radio station Ekho Moskvy, accusing it of serving the interests of “foreign” countries.

And, along the way, he took a swipe at Russia’s oligarchs, accusing them of fuelling a “negative attitude to business”. Expect more of this in the run-up to the March presidential election where Putin’s challengers include oligarch Mikhail Prokhorov. This could be tricky time for business in Russia, including foreign investors. Read more

Russia’s total capital outflows in 2011 were $84bn as political uncertainty in the fourth quarter caused volumes to rise sharply.

However, while the year’s outflows are the second largest ever recorded in absolute terms, they are not as significant when measured against overall GDP. Read more

China hit the stimulate button on Wednesday as slowing growth and inflation spurred the government into action – vindicated by Thursday’s negative PMI number.

Beijing’s 50 basis point cut in reserve requirements for all China’s banks was a decisive shift in monetary policy and one that is set to continue into 2012. But confusing this round of easing with the enormous stimulus package unrolled in 2009 would be a mistake. Read more

Hugo Chavez may like to indulge in a bit of fist-shaking at the gringos every now and again, but often he can inadvertently be quite useful to what he likes to call the “evil empire”.

Most recently, he has helped to power a recovery in Miami’s depressed real estate market by driving a growing number of rich Venezuelans to buy up property in that hotbed of expatriate latinos, thanks to an absence of investment options at home. Read more

Argentina is wielding a new weapon in its fight to control the black market exchange rate that has soared to 17 per cent higher than the official rate in recent days amid tough new foreign exchange controls and devaluation fears.

It is the same – rather blunt – weapon that the government has deployed in the past to seek to curb rising food prices and to ration gas to factories, to quell petrol price hikes and to block imports. Its name: Guillermo Moreno. Read more

A strange thing has started to happen in Argentina’s real estate market: since new foreign exchange controls were introduced this week, some people have started to buy property… in pesos.

For decades, the norm has been to buy real estate in dollars – which tells you a lot about popular faith in a currency that has changed repeatedly over the years, been rocked by economic crises and hyperinflation, and which even spent a decade believing itself to be as powerful as the greenback (the 1:1 regime in the 1990s). Read more

Russia’s central bank delivered some startling but expected news this week. While the central bank had long maintained its prediction that Russia would have no more than $36bn in capital outflows this year, it has finally faced reality and on Tuesday announced that the country faced a whopping $70bn of outflows instead.

The number is painful to look at – especially compared to the original $36bn projection. But according to Ivan Tchakarov, Renaissance Capital’s chief economist for Russia and the CIS, there is a silver lining. Read more

“In a few days’ time, all this will seem fleeting and temporary.” So says Amado Boudou, Argentina’s economy minister and vice president-elect, of the pressure on the peso and mounting capital flight, which led the government to introduce foreign exchange controls this week.

The market thinks otherwise. It patently does not buy Boudou’s argument that there won’t be a devaluation from the current rate of 4.265 pesos to the dollar. Read more

Argentines, well known for having little faith in the banking system, have been increasingly falling over themselves to get their money out of the country. Now the price they have to pay has more than doubled this year to 5 per cent.

One exchange bureau in Buenos Aires confirmed that it was now charging a flat fee of $80 plus 4.80 per cent of the amount to be sent abroad. “It’s this year that the charge has shot up,” a source there said. Read more

For weeks, bankers and analysts have been cautioning about how much money is flowing out of Russia. Now we know how much.

According to a report by the central bank, capital outflows reached $18.7bn last quarter and a whopping $13bn during the month of September alone. Read more

By Norma Cohen

The Bank for International Settlements for the first time unveiled the extent of capital flight from Egypt and Libya in its latest quarterly report, noting that outflows from Egypt in the first three months of 2011 surged at their highest quarterly rate ever. Read more