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Showing posts from June, 2015

Venezuela Bonds Trapped by Oil’s New Normal as Relief Rally Ends

By Nathan Gill (Bloomberg) -- This year’s climb in crude prices, however slight, brought relief to Venezuelan and Ecuadorean bondholders after last year’s crash decimated the oil producers’ revenue and prompted concern they were running short of cash.
Now, the pessimism is back.
While New York oil futures have surged 36 percent from a six-year low in March, they’re still down 45 percent from their 2014 high and probably will stay around there for the rest of the year, based on analyst forecasts compiled by Bloomberg. That means the Andean countries could struggle to find enough cash to continue meeting debt payments and prop up popular social programs that help maintain stability.
“Things are going to get much more difficult if oil prices stay where they are,” Sarah Glendon, the head of sovereign research at Gramercy Funds Management LLC in Greenwich, Connecticut, said in a telephone interview Monday. “High oil prices masked the challenges that both governments had, allowing them to …

Ecuador Cocoa Forecast Cut to 230,000 Tons After Rains Hit Crops

By Nathan Gill (Bloomberg) -- Ecuador, the world’s biggest grower of flavored beans used in fine chocolate, will probably lose about 15 percent of this year’s cocoa crop after heavy rains hurt farms in the Andean nation’s coastal region, the National Cocoa Exporters Association said.
Anecacao, as the association is known, reduced its 2015 forecast to about 230,000 metric tons from a January estimate of 260,000 tons to 280,000 tons, Ivan Ontaneda, the group’s president, said Wednesday by telephone from Guayaquil. Heavier-than-normal rains since April have hurt the mid-year harvest and are damaging flowers on trees expected to bear fruit beginning in September, he said.
The bad weather in Ecuador comes on top of problems in West Africa, where floods in Ivory Coast and Ghana, the world’s top cocoa producers, are blocking roads and leaving cocoa pods rotting on the trees.
“We’re worried about the weather,” said Ontaneda, who’s also the chief executive officer of Guayaquil-based cocoa exp…

Correa’s Back-Track on Tax Bills Fails to Halt Ecuador Protests

By Nathan Gill (Bloomberg) -- Ecuador President Rafael Correa’s attempt to defuse nationwide protests by back-tracking on two controversial tax proposals failed to prevent opposition supporters marching for a ninth straight day Tuesday.
Protesters gathered in the capital city, Quito, less than 24 hours after Correa called for calm and announced he would delay plans to raise taxes on inheritances and real estate profits to avoid violence.
Correa “temporarily” withdrew the plans just hours after saying he wouldn’t “cede a millimeter” to protesters’ demands. It’s probably too little to stop the protests from growing in the coming days and months as opposition groups seek to boost support ahead of presidential elections in early 2017, said Michel Levi, coordinator of the Andean Center of International Studies at the Universidad Andina in Quito.
“I don’t think the president’s announcement will calm spirits down completely,” Levi said Tuesday in a telephone interview from Quito. “Rather, t…

JPMorgan Says Not to Worry as Ecuador Promotes Digital Currency

By Nathan Gill (Bloomberg) -- Ecuador’s home-grown digital currency is nothing to fear. At least that’s the conclusion of analysts from JPMorgan Chase & Co. to Credit Suisse Group AG and Nomura Securities International Inc.
The country’s bonds fell last week after the government ordered banks to start accepting a new electronic tender it created last year. Previously, officials had said the system would be voluntary. Investors are concerned that President Rafael Correa plans to use the dinero electronico to wean the nation off its official currency, the U.S. dollar, and eventually start creating virtual money to plug a budget gap.
The bond selloff, and the concerns, were overblown, the analysts say. Javier Kulesz, a managing director at Nomura, said he isn’t worried about a sudden end of dollarization because the government has said it will keep liquid reserves to back the digital currency. Oil prices will be more important in determining how the country’s dollar bonds perform th…