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Emerging Market Briefs
By
Scott B. MacDonald
 Brazil
– Trends in the Right Direction: Credit conditions for
Brazil are gradually improving. In mid-March Fitch changed the outlook
on its B sovereign ratings from negative to stable. The rating agency
indicated the change was due to “a marked turnaround in international
trade performance and signs the new government is committed to economic
policies that could place Brazil’s public and external finances
on a sustainable path.” Looking ahead, Fitch “believes
that maintenance of sizable primary surpluses, a trend toward declining
real interest rates, and critically, a resumption of reasonable
economic growth rates will be critical to further improvements in
Brazil’s international credit standing.”
Colombia – Coca Down:
There is some good news on the war on drugs. According to United
Nations data, Colombia’s coca harvest was down by 30% in 2002.
This data was derived from satellite imaging, comparing the prior
year’s data to 2002’s. Most of the 105,600 acre (42,736
hectare) fall in coca production was due to the forced eradication
campaign undertaken by the Uribe government. The acreage removed
from production is estimated to cover an area more than double the
size of Washington, D.C. The Uribe government attack on drugs is
a major weapon for the government in its war against leftist guerrillas
and far-right paramilitaries who sell coca to buy weapons.
Israel – Israel Elect
Goes Down: Standard & Poor's downgraded in February Israel
Electric, from A- to BBB+, with a negative outlook. The agency cited
uncertainties in the company’s operations and investment program
and its weak financial profile.
Malaysia – Positive Growth Numbers: Real GDP grew 5.6%
in Q4 2002, slightly ahead of the consensus and slightly lower than
the previous quarter’s growth rate, which was revised up to
5.8%.
Peru – 2002’s GDP Faster Than Expected: Good news
is always welcome, even in the form of a surprise. Expectations
for real GDP growth in 2002 were around 4.8%. However, the final
number was 5.2%, making 2002 the fastest year of growth since 1997.
The key drivers for growth were improved performances by the mining
and construction sectors. The Peruvian government has made a forecast
of 4% growth for 2003. Mining benefited from the opening of the
Compania Minera Antamina copper-zinc mine, which is owned by BHP
Billiton (33.75%), Noranda (33.75%), Teck Cominco (22.5%), and Mitisubishi
Corp (10%).
South Africa – Upgrades Coming: At the end of February
2003, Moody’s revised South Africa’s Baa2 outlook from
stable to positive. The agency cited declining debt ratios, improved
external liquidity and careful macroeconomic management. Shortly
following that, Finance Minister Trevor Manuel presented his 2003/04
budget. The government revised its budget deficit to 1.4% of GDP
in fiscal 2002/03 (from 1.6% of GDP) and is forecasting a deficit
of 2.4% of GDP in 2003/04 (allowing for a little more room in social
spending). In addition, the government signaled it was loosening
foreign exchange controls, long urged by the IMF. In March, Fitch
placed its BBB- rating on review for a possible upgrade. We suspect
that S&P, which rates South Africa at BBB-, with a positive
outlook, will soon be upgrading the country as well.
Ilissa
A. Kabak, C.
H. Kwan,
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