Scott B. MacDonald
Chile – Inflation
Up: Chile’s central bank in early June
announced that its inflation rate forecast for 2004 is
rising, largely due to higher-than-expected oil prices.
The old inflation forecast for the year was 2%, It has
been raised to 2.1%. Chile imports 90% of its oil needs.
China – Fitch
Calls for More Slowing Measures: On May 17, 2004 rating
agency Fitch stated that China needs to do more to rein
in its breakneck economic growth but a drastic slowdown
is unlikely. According to Brian Coulton, head of Asia Sovereign
Ratings at Fitch: "Our base case is not for a hard
landing in China. Growth isn't going to come crashing down
to a halt." Fitch expects China's economic growth
to slow in the second half, with 2004's growth rate averaging
around 8.5 percent and slowing to around seven percent
in 2005. Coulton added: "Our view is the authorities
in China have caught this boom early enough, meaning a
hard landing is not inevitable. It doesn't mean they've
done enough...we do want to see further measures and in
our view they do need to bring interest rates up," China
has not raised interest rates for nine years but media
reports have said that a rate hike is imminent. China is
struggling to slow its economy, which grew 9.8 percent
between the first quarters of 2003 and 2004. Financial
markets are worried that authorities may be moving too
late to control growth and that boom will turn to bust.
Alternatively, the measures to restrain the economy could
themselves push it into a severe slowdown.
Indonesia – Presidential
Elections: Campaigning began June 1 in Indonesia's
presidential race, scheduled for July 5. Five candidates
are contesting the elections, which will mark the first
time Indonesians will directly elect the country's president.
According to the most recent opinion polls, incumbent
President Megawati Sukarnoputri (with 11% of potential
votes) trails former Security Minister Susilo Bambang
Yudhoyono (with 41% of potential votes). Megawati has
been in office for 2 and half years, following the resignation
of President Wahid. Although she has restored some degree
of political calm to the country, many Indonesians believe
her time in office has been marked by indecisiveness
and she has sadly demonstrated a lack of initiative and
new ideas. In comparison, Yudhoyono comes across as a
more disciplined political leader, capable of providing
stability as well as new ideas. The candidate in third
place in the polls is former general Wiranto, who was
one of the top military people under President Suharto’s
regime and is tainted by human rights abuses in East
Timor. He polls at 10 and has the support of Golkar,
which has a national organization and financing. Rounding
out the field are Amien Rais (4.4%) and Hamzah Haz (3%).
In other Indonesia news, the consumer price index rose at a faster-then-expected
6.5% in May compared to a year earlier, the most in seven months. It is felt
that faster inflation could force the central bank to raise interest rates,
which are close to six-year lows. Inflation could average as much as 7% in
2004, higher than the government forecast of 6%. There is also concern that
higher rates could break the pace of economic growth – not a good thing
in a country where people have been struggling on the economic front since
the debacle in 1997-98.
Mexico – The Political Pot Stirs: In
early June, Mexico’s political situation suddenly became
a little more interesting with the resignation of Energy Minister
Felipe Calderon. Clearly, his unexpected departure sent tremors
throughout the Mexican political establishment. Though the
presidential elections are two years away, Calderon's resignation
was an indication that the country’s political parties
are preparing for battle. As one long-time Latin American observer,
Walter Molano, noted: “Although we were never optimistic
that the Fox Administration would pass any of the structural
changes, Calderon's resignation formally killed energy reform.
Fernando Elizondo Barragan, the new Energy Minister, said that
he would launch "Plan B," but he failed to provide
any details. Mexico is one of the two darlings in the emerging
markets, but it is also marching towards a new sexenio crisis.
It is too bad nobody really cares.”.
Malaysia – The
March 29th Elections: On March 29th, Malaysia
voters went to the polls to elect a new government.
As was the case over the last several decades, the
ruling multi-ethnic coalition, the Barison Nasional
or BN, won handily, reasserting the dominant role
of the United Malays National Organization (UMNO)
within the majority Malay community. The BN captured
198 of the 210 (90%) seats in the federal parliament
or 64.4% of all votes cast (up from 56.6% in 1999
and just below the 65% it scored in 1995). This was
decidedly good news for the standing Prime Minister
Abdullah Badawi, who had earlier assumed the leadership
role from longstanding Prime Minister Mohammad Mahathir.
Despite considerable speculation as the strength
of the Islamic issue in swaying voters to opt to
non-BN parties, Badawi marked his first outing as
national leader with a sweeping victory, which should
provide him the opportunity to further put his own
personal stamp on the direction of the country.